Linking Advertising and Brand Value

Linking Advertising and Brand Value Irene M. Herremans, John K. Ryans, Jr., and Raj Aggarwal

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egardless of whether or not it explicitly appears on the balance sheet, most top executives would agree that the value of a company’s brands—its brand equity—is one of its most important assets. This is especially true for major consumer goods companies, such as Coca-Cola or Nike, but what about business-tobusiness products? Recently, Allied Signal acquired Honeywell and decided to name the newly created company Honeywell. Why? Because Honeywell has long had strong brand recognition in control systems, which is the centerpiece of the newly merged group. Honeywell, of course, is not an isolated example, and the importance of brand equity has been a frequent topic of discussion for practitioners and academics alike. In addition to brand assets, most firms increasingly have other intangible assets that are quite valuable. These include not only such technological assets as patents and process know-how, but also corporate culture and organizational architecture designed to optimize the use of human capital. As an example, Nakamura (1999) reports that R&D expenditures for U.S. companies have risen steadily in each decade as a proportion of sales— from 1.3 percent in the 1950s to 2.9 percent in the 1990s. Reflecting the increased importance of intellectual and other intangible assets, recent years have seen important increases in price/ earning and market value to book value ratios for U.S. companies. Indeed, the bases of wealth creation are rapidly moving from tangible to intangible assets. Yet intangible assets, including brand equity, intellectual capital, R&D, and so on, have historically received little attention from the finance and accounting communities. This view may now be changing. Recently, Banham (1998) and others have suggested that finance has an important role to play in the management of such important assets as brand equity. And according to Rutledge (1997), The Confer-

Linking Advertising and Brand Value

ence Board, a highly respected New York corporate research organization, has suggested that appropriate disclosure procedures must be developed that will allow the stock price to reflect the value of a company’s intangible assets. While all intangible assets can be of considerable importance in today’s competitive environment, the focus of our research here is on brand equity, particularly on developing performance measures of various marketing and advertising activities as they relate to brand equity. Our objective is not related to brand values simply for external reporting, but equally, if not more so, for internal management and control. This latter area is often ignored because marketing has long been seen as the “soft side” of operations compared to finance and production. As a first step in the measurement process, we shall explore the relationship between brand enhancement and advertising.

This advertising turnover factor can measure how well your ad dollars are building brand value in the industry.

Efficiency Versus Effectiveness of Marketing Expenditures In an era of increased productivity through computer-aided production techniques and global competition, available capacity can easily provide for demand. Thus, individual product profitability has become a success factor, and inefficient and ineffective marketing efforts quickly lessen product profitability. “Marketing has advanced to a stage in which it has become a critical factor in determining success or failure of the organization,” state Herremans and Ryans (1995); “therefore, accountability is important.” 19

Given the large investment in advertising and marketing and the high failure rate of new products (six or seven out of every ten), marketing managers must have some means to justify the continued investment in brands, especially when budgets are tight. Not only must “Isolating return on brand expenditures on values, just as with other brand building be effective, but managcapital investments, is ers must also know necessary to ensure that which of them are most efficient (that is, each investment is the most effective per doing its part in creating dollar). Unfortunately, information on either shareholder value.” the efficiency or the effectiveness of advertising and other brand-building expenditures is usually unavailable in most companies. Gap Between Accounting and Marketing Focus A number of attempts have been made to reconcile the differences in accounting/finance and marketing perspectives. Indeed, as an example of the importance of doing so, Anderson (1982) notes that ignoring the financial implications of marketing decisions (such as increases in working capital or in optimal debt ratios) is a serious form of marketing myopia. Other researchers have sought to clarify how market-based assets such as customer and partner relationships can enhance shareholder value. Clearly, marketing expenses represent a significant component of the cost structure, especially for consumer product companies; yet attention has been focused mostly on marketing effectiveness rather than efficiency. Thus, there is a significant gap between the usefulness of information currently available from accounting systems and the information that would be useful in making marketing decisions. To illustrate this marketing-accounting gap, in its 1994 annual report General Mills informed its shareholders that it had earned a return on equity of 37.7 percent. However, if the calculation is adjusted to consider the company’s brand values, the return on equity is reduced to 7.3 percent. Other companies with large investments in their brands show similar results. Moreover, the return on equity with brand values should be compared to industry averages to determine whether General Mills and other companies are getting the return they should. Isolating return on brand values, just as with other capital investments, is necessary to ensure that each investment is doing its part in creating shareholder value. 20

