The question I posed in my last blog entry concerned the most appropriate way in which to measure the value of marketing. To my mind, the best place to start is consider the entire “value added” of a business, then move on to consider what percentage of that value added can reasonably be ascribed to marketing.
Here are some key thoughts to bear in mind:
- All value added is the result of human ingenuity. Tangible assets are inert – it is only the addition of human capital that makes a business more valuable than the sum of its tangible assets
- A company does not actually own its human capital (that is, the people themselves) but it does own the results of their work in the form of the unique business systems, new scientific discoveries, unique information and desirable brands that they generate
- Certain industries – basic materials and utilities, for example – rely heavily on physical assets, so the relative degree of value added of human capital will necessarily be lower than in industries – such as software - which employ very little by way of physical assets
- Just as the overall value added by human capital relative to tangible assets varies by industry, so does the relative importance of different forms of intangible value. For example, scientific discovery is the dominant form of intangible value in the pharamceutical industry but, for consumer goods, it is effective brand management
My belief is that a convincing argument for the value of marketing needs to begin by documenting the importance of intangible value in each industry, and then advancing a compelling argument about the relative importance of marketing vs. other disciplines in creating that intangible value.
My next post will try to establish some rules of thumb.
