Brand investment matters to the City, reveals new IPA survey

The IPA has unveiled the results of a new IPA/Brand Finance survey and analysis, finding that investment analysts fundamentally believe that brand strength is critical to a firm’s success. This is according to new research by IPA/Brand Finance and analysis by Ian Whittaker, a former City analyst and founder and managing director, Liberty Sky Advisors, that will be unveiled at the flagship IPA EffWorks Global 2023 Conference later today (10 October 2023).

The new 'Investment Analyst Survey', which was completed by over 200 financial analysts who cover publicly listed companies in the United States and United Kingdom, reveals that 'strength of brand/marketing' is the factor most frequently cited by analysts (at 79 per cent) when asked how they appraise and analyse the companies they cover. This is cited ahead of leadership quality (76 per cent) and technological innovation (72 per cent).

Further positive findings reveal that more analysts perceive advertising as an investment (37 per cent) than a cost (24 per cent). While 38 per cent state it is a mixture of both.

Building on this, according to the findings, the analysts who examine advertising and promotions are significantly more likely to believe marketing is an investment and that it drives organic growth.

Despite the positive perception in some areas, the results show a seeming lack of understanding of marketing in other areas. For example, marketing was seen as contributing most to 'profit margins' (77 per cent) and 'sales volume' (71 per cent) - but less in areas such as 'sales price' ie premium generated (54 per cent) and 'share price'. (44 per cent).

This is contrary to current evidence that Ian Whittaker has analysed from some major global brands, which shows how strong brands managed to retain volume share despite price increases.

In addition, when asked for their reactions if one of the companies they analysed announced a marketing spend cut, only 36 per cent of analysts felt it was a ‘short-term fix with long-term negative consequences’ compared to over half (52 per cent) who said they saw it as a ‘positive cost-saving measure’.

When asked whether they thought marketing spend should be treated like technology R&D, where it is capitalised, nearly 90 per cent of analysts said they believe marketing spend should be placed in capital expenditure either all (56 per cent), or part of the time (33 per cent).

Two thirds of analysts (67 per cent) also want to see changes to how intangible assets as a whole are reported upon and accounted for.

Those that stated they think it should be capitalised at least some of the time believe it would improve their ability to value the company and give them better understanding of future growth potential.

Further to his analysis of the findings, Ian Whittaker, a former City analyst and founder and managing director, Liberty Sky Advisors, will share his conclusions and recommendations that he will expand upon in an upcoming IPA report.

Laurence Green, Director of Effectiveness, IPA said: “This survey provides welcome news that investors are placing increasing interest and importance on investment in brands. To facilitate this and to improve understanding, it is incumbent on brand owners to provide the relevant data and evidence to investors, and to engage with them using their language in order to make the most compelling case for marketing as a long-term investment.”

Annie Brown, General Manager, Brand Finance added: "When companies spend money to change the way people see their brand, they are not doing it for a one-off result. They do it to build up the long-term value of their brand asset. Therefore, advertising spend should in most cases be considered an investment for future growth, not just a cost for delivering immediate business.”