‘Enterprise value is now composed of marketing-driven “intangibles’. Intangible assets such as brand value, customer equity and perceptions of innovation now make up over 80% of shareholder value and increasingly drive stock price.’
Forbes CMO Marketing Accountability Report 2017
Clearly strong Value Propositions and powerful Brands drive business value; in certain situations nowadays to levels well beyond ‘normal’. Brands like Uber (valued at around $80bn before it had made any profit yet) are living proof. It’s plain that in a world where customer experience is king, the contribution of marketing to business value needs to be better understood and, where possible, quantified – in order to aid investor decision making.
In 2017, Forbes CMO produced a report; ‘Forbes Marketing Accountability’ which codified the areas where marketing makes a contribution to ‘Enterprise Value’. The stronger and more tangible the following six areas are, the higher the Value contribution;
- Having a Brand with ‘Strong Brand Value’
- Creating ‘Customer Equity’ via great customer experiences and deeper customer relationships
- Strong Organisational Competence – successful linkages & collaboration between Marketing and other business functions
- Initiatives in Modern Marketing Methods & Techniques, particularly Marketing Measurement & ROI
- Use of appropriate Digital Platforms & Tools
- Innovation in Marketing
So how should Investors approach Marketing Performance Evaluation? The challenge is to approach evaluation of the Marketing function & performance of a business in two scenarios;
- In prospective ‘Buy Mode’. When you’re considering an Investment in a business. When you are in the Due Diligence process and as part of that wish to assess & consider how a prospect business’s marketing performs.
- In prospective ‘Sale Mode’. When a business in which you are invested is being readied for Sale and needs to ensure its marketing function is positioned as fit for purpose to prospective buyers.
The benefit of assessing marketing performance is to deliver as objective a view as possible in an area of business that is harder to quantify than some. At M4G we aim provide clear guidance to support other traditional Due Diligence and Pre Sale activities, adding to the insight available to decision makers.