I am presenting to an EMBA class at Columbia this evening on the topic of brand equity and marketing accountability. I am looking forward to it – EMBA students always ask great questions.
The gist of my presentation is that brand equity represents an important bridge between the worlds of marketing and finance. Marketers intuitively think of brand equity as a measure of the strength of the brand’s franchise with customers; Finance folk intuitively think of it in terms of the incremental profit/cash flow that is generated by the brand. The two definitions are compatible but they do not describe the same thing. The marketers view of brand equity represents the potential for value; the finance view represents the realization of value. In that sense, a marketing definition of brand equity will always be larger than the financial defintion because it does not allow for all of those potential brand sales that failed to occur due to lack of distribution or stock outs or a host of other factors that may prevent customers acting on their stated “intention to purchase” (one of the key measures of brand equity from a marketing perspective).
Should be a fun session.
