All successful companies practise marketing, whether they use the word or not. If they talk of “marketing performance”, what they mean is “brand performance”, i.e. the sum of their brands’ performances if it has a portfolio of brands or the single brand if it has just one, usually bearing the name of the company. If it only sells no-name products, the brand name is the company name. In other words, assessing brand performance matters to everyone in business.
Marketing has two stages: creating demand and fulfilment. The former is far more difficult than the latter, but it is the latter that gets the accountant’s attention. Marketing needs expenditure for both stages, but all the income arises in the latter. The typical ROI assessment expresses the profits (second stage) as a percent of the expenditure (both stages). That is clearly illogical, and it is astonishing how widely ROI is bandied about as a valid measure of marketing, or brand, performance.
For example, a successful brand may need little advertising in the short term because it can live for a while off its established goodwill. The ROI will be high. But as the goodwill runs down over time so will the profits, unless the brand asset is restored by above average MarComms, or whatever. At which point, ROI will nosedive, and the accountants will whinge. Marketing is not to blame but the use of ROI as a performance metric is. Brand or marketing performance should never be assessed by ROI. Non-financial metrics, as well as financial, are needed.
Different Challenges for Different Business Models
A company selling direct to end consumers faces a different problem to the one selling to an intermediary or indeed a chain of intermediaries. The intermediaries are typically the responsibility of the sales force, whereas the end consumers and intermediaries taken together are the responsibility of marketing.
The Birth of Brand Equity
Two developments in 1991 changed the game. David Aaker coined the term “brand equity” for the brand asset, i.e. the pent up, unrealised demand. He described it thus:
“The most important assets of any business are intangible: its company name, brands, symbols, and slogans, and their underlying associations, perceived quality, name awareness, customer base, and proprietary resources such as patents, trademarks, and channel relationships.”
Tim Ambler
The asset, brand equity, should not be confused with the value of the brand, brand value, which is the price the owner could get for the brand. One’s home is an asset; one could not live in the value of one’s home. Yet brand equity and brand value are frequently confused.
Aaker’s work initially was noted by just a few marketing academics, but the concept had earlier hit the headlines in 1988 when Nestlé bought Rowntree for £2.55 billion – far above the value of the brands on the balance sheet. The difference was attributed to brand value. That began an argument between accountants as to whether brand values could be put on the balance sheet and, if so, how brands should be valued. The conclusion was that home grown brands could not be but acquired ones could.
The Challenge of Measuring Brand Equity
The position today is that we cannot objectively measure brand value, and we have to use non-financial measures instead, e.g. market share growth or consumer research measures like “My favourite brand”.
Most leading international market research agencies, e.g. Kantar’s Brand Power/BrandZ or Brand Finance. Qlik suggests 15 Key Marketing Performance Indicators, proffer their own sets of brand equity metrics but they will not mostly prove efficacious in terms of being both relevant to marketing goals or intentions, e.g. brand awareness, and predictive of future profitability. Ideally, the alternatives should be tested to identify which one most reliably predicts future sales and profitability.
Measuring brand, or overall marketing, performance requires the marketer to specify, usually in an annual plan, what results are being sought and therefore what should be measured. The immediate metrics may not be the same as the longer-term ones. For example, after a new brand launch, trial matters little but repurchase rates matter a lot.
Research Findings on Measurement Frequency
In 2002, Ambler and Kokkinaki sent questionnaires to 1,014 marketing and 1,180 finance senior executives in the UK, recruited through two professional bodies (The Marketing Society and the Institute of Chartered Accountants in England and Wales). A total of 531 questionnaires were returned (367 from marketers and 164 from finance officers).
The results should have been 100% for non-financial metrics annually or more often and nil% for financial ones, but they were not:
Regularity of Tracking the Marketing Asset (%)
| Never/Rarely | Yearly | Quarterly | Monthly or more often | |
| Financial valuation | 51.4 | 23.6 | 16.9 | 8.0 |
| Other measures | 36.8 | 22.2 | 28.7 | 12.3 |
Of course, measuring brand equity or brand performance more often than quarterly is absurd. Brand equity does not change that fast.
Practical Examples and Digital Metrics
One of the best examples of brand equity performance measurement tracking from the 1974 launch of Baileys Irish Cream was repeat purchases. Trial and initial purchases were unremarkable, partly because the brand looked unattractive; repeat purchases however, proved to be a fine indicator of the success to come. Today, that is no longer relevant.
Non-financial metrics may be dictated by the marketing tools selected. For example, digital marketing may use:
- Traffic by source
- Returning visitors
- Average session duration
- Exit rate
- Bounce rate
- Conversion rate
Key Principles for Selecting Metrics
In summary, some financial metrics, such as sales and profits versus plan and prior year, will always be relevant but non-financial measures of brand equity will be needed too. Many hundreds are available, and it is far from easy to choose which should be chosen. There are four tests:
- Is the metric available at an affordable price?
- Is the metric relevant to at least one of the Marketing goals?
- Does the metric pretty much duplicate one or more of the others?
- Does the metric predict future profitability?
Authored by the late Tim Ambler
