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Published on April 15, 2008

"The answer lies in understanding how marketing affects cash flow - specifically, the inward flow of cash from sales to end-customers of the business," it said in a statement to promote its "Brand Science" concept.

Marketing has multiple effects that vary in size and the time they take to work. The standard practice in assessing the impact of marketing is to measure the effect on short-term sales. Then econometric modelling techniques can be employed to determine accurately the effect on incremental sales of all measurable marketing drivers like pricing, advertising and public relations; and non-marketing drivers like seasonality, sector growth and competitive activity.

But econometrics is likely to prove that marketing is not an investment, but rather a cost if only short-term sales effects are evaluated. Under "Brand Science", other effects must be measured with a wider set of analytical techniques.

Then the results will tell the value of marketing and how producers should spend money on building brand awareness.

A successful evaluation will show that if a price premium is maintained, the effect on profitability is higher than spending money on advertising. The premium affects the whole brand rather than incremental sales.

"Increasing barriers to entry through brand loyalty may take a long time to achieve but once established can be a way to secure inward cash flow and thereby reduce inherent brand risk," the group said.

The Nation