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Slouching Toward Brand Accountability

Posted on | July 8, 2010 | No Comments

By James R. Gregory, Founder and CEO CoreBrand

Many departments within a corporation will argue the need for accountability in marketing, but none steps forward to take ownership of how to account for brand equity.

Theoretically, the CEO is responsible for the value of the corporate brand. Unfortunately, it is a rare CEO who understands how brand equity value is created. CEOs would love to see their company prosper but few understand how to take command or utilize the tools available to make it so.

The CFO properly challenges the high costs of marketing today because there is no standard for accounting for the profitable return on investment for brand building activities. In the world of the CFO, marketing is ONLY seen as an expense without any direct connection to ROI. Thus, creating a self-fulfilling prophecy.

CMOs would be wise to step forward to take command of brand marketing accountability. Many would argue that they have done so, but attempts to date to create a unified set of standards have been anemic. Most attempts to build accountable ROI bridges to the CFO or CEO have been misunderstood or at the least unrequited.

Procurement officers, whose mandate is to dissect every transaction and shave off another percentage point from the already impossibly tight margins of advertising agencies and marketing communications firms, are reluctant to open their view of the total value of a transaction to include the impact of growth (or potential loss) of brand value. To acknowledge that brand building is a two-way street that creates or destroys value with every communication would open an entirely new avenue for evaluating the performance of vendors.

Investor relations, which could help the CEO add billions in market capitalization, is usually focused only on the next earnings release. While they have the attention of the CEO, it is rare to find an IR professional who is willing to suggest that the corporate brand might need tweaking or that corporate clarity is a bit soft. Shouldn’t this department have its finger on the pulse of the corporate brand?

And, why aren’t advertising agencies and public relations firms demanding accountability? They have the most to gain by understanding consistent accountability measures for valuing product and corporate branding. Yet, the agency industry is too frail due to decades-long cost containment pressures or too afraid of the results to demand accountability. So, most seem happy just to survive another year.

Most unfortunately, the accounting profession has ignored the undeniable growth of brand value. GAAP standards don’t account for the value of brands until a company is bought or sold, which doesn’t accurately reflect the changing value of the living brand. Brand value fluctuates daily based on the decisions and communications of management and the impact on key constituencies. It can be easily identified, readily measured and valued on an ongoing basis in comparison to its industry or specific competitors. Accountants should embrace this process and shareholders should demand to better understand and to see brand equity reported on financial accounting statements.

Only one association has come forth ready to take on the issue of marketing accountability. The Association of National Advertisers, under the leadership of Bob Liodice, has been pursuing the concept of generally accepted brand valuation principles. The ANA represents the largest advertisers so it is logical and commendable that such an organization lead the discussion.

A group of academics and practitioners have also been in hot pursuit of brand accountability standards. It is aptly called the Marketing Accountability Standards Board, under the leadership of Meg Blair.

I marketing measurement is the single most important business issue of this decade. If you agree with me that marketing stands to gain tremendously by connecting the brand to accounting standards then you should join with the ANA and MASB and add your voice to the discussion.

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