Holding marketers accountable

Dr Roger Sinclair, professor of marketing at Wits and MD of brand valuation consultancy, BrandMetrics, highlighted this, "the new future of brand management", at a breakfast presentation last week hosted by the Marketing Federation of South Africa (mfsa).

The topic under discussion, Accounting's New Brand Attack, unravelled the complexities of the newly introduced standard and explained how it will impact on the status of marketing and general brand elevation.

IFRS 3 recognises that when a brand owning company is sold the brands that are owned by the target company, will formally be accounted for as assets. In January this year, accounting bodies throughout the world, including South Africa, introduced this standard as part of their accounting practices.

Marketers are advised to get with the programme or lose out, as South Africa, along with most other countries is now subject to raising branding to the new standard. The United States of America introduced a similar standard three years ago.

Fundamentally, explains Sinclair, the change signals greater accountability for brand managers. "In future, brand champions will be judged on their ability to manage and sustain a balance sheet level asset, as opposed to being custodians of an annual budget," he says.

Sinclair says that, essentially, brand managers have been getting away with murder in the past, as no definitive measures existed for what they do: "The new standard introduces an almost precise measure. Accountants will start demanding that brand value be tested like any other asset, and if value slides, marketers will be held accountable. Accountability will be enforced, and it's something we are going to have to get used to."

The reality for marketers is that certain key areas of financial management can no longer be ignored. "This is no longer strictly an accounting function; if you want to be a brand manager, it is absolutely essential to understand the financial structure of the organisation and how the brand fits into it. Basic financial tools such as Net Asset Value (NPV) and Return on Investment (ROI) will form an integral part of the marketer's operational vocabulary," Sinclair says.

But, says Sinclair, this is not to say that brand managers should stop doing what they do, in terms of marketing the brand and understanding consumer behaviour. The biggest change will be that, along with technical people of the organisation, for example, marketers must be as conversant with finance as their own topic.

"As soon as the brand is represented on the balance sheet and shareholder wealth is affected by a brand's asset value performance, marketing's responsibility extends to maintaining that shareholder wealth.

"If the value is on the balance sheet, shareholders will want to know what you are doing to build that asset. Marketers have for decades now been marginalised, with marketing budgets seen as an expense, and one reluctantly spent at that.

The old perspective of marketing as expenditure will change to that of being a maintainable investment," he adds.

"The overall implication is that the value of marketing, itself, will be hugely raised within the organisation. Marketers still have to deliver the goods, but it will be that much easier to demonstrate how successful we've been," Sinclair concludes.