Brand - the New Language of business?
They say numbers are the language of business. This one is a game-changer:
(ISO) 20671
I’ll come back to this, but first let’s get to the most central ‘numbers’ question of them all, when it comes to marketing:
What do the marketing assets of a business contribute to the real value of a business?
Or to put it even more straightforwardly, how much of the value of these assets is typically captured in financial accounts? The answer is very little according to John Diorio. He says the issue is that the current financial reporting system is a “dog’s breakfast” of inconsistent rules. For Marketing Professor, Neil Beadle, “Brand valuation has been a hodgepodge of rules inconsistently applied and reported”.
The implications of this have been profound for the influence and status of Marketing as a key value-driver of enterprise. In the 9 years I spent at the UK’s largest retail bank, it was always a source of amazement to me that there was never any Marketing representation at board level. I should not have been surprised. Without the standards and rules in place, CEOs and CFOs have always been suspicious of Marketing, and CMOs have typically been excluded from the top table. In their eyes, investment in brands and marketing are “soft” investments (…or maybe worse!). Forbes CMO Research (2017) suggests over 97% of boards do not have CMO representation.
And yet… we know that marketing investment - and wise and skilful BRAND investment, in particular - can have a profound impact on enterprise value (the real £value of a business). For example, according to brand valuation standards proposed by International Organization for Standardization (ISO) - brand value alone contribute 19.5% of enterprise value on average based on an analysis by the Marketing Accountability Standards Board (MASB). For consumer and luxury brands that number can make up the majority of shareholder value.
Together with Richard Stone of Model Decisions I will be writing and posting on this in the coming months.
‘Brand value’ has often remained a mysterious and misunderstood asset and largely excluded from all the sophisticated tools that financiers use in the buying, selling and valuing of companies.
This leads me back to ISO/DIS 20671, the now globally acknowledged standard to evaluate brand value, agreed in 2018. Developed over several years by branding experts from numerous fields, it covers the entire process; from brand development to brand performance to brand valuation.
I have studied the model and it is comprehensive, assessing and measuring ‘inputs’ (Brand Development), ‘Outputs’ (Brand Strength and Performance) and then what it contributes in monetary value (Brand Valuation). I suspect only bigger companies with sufficient resources in place could truly apply the necessary measurements but this is a massive step forward.
In my corporate research and brand roles I was heavily involved in the Inputs and Outputs stages of brand management. The validation in this ISO standard for my approach to brand management is extremely satisfying for me! It makes the vital link between ‘brand’ and how a company plans ahead, invests and focuses its energies. It makes explicit the profound impact that carefully nurtured and managed brands can have on enterprise vale. This is what Brand Compass is all about.
This ISO standard provides a credible framework for the wider network of directors and leaders to begin recognising the value of marketing investment. Equally, it will help protect the vital longer-term investment in ‘brand’ as opposed to short-term marketing tactics which are value-destroying.
I am indebted to John Diorio for his insights and thoughts
