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New metric can boost marketing

News, 24 November 2015

NEW YORK: A new metric developed by the Marketing Accountability Standards Board (MASB) promises to elevate the standing of marketers in the boardroom by tying consumer preference to market share.

The MASB, set up by academics, market researchers and marketers seven years ago, has recently completed the first part of a research project where it trialled a "brand choice" metric.

This involved a study of 100 packaged-goods and automotive brands, with around 500 people per brand being asked which of several competing brands in a category they would choose if they were winners of a prize draw.

Movements in this metric were tracked across an 18-month period and found to correlate closely with market share, Advertising Age reported.

The correlation figure of 0.88 – one indicates the strongest correlation, zero the weakest – rose as high as 0.94 once the effects of pricing and distribution differences were removed.

"I'm actually very optimistic," said Donald Stewart, marketing professor at Loyola Marymount University in Los Angeles and MASB chair, of the Brand Choice metric. "It's simple. It's easy to understand. It's highly predictive.

"We are now at the point where we can begin to contribute to the financial dialogue of the firm as well as the marketing dialogue," he added.

By linking the new metric not just to market share but to other metrics such as price premium and distribution coverage, "we can actually generate estimates of future operating cash flow, which allows you to get at the value of a brand", Stewart explained.

Brand valuations can be notoriously subjective, as was evident at a panel discussion during the recent Festival of Marketing event in London, where an audience was equally divided on whether brand valuations were "bullshit or brilliant".

The next stage in MASB's research will tackle this issue, as it looks at how the Brand Choice metric holds up compared to the valuations produced by the likes of Interbrand or Millward Brown's BrandZ.

Data sourced from Advertising Age; additional content by Warc staff