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By: Bill Nissim, 2004 ©
Par•a•dox
Pronunciation: 'par-&-"däks
Function: noun
1: a tenet contrary to received opinion
2: a statement that is seemingly contradictory or opposed to common sense and yet is perhaps true
At the heart of branding resides a distinct paradox. This article meticulously unveils this paradox and
examines its true intricacies. It begins by asking what and why this paradox occurs. Next, it translates
branding from the realm of the theoretical into metrics that are financially based. This approach
illuminates the critical need for brand management, and in turn, quantifies the process into tangible
results. A new metric arises from this process – Return on Customer Investment (ROCI).
In previous articles, my constant droning that top management “doesn't get branding” has reached an
apex (in my mind) and this article attempts to frame the discussion in terms that business leaders are
most comfortable with. If “financial metrics” are more palatable to organizational leaders, then let’s
translate branding into quantifiable terms (ROCI).
What is this paradox?
As noted in the above Merriam-Webster definition, a paradox is an idea, thought, or accepted notion
that may be contrary to the truth. In today’s business environment, marketing plays a subservient role in
crucial imperatives that drive strategic trajectories of organizations. The notion of branding, primarily
viewed as a subset of marketing, receives even less notoriety.
The business paradox, more specifically, is the link between branding and an organization’s market
value, but at the same time, is received amongst corporate America as unrelated. The brand paradox is
further compounded by erroneous conceptions of what marketing is and the real impact it plays in
business valuation. A quick test – why would you consider buying Nike’s shoes or invest in their
stock? Because their P/E ratio is 20.3 or your overwhelming desire to associate with this brand
identity?
Why does it occur?
In my estimation, the prime reason for this widely accepted opinion is the absolute dependence on
financial imperatives. When considering a stock purchase or a business relationship with another
public company, most leaders immediately turn to the annual report, skim the statements, and calculate
key ratios. In their minds-eye, the numbers (historic) dictate the health and proposed future trajectory
of a given concern. Unfortunately, there isn’t a line item in an organization’s 10K statement for neither
brand contributions nor valuation. We all agree that Coca Cola and Nike’s most valuable asset is their
brand mark, yet try to find a financial valuation on the income statement or balance sheet. Touché!
Translation in financial terms:
During graduate school, my professor introduced us to a new concept called Integrated Brand
Communications (IBC). Until such time, Integrated Marketing Communications was the latest rave
amongst organizations as a means to unify their corporate brand messages. IBC, on the other hand,
quantifies media expenditures and through a spreadsheet format, allows the leader to evaluate the
return on investment. In addition, a direct link (for the first time) can be established between media
expenditures and growth in revenues. This causal relationship between media placement and ROI is
rarely utilized due to thin resources and breakneck speeds most organizations traverse. Another
significant paradox is this – organizations use financial results as the key metric of performance, yet
forego this critical analysis and squander precious resources in the process. In my opinion, the
application of IBC provides management accountability and tangible metrics to assess their strategic
branding and marketing initiatives!
An abbreviated ROCI spreadsheet below provides the framework by which a financial assessment can
be undertaken. The essence of this exercise is to establish the available market potential, the current
income flow without communications, and the ensuing outflow by pursuing an investment in brand
communications. If this methodology was followed in pursuant years, a true ROCI could be
established and evaluated in quantifiable terms. .
Return on Customer Investment
| Category Requirement Assumptions |
Domestic |
Europe |
Asia |
| Base Income Flow Assumptions |
$ |
$ |
$ |
| Scenario A: No Communications Investment |
$ |
$ |
$ |
| Scenario B: Communications Investment |
$ |
$ |
$ |
| ROI Calculation |
$ |
$ |
$ |
| Incremental ROCI |
$ |
$ |
$ |
How can one effect change?
The application of IBC shifts marketing philosophy from that of measuring awareness to one of
targeting opportunity. For the first time, it forces marketing to analyze the overall category potential
(market leaders per segment) and determine through a targeted effort what a focused IBC program can
yield. This process also allows the monitoring of current media spend to assess the ROI from year-to-
year. Finally, leaders can now apply accountability to marketing budgets and evaluate the
effectiveness of different programs. In a world driven by financial metrics, isn’t it time to measure
your marketing staff and subsequent programs?
Final thoughts
If management hired one individual to implement IBC throughout the organization, the return on
investment and increase in business opportunities would dwarf the monetary expenditure in less than
one year. Even if your organization had one staff member responsible for the marketing function, the
accountability realized in the short term would be dramatic. The application of IBC not only helps to
identify the what and why of your current marketing programs, it quickly enables leaders to shift
investments from under-performing programs to those with more attractive returns!
Bill Nissim consults with organizations on strategic branding
imperatives. His website www.ibranz.com contains reference materials, links, and helpful
articles on the many facets of branding. In addition, Nissim released his first book
“The Brand Advocate” to provide a tool-kit for the marketing practitioner.
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