Knowing how to win:
Why marketing capability-building is business-building
How much is your most valuable brand worth? The three most-cited global brand-valuation agencies use different methodologies and produce slightly different league tables but agree on this: the value of every brand in the global top 100 runs into the billions (see Fig 1).
In the latest Millward-Brown BrandZ rankings, published in June 2016, the top three global brands, with their valuations, were Google ($229.2bn), Apple ($228.5bn) and Microsoft ($121.8bn). The 100th-highest rated brand, Adobe, was valued at $10.4bn.
More striking than the giddy figures themselves, though, is the weightlessness, the ephemeral nature, of what they are valuing. Again, methodologies differ, but the essence of brand-valuation is that it attempts to place a dollar value on the brand asset itself, beyond the value of any part of the substantive product or service or the means of their production (see panel below).
The upshot of this is that the single most valuable asset owned by many corporations – more precious than any plant, fleet or IP – is something that can ultimately be abstracted to signs, words and symbols, whose wealth-generating associations reside not in any part of corporate HQ but in the minds of millions of consumers all over
Brand Finance’s methodology
Brand Finance uses a ‘Royalty Relief methodology which determines the value a company would be willing to pay to license its brand as if it did not own it. This approach involves estimating the future revenue attributable to a brand and calculating a royalty rate that would be charged for the use of the brand.’
Marketers cannot and generally do not take credit for the value of these atomised assets; they are always the product of an entire organisation striving toward the same ends. That said, marketers are the people with their hands on the levers, the ones with the greatest share of responsibility for enhancing the equity and, just as crucially, ensuring that wealth-destroying harm is guarded against.
If any other multi-billion-dollar asset were largely in the hands of a single department – a production plant, say – it would be taken for granted that each operative would be a highly trained professional. In marketing that is rarely the case. In many departments it is the norm to ‘learn on the job’. The diffuse nature of the discipline perhaps
encourages that; marketing is not a ‘chunked’, reductive process and not one where cause and effect are easily weighed.
But what about those businesses that do take marketing training seriously? What about those who insist that the malleability of the discipline, its often intuitive nature, are reasons, not to shirk training, but the reverse – to underpin talent with
continually-updated, best-practice technique? Is there quantitative evidence that
their investment in marketing capability-development pays off? As it happens, one
of the very agencies that value brands has taken a look. And its answer is an
The M2020 study
The study was able to use quantitative data to divide brands into two broad
achievement camps: ‘over-performers’ and ‘under-performers’. It then looked at a range of variables and assessed the importance of each by mapping the effect they had in helping brands make it into the ‘over-performer’ camp. Of all the potential
influences for success, capability-building was No. 1:
‘Of all strategic levers to drive competitive advantage, building marketing capability was identified as the most important.’
Again, working from quantitative data looking at what makes an ‘over-performer’, that key conclusion was deepened with more nuanced observations:
‘State-of-the-art marketing capabilities drive higher revenue growth. The capabilities with the highest growth correlation are Consumer Understanding, Brand Positioning and Brand Strategy’
‘When it comes to building marketing excellence, over-performing marketing organizations have a clear quantity and quality advantage in their trainings. On average, their employees receive 20% more training days, each of them more tailored to their company’s unique challenges and way of marketing.’
The M2020 study is not the only one to highlight the importance of marketing capability in business growth, although it is by some way the most comprehensive. Among those who have independently reached similar conclusions are McKinsey, in a 2015 paper entitled ‘Building marketing and sales capabilities to beat the market’ (see below) and Forbes, which reported in a 2014 article that ‘70% of organisations cite capability gaps as one of their biggest challenges’.
‘Companies with better marketing and sales capabilities grow faster’
‘Revenue growth at companies with more advanced marketing and sales capabilities tended to be 30% greater than the average company within their sector’
That McKinsey paper concluded with a statement few business people would disagree with: ‘Consistent growth is difficult; consistent outperformance rarer still.’ Here’s what it went on to add: ‘Yet many companies still fail to develop their marketing and sales capabilities to drive performance.’
Yes – the temptation to cut is always there. In a diffuse discipline like marketing, where the effects of decisions and interventions can take time to play out, budgets for training and continuous development are always under threat – seen as ‘optional’ to unenlightened eyes. It’s time to hit back against that ignorance. For those who need to fight for capability-development budgets, the evidence for effectiveness is there.