Brand Value Disclosure Practice Although the accounting profession currently fails to provide adequate direction on assessing and reporting brand values, a few firms have been leaders in disclosing information on their brand investments. Further, they often highlight the relative importance of intangible assets compared to their total assets and refer to the role that advertising plays in maintaining brand value. To illustrate, the Clorox Company stated in its 1997 annual report that “effective advertising persuades consumers to use our brands.” In explaining its increased advertising expenses for one product, it noted that “higher levels of media and sales promotion spending…ensure that our established brand equities remain strong, and in particular…solidify Brita’s brand equity and category leadership.” To date, however, it appears there is little consistency in how companies discuss their brand equity. And only a limited number appear to attempt to evaluate advertising’s role in maintaining or enhancing brand equity. Brand value reporting is much more common in the U.K., where the values may be reported on the balance sheet, but there is still a lack of credible disclosure to accompany the brand values. BRAND VALUE MEASUREMENT MODEL

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n his 1996 book Building Strong Brands, David Aaker provides descriptions of the EquiTrend’s model, the Interbrand model, and Young & Rubicom’s Brand Asset Evaluator. The Interbrand model was developed by U.K.based Interbrand, a well-respected private brand consulting firm, and the results of its annual ratings tend to receive the most extensive media exposure. Unlike the other models, the Interbrand model is more business-related and offers the best potential for determining a financial value for a brand. In Interbrand’s most recent annual report, Coca-Cola is deemed the world’s most valuable brand, and its brand equity of $83.8 billion represents 60 percent of its market value. The Financial Times notes that Interbrand’s approach has been recognized by auditors, tax authorities and stock exchanges in many countries (Tompkins 1999). Between 1991 and 1996, Financial World (FW ), a then popular business publication, used a slightly modified version of the Interbrand method to analyze a wide range of brands from various industries. As with Interbrand, the FW approach was concerned with the brands making the greatest one-year change, and gave little attention to marketing’s relationship to the change. Thus, each brand valuation model has its strengths and weaknesses; the measurements Business Horizons / May-June 2000

used in some are more subjective than in others. Even though the level of advertising expenditures might not result in a direct relationship to brand value (an advertising campaign might be ineffective, given the sheer dollar volume of resources spent), it is important to determine the role such expenditures do play in building brand value. All the brand equity models contain elements that could be developed or improved through more effective advertising support. Most measurement models result in a qualitative analysis of what builds brand equity, but a few help in determining a quantitative value for a brand. Although intuition supports the fact that advertising would play a role in the development of brand equity, our research attempts to define the relationship more clearly so that management can monitor the efficiency as well as the effectiveness of its advertising in relationship to its brand values. Aaker explains that it is not easy to build strong brands, especially because of the pressure to invest elsewhere and see short-term results. In terms of advertising expenditures, to eliminate the pressure to invest elsewhere means that marketing managers must be able to show that the expenditures continue to show a high return on investment, even when the brand is strong. To eliminate the pressure for short-term results, especially when budgets are tight, managers must show that a cut in expenditures will be detrimental to the bottom-line profitability in the longer run. Research on the role of advertising expenditures will be useful for firms determining future cash flows (or operating income) or reviewing possible impairment of brand value in either the short run or the long run. Model and Research Methods In financial terms, the value of a brand, like the value of any asset, is determined by assessing the present value of future returns associated with that asset. “Returns” are usually interpreted as cash flows or operating income. Riskier returns are discounted at higher rates and have lower present values. One way of interpreting risk is through variability or instability. The more the returns generated by the asset fluctuate, the less reliable or less predictable they are, and the more risk and less value are associated with the asset. Risk can be reduced through higher loyalty, resulting in fewer costs to retain customers or find new ones. Customers are retained in several ways but generally by some form of investment in marketing and/or R&D. Advertising is necessary to communicate the product’s availability, understand its characteristics, and build an image. R&D and market research should ensure a high-quality product that continues to meet customers’ needs. Linking Advertising and Brand Value

So brand asset measurements should address the extent that the firm is successful in these steps: Create a product ➠ Provide marketing support ➠ Retain customers ➠ Build brand value ➠ Reduce return volatility

