A major problem marketers face today is showing why what they do is important. Marketing’s value is hard to measure and, in most cases, accounts simply do not capture the value created by marketing.
Assistant Professor Neil Bendle is researching the relationship between marketing and accounting and looking at how marketers can use managerial accounts to better show marketing’s value. As both an accountant and marketing professor, he understands the challenges of accounting for marketing but believes progress can be made.
“We encourage companies to record the value of their marketing assets such as the relationships with their customers and the brands the company controls,” he said. “If they do that, hopefully they will more effectively invest in building and maintaining these assets.”
Changing the paradigm
His research looks at three areas:
- Identifying the problem: Marketing activities are typically undervalued and marketing’s long-term value creation is often not recorded in accounts. Bendle said there is a big difference between the market value of a company, measured through what people will pay for shares, and the book value of the company, the company’s value reported in the financial accounts. While there are understandable reasons for the discrepancy, such as financial accountants’ reluctance to record hard to value brands on the books, the result is problematic if financial accounting values influence managerial decision making;
- Presenting the solution: Bendle’s research looks at how senior marketers can work with managerial accountants to create comprehensive marketing accounts. If marketers adopt marketing accounts, they can begin recording marketing assets on a consistent basis, helping to treat marketing as a valuable investment, and to better control the assets generated by the investments; and,
- Ironing out the details: Bendle’s research explains the principles underlying, and how to create, marketing accounts. These accounts should be based on expected value, and give the best possible estimate of the value of marketing assets. Since marketing accounts calculate the best possible estimate of a firm, rather than a more conservative estimate, Bendle said the numbers shouldn’t be shared with investors or with external stakeholders. They are solely to aid company management.
As an accountant, Bendle understands managerial accounts and how they can, indeed he argues should, be used to track the value of marketing efforts. He said consistent reporting is key to creating a shared understanding of marketing’s value.
“I want to ensure we regularize things, know what we want to achieve, and get a consistent process together,” he said. “You come up with a method, use it consistently, and keep it on record so the same method is used each period. No valuation method is perfect, and valuations of marketing assets certainly won’t be, but the basic idea is to leverage the benefits of consistency. Doing the same thing consistently allows companies to record the value of marketing assets going forward and see how this changes over time.”
Translating findings into the classroom
Bendle has been working with the Marketing Accountability Standards Board (MASB) to understand how to help marketers liaise better with accountants and finance colleagues. He is working on incorporating the findings into a curriculum for marketing and finance.
“I think it’s important that what we do for research filters back into how we teach and what we teach. This research has real-world practicality and will translate to student learning quite well,” he said. “With this, and other projects, we are exploring how you could teach relevant issues in the marketing-finance interface.”