JACQUELINE IRELAND MARKET INSIGHT
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Marketers at the board table
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hat do CEOs really think? It’s a question for the ages. One thing that we do know is that The Marketing Society in the UK studied these big business brains, and found that they overwhelmingly believed bringing the customer into the boardroom was a top priority. But saying it and doing it are two different things. Many other studies have found marketers struggle to influence the top leadership stratum of companies. A study by executive head hunter Norman Broadbent, for example, found that only 50 non-executive directors on the boards of FTSE 350 firms in the UK had any substantive marketing in his or her background. This has a direct impact on the budget allocated to marketers and experience designers, who hear lots of lip service paid to the importance of the customer at the higher echelons of a company, but struggle to get the funds required to connect and engage fully with their customers. Building brands and relationships requires a longterm commitment and investment, and all too often this is sacrificed for short-term shareholder gain. There is a lot more to be done before ‘brand’ becomes truly integral to every business operation; before it completely shifts from the ‘cost centre’ category and into the ‘value builder’ category. This, despite the fact many more CEOs are now familiar with the importance and meaning of brand than they were 10 years ago. Brand valuations are certainly helping the cause by creating a common measure for both marketers and financiers, and ensuring that marketing is better understood and accounted for by the business as one of the key drivers of financial and business success – alongside more direct sales activities and business partnerships. Over the past 30 years, in fact, brand has
become one of the most valuable financial assets of modern organisations. Overall, brand contributes more to shareholder value creation than most other tangible and intangible assets. Recent analysis by Millward Brown Optimor shows that for an average S&P 500 company, the additional value realised by brands amounts to 50 percent of intangible capital and over 30 percent of total company capitalisation. The analysis further concludes that solid investment in strong brands leads to consistently higher share prices. Further, companies with strong brands lose less value precipitously in a recession, emerging with a sustainable competitive advantage. They do this because strong brands provide a cushion against crisis and are a springboard in periods of economic growth. Brand valuation quantifies the financial value that brand and marketing add to the business – crucial for merger and acquisition situations, compliance with accounting standards, and for tax purposes. Furthermore, putting a dollar number on the brand sends a signal to CEOs, CFOs and boards that brand matters – and is, in fact, one of the major financial assets any business has. Yet, as marketers know, brand valuation is about more than a number. It sets up a model of how brand creates value in the business through its impact on the critically-important customer purchase decision. Brand valuation can be used to measure the effectiveness of brand strategy and marketing initiatives by tracking their success in growing a company’s financial value and quantifying the return on investment (ROI) from investment in marketing. In addition, it can help identify opportunities to grow shareholder value by providing useful insights into brand strengths and weaknesses, enabling
management to calculate the financial impact of alternate brand and marketing investment strategies and prioritise the right course of action. MORE PROOF (AS IF YOU NEED IT) The BrandZ Top 100 Most Valuable Global Brands ranking is the only brand valuation in the world to combine analysis of financial performance with the results of detailed research amongst the people who really matter – category consumers of each of the brands being measured and valued. BrandZ uses real consumer perceptions, generated by quantitative research that is updated annually, to determine the role of brand in driving purchase decisions. Despite difficult economic conditions, the Top 100 Most Valuable Global Brands rose seven percent in value in 2013, with that rise spread across most categories. In and of itself, this proves the power of strong brands. But the story becomes even more impressive when you consider brand value growth over that time. The total brand value of the BrandZ Top 100 has improved a whopping 77 percent since the ranking’s introduction in 2006. During the intervening eight years, the stock market value of the BrandZ Top 100 portfolio grew 58 percent, substantially outperforming the S&P 500, which gained only 23 percent. This growth occurred as brands faced unprecedented challenges in a marketplace disrupted by the digital revolution and global recession. In these circumstances, the steady growth in brand value illustrates a fundamental finding of the annual BrandZ Top 100 reports: When the economic tide comes in, strong brands ride the crest of the wave, and when the tide turns, as it always does, strong brands resist the undertow and recover substantially faster.. M Jacqueline Ireland is CEO of Colmar Brunton.
JULY 2013
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