The process might not always occur in exactly this order. Marketing support might lead directly to building brand value, which in turn retains customers. Another possibility is that marketing support might retain customers; customer retention then reduces return volatility, which in turn builds brand value. The particular sequence is not our focus here, however. Rather, we are attempting to define the important elements in creating a brand value in order to suggest an appropriate performance measurement system. In marketing terms, three main factors tend to drive brand value and the resulting returns: marketing investment, product quality, and market share. For our purposes, marketing investment is defined as advertising investment. Although other marketing support is important in building brand value, evidence suggests that advertising plays a superior role compared to other forms of promotion in brand enhancement or brand building. Moreover, because advertising expenditures frequently run between 10 and 15 percent of sales, more attention must be paid to their ability to build brand value. Although more firms are using post-purchase studies to evaluate satisfaction, a direct measure of customer loyalty is not always available, especially with the consumer products industry. However, a surrogate of customer loyalty can be used in the form of trends or volatility of market share. Because the focus of this research is on the advertising component of marketing support, advertising expenditures were separated from other forms of support. To convey the relationship of the firm’s advertising expenditures to its brand value in an easy-to-understand fashion, we used a calculation called advertising turnover. It suggests how efficiently and effectively the firm is able to convert its advertising dollars into brand value. The measure is similar to the one used in financial analysis to determine the productivity of capital assets or accounts receivable. Referred to as “asset or accounts receivable turnover,” the latter answers the questions: How quickly are capital assets turned into sales revenues? Or how quickly are customer credit sales converted to cash? The former measure determines how well advertising expenditures are turned into brand value. It is calculated for each year and shown as a trend: Advertising turnover =

Brand Value Advertising Expenditures

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To study the relationship between a firm’s advertising expenditures and its brand value, it was first necessary to find a database of externally reported brand values. Even though the valuation process is being undertaken by more and more firms as they begin to recognize the necessity of managing intangible assets, generally the brand values are not made available to the public. Fortunately, FW reported a number of brand values over the period 1991–1996. With each year, increasing numbers of them (both corporate and product brands) were reported. An important controlling feature of the FW database is that all the brand values were based on Interbrand’s respected valuation method, and all were valued using the same method. Therefore, if an error has been made or a subjective amount determined in the reported brand value due to the inappropriateness of the valuation model used, it does not affect the results of this research because the error would be systematic and would affect all brands in the same manner. Criteria were set up to determine which firms to include in the study sample, as follows: 1. Both brand values and advertising expenditures had to be available for at least four years. The related expenditures used were available either from Advertising Age or the organization’s annual report, SEC documentation, or a combination of both. 2. The product brand sales had to be at least 70 percent of the company’s total sales. In other words, the brand had to be a company brand rather than a product brand. Because the advertising expenditures available were reported only in an aggregate number for all the firm’s brands, to isolate the effect of the firm’s advertising expenditures on its brand value it was necessary to study only corporate brand values. Applying these criteria, we were left with 12 sample firms to use in the study. The names of the companies and the number of years for which their brand values were publicly available are shown in Table 1. As mentioned before, one would assume intuitively that there is a relationship between a firm’s brand value and its advertising expenditures. However, a correTable 1 lation and regression analysis of Sample Firms Used in Study these 12 firms showed that advertising expenditures and brand values Number in ( ) Indicates Years of do not always move in the same Brand Values and Advertising direction in the same year, or even Expenditures, 1991-1996 one or two years later. Depending on the product, a lag might exist Intel (5) Reebok (5) between the time the potential Hewlett-Packard (4) Kellogg (6) Compaq (4) Wrigley (6) buyer is exposed to the advertising Kodak (5) Coke (6) and the time the purchase actually Polaroid (5) Coors (5) takes place. So tests were run to Nike (5) Avon (5) determine whether advertising ex22

penditures are converted into brand values the same year, one year later, or two years later. Those tests resulted in various findings as to the extent that brand values are a function of advertising expenditures. RESULTS

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ased on the relationship between their advertising expenditures and their brand values, firms were categorized according to the dynamics of the relationship: A. High-Efficiency Brand Enhancers. Both brand values and advertising expenditures are rising; values are rising at a faster rate than expenditures. The advertising turnover shows a slightly increasing trend. B. