Research. You gotta love it. It can support whatever point you want to make and it can reiterate important findings even if an almost identical study has been done prior resulting in the same findings.
More than fifteen years ago, Fortune (as well as many others over the years, one would assume) commissioned a study which found the money spent on marketing directly effect brand perception, stock market prices, cash flow and bond ratings.
These studies are great for agencies pitching marketers on brand-building campaigns that are easy to create, easy to manage and make the agency a lot of money without having to actually move any product or prove the campaign had any immediate effect. [Ed. I know. I used this strategy many times to get companies to spend boatloads of money on frivolous “branding” campaigns.]
So here comes another study touting “firms with strong brands have more stable stock prices, predictable cash flow and higher bond ratings than firms with weaker brands, thus reducing the firm’s overall risk” and “a strong brand–high levels of consumer loyalty and commitment, insulation from competition, and diminished price sensitivity–contribute to higher levels of more stable cash flow” and “Strong brands are associated with stronger cash flows that are more reliable and predictable in the future. That means debt and equity holders have an easier time predicting the firm’s future cash flows and that makes them less risky investments, increasing their long-term financial stability” and…oh you get the point.
The study was conducted by two University of Iowa professors, Lopo Rego and Matt Billet, using data from Harris Interactive. From the data, the pair created a Consumer Brand Equity Score.
The thrust of the study encourages marketers to think of marketing as an investment versus a cost center. [Ed. Hmm. Nevrer heard that one before!]
Rego drives the point home saying, “Most corporate executives see marketing as a cost center, not as an investment, but this study should remove all doubt that brands are assets and should be managed as such. This tells us that a firm’s ability to build a strong brand using marketing reduces risk and raises the firm’s overall value, and will help especially during a downturn.”
Well, there you have it. Yet another reason not to cut your budget during a recession or anytime for that matter…whether or not you have revenue to support a marketing budget.
