This was the title of my presentation today at the town hall of a talented design and branding firm with which I have collaborated on a number of occasions. Like so many others, they are grappling with the issue of how to respond productively to questions about ROI and the value of their work.
My mandate was simply to talk about the research and analysis I have been doing on a number of topics relevant to the business context and business impact of marketing. I talked briefly about intangible value, brand valuation, the brand “bonus” and the relationship between brand strategy selection and post-merger financial performance (all topics on which I have shared topline results in this blog).
I hope I provided them with some interesting insights, and some confidence to engage in the discussion about the financial impact of marketing. At the very least, I left them with a number of financial observations for use in their conversations with clients:
- Tangible book value represents only 21% of the value of US companies, and 33% of the value of Canadian companies
- Brand value represents an average of 15% of market value – but varies enormously by sector (ranging from less than 5% in energy and basic materials to over 40% in consumer goods)
- Strongly branded companies seemed to benefit from a cushion of 3 to 5% during the market meltdown of late 2008/early 2009
- In the two years following a merger, companies that used the more sophisticated forms of corporate brand outperformed those that used the two “expedient” forms of brand strategy by a margin of 5 to 10%
My parting advice to them was to use any request for ROI or brand value as an opportunity to engage in a discussion about the changes in customer and employee behavior that would result in signficant financial returns. That would do two things:
- Convince the person asking the question that you are focused on improving the performance of the business
- Generate the working assumptions on which a credible model could be based
