As part of his presentation at the recent Berkshire Hathaway annual shareholders' meeting, Warren Buffet said: "I can make a whole lot more money skillfully managing intangible assets than tangible assets." And if Buffet is true to his words, one of the first types of intangible he will look at is brands, arguably the single most important category of intangible assets.
Given the potential value in brands, it makes business sense that an increasing number of executive boards devote an equal amount of attention to their ROI and evaluation as they spend in relation to monitoring tangible assets.
In addition, in March 2004, the International Accounting Standards Board (IASB) issued a new standard — IFRS 3 Business Combinations. In essence, IFRS 3 requires all publicly listed companies to place the value of acquired brands and other acquired intangible assets on their balance sheets. This standard followed many years of global debate concerning the accounting treatment of brands. These changes have brought a greater prominence to the ongoing debate concerning brand and intangible asset valuation and have also increased the number of those participating in the debate. International standard setting bodies are now establishing various initiatives in a bid to standardise valuation techniques.
The combination of the increasing economic significance of brands and this reform to accounting standards has heightened the importance of a well-informed discussion of the value that brands add to the bottom line.
The challenge to the marketing profession is to demonstrate that brands are business assets capable of generating superior economic returns for their owners, and worthy of multi-year investment commitments. To do so, marketers need to show that they have a robust approach for measuring the quality of their brand assets, and for quantifying the contribution that the brand asset makes to shareholder value.
Indian companies need a board savvy argument, which captures the value of brands. In essence, the problem of convincing the board of the value inherent in brands involves conceptualising marketing as an investment to create a brand asset rather than an expense. To provide momentum to this discussion, Brand Finance has created a comprehensive analysis of India's top value creating brands. To our knowledge, this is the first time that such a list has been produced for Indian companies.

Marketing — Reclaiming a Seat at the Top Table

Many business heads — and a fair proportion of marketing professionals themselves — are frustrated about the lack of a framework for measuring and managing brand equity in a way that links directly the metrics that CEOs care about.
One of the challenges is that the traditional metrics used by marketers (such as awareness and perceived quality) no longer appear to be reliable indicators of the potential for value creation. This has led to the marginalisation of the marketing function — a trend succinctly expressed by Don Lehmann, professor of marketing at the Graduate School of Business at Columbia in New York — when he observed: "When marketing people talk about what they do, the variables they cite are not the ones the CEO cares about. Customer awareness, customer satisfaction and market share are metrics, and they are nice to know about. But the CEO is more concerned with shareholder value, market capitalisation, return on assets and return on investment. In marketing, people don't talk that way."

The goal of this report has been to suggest ways in which this gap can be narrowed. Specific suggestions include:

• Acknowledging that brand equity is an intermediary step towards the larger goal of creating a more successful business.
• Accepting the need to express the impact of brands in terms of profitability, growth and risk.
• Defining brand equity in a way that captures the potential of a brand to create future cash flow (for example, by replacing metrics such as awareness with measures of brand salience —such as relevant differentiation)
• Resisting the temptation to narrow the focus to brand valuation when the focus should be on the overall value dynamics of the business.

The key thing for marketers is to engage in the debate, accepting that the language they will need to use is that of shareholder value.

Source: Economic Times