It is dreadfully disappointing that such a small proportion of finance directors – 29 per cent, according to a recent Institute of Practitioners in Advertising poll – acknowledge that, after people, brands are a company’s most important asset. Encouraging the marketing community to talk to finance directors in a language they understand, as Rupert Howell suggests (MW February 17), will help, but there are two other courses of action which could have a dramatic impact on the way brands are regarded by this important group.
First, change the accounting status of brands. Finance directors will always struggle to accept brands as assets so long as they remain absent from the company’s balance sheet – and therefore excluded from its capital. Changing the accounting status of brands could do everything to change the current mindset. Marketing “cost” would be viewed as investment, and finance directors would be required to explain the returns arising in the same way that they report on the efficiency of all the other investments they make in running the business.
The second is pressure from investors. It is perhaps ironic that last month saw the departure of that champion of brands Dominic Cadbury. I remember attending a Marketing Society dinner a couple of years ago where he spoke about the time and trouble his company takes to explain how its marketing expenditures add value to its brands. Investors and analysts need this information because “marketing” is the single biggest investment Cadbury makes, yet the evidence of its effectiveness is not reflected in the company’s financial statements.
Until times change, however, we must continue to seek ways to identify and measure the financial value that good marketing delivers. Brand valuation techniques have been in existence for some time, and it is significant that more and more clients value their brands nowadays, not just as an arid accounting exercise but as a way to acquire a deeper understanding of how marketing works in an increasingly complex world.
Group deputy chairman