On Monday this week, I presented to an MBA class at NYU’s Stern School of Business on the topic of “Brand Equity Measurement and Valuation” and the challenge of measurable marketing.
They were a very bright group but I was shocked to see how quickly they defaulted to a definition of marketing as “communications” which led to “advertising effectiveness” as the definition of marketing accountability. It is an all-too-common mistake.
Marketers need to stake out their claim as a strategic discipline if they aspire to relevance in the boardroom. The strategic significance of marketing rests on the twin observation that human beings have complex utility functions, and place importance on relationships. Brands derive their value from their ability to communicate on multiple levels and to create perceived relationships between customers and companies (or their products).
Marketing is about the creation, communication and delivery of customer value. Brands, advertising, social media are the mechanisms and channels through which this process of customer value creation occurs. Value capture by the company occurs through the transactions that result from the customers’ recognition of the value being offered. In the discussion on Monday night, we agreed that the success of marketing should therefore be measured in terms of two ways – transactions in the current time period; and building a relationship asset that would result in transactions in future time periods.
This led to a productive exploration of the metrics that should be used to characterize the success of marketing in the short-term – the kinetic energy created so to speak – versus the metrics needed to assess the quality of the relationship asset – the potential energy created so to speak.