A new weapon in the battle for recognition

21 January 2010 | By Mark Choueke

Entitled The Importance of Advertising and Promotions (A&P), it is a study into the value of marketing and intangible assets such as the notion of “brand”.

For too long, the City has been ignorant of much of what it is that marketers do and the value that marketing and media spend, in turn, creates within brands and organisations.

Our lead news story on page five provides a summary, but a deeper examination of the note’s contents reveals the effort made by Deutsche to become the Square Mile’s expert on marketing.

It looks at the performance against the marketing spend of 30 large multinationals in the FMCG sector over the past 15 years. Among its conclusions it finds that sustaining marketing spend is critical to the health of brands in this sector and indeed, their valuation. It states that brands which increase spend deliver sales growth 30% faster, and profit growth at a rate 50% faster, than peers who do not.

It essentially says everything you need it to say. It is a research note from the gods, and a potent weapon the next time you meet to discuss budget “realignments and adjustments” with the finance director.

But it is not just a gift. It is also a plea. Marketers are often accused of responsibility for the knowledge gap that exists between marketing and the City. There is a mutual lack of understanding between the two tribes and the more we do to bridge that gap the better for all of us.

Marketing as a board-level discipline will not be widespread until marketers prove beyond question that they understand the balance sheet.

Businesses in which marketing and commercial strategy have reached that level are now largely marketing-led but the understanding must come first.

Deutsche polled a large group of investors to measure their understanding of A&P. Almost three-quarters said they had no understanding of how the industry spends its budget, while 83% said cutting spend to protect profitability in a downturn was not a sensible strategy. The same figure said that there are aspects of marketing that they don’t understand or want to know more about. The message? Full disclosure and reporting on marketing activity is necessary. Those Masters of The Universe that trade our nation’s fortunes each working day have no idea what it is we do because they can’t read it in the annual report. But their masters have now indicated interest and asked for more information.

Maybe if the analysts had known more about the value of different types of marketing activity, Cadbury would have stood a better chance.