Marketing: can you justify your expenses?

Pity the poor marketers. Their marketing expenditures always are being scrutinized for the impact on the bottom line. Yet, a lot of marketing affects an institution in intangible ways--such as by building brand equity--which cannot easily be measured.

Increasingly, marketers in other industries are justifying their expenditures in terms of how they impact shareholder returns. This technique is called "shareholder value analysis."

Now, the Marketing Science Institute reports that a new study entitled, "Advertising Spending and Market Capitalization" by Amit Joshi and Dominique Hanssens of UCLA's Anderson School of Management finds a link between advertising and firm value. In other words, when a company advertises more, it creates a stronger brand, and investors are willing to pay more for stock from companies with a stronger brand.

The finding offers a way to improve the accountability of marketing and advertising expenditures, according to Joshi. It also supports the importance of using marketing to build intangible assets, www.msi.org