Marketers need to place a clearer financial value on the returns delivered by intangible assets such as brands, an article in the Journal of Advertising Research (JAR) has argued.
David W. Stewart, the president’s professor of marketing and business law at Loyola Marymount University, discussed this subject in a paper entitled, The accountability crisis in advertising and marketing: Self-regulation and deeper metrics are needed to survive the Digital Age.
In the digital universe, Stewart proposed, information has become a “critical asset”. But because it is an intangible asset – just like brands, customer loyalty and relationships – it does not appear on corporate balance sheets.
This is the case even though intangible assets have a central role in business value and profitability – with estimates of the value of such assets in major firms reaching as high as 87%, according to certain studies.
Building on this topic, Stewart added that the “value of media is in its ability to facilitate the creation and management of market-centered intangible assets”.
The problem? “Advertising and marketing, however, have done a poor job of articulating the value of the assets they create and manage in economic terms,” Stewart wrote.
Frequently, he explained, marketing metrics do not include an “explicit statement of the financial outcomes” – as, say, relate to current and future cash flows.
“There is a pressing need for measures of the value of market-centered intangible assets, not only because they represent a large proportion of the value of a firm,” argued Stewart.
“Creation and management of intangible assets involves substantial resources, the size of which would suggest the need for on-going and careful measurement of the return on such expenditures.”
Introducing measures tied to financial performance would enable the assessment “of changes in intangible assets over time but also a means for assessing the effects of specific marketing activities and expenditures,” Stewart stated.
“The absence of such metrics adds to the suspicions and concerns about the positive contributions of advertising and marketing, even as concerns about negative outcomes are magnified,” he continued.
Any debate around new regulations – or, say, potential anti-trust legislation – in the industry as a whole must also take the nature and role of intangible assets into account, as well as their “benefit” to consumers, Stewart added.
Sourced from Journal of Advertising Research; additional content by WARC staff