Biggest firms fail to measure marketing's effect
Britain's biggest companies are not recognising the contribution of marketing in their financial reporting, according to research by the Institute of Practitioners in Advertising (IPA).
In a study of their financial reports, the IPA found that just four FTSE-100 companies - British American Tobacco, National Grid, HSBC and Reckitt Benckiser - used brand measures as key performance indicators, and only one of the 388 key measures used concerned marketing spend, yet 22% of companies' key performance indicators are based on factors such as sales that are in part driven by marketing activity.
'A tiny minority monitored brand assets, even though brands now account for 12% of a company's value,' said Moray MacLennan, president of the IPA. 'Boards need to better understand how advertising and marketing enable business growth.'
Regulations on financial reporting are due to change in October with the enforcement of Enhanced Business Reviews under the Companies Act 2006, which will require quoted companies to disclose information on trends and factors likely to affect performance. According to the IPA, factors such as the strength of a firm's brands will be relevant in these reviews.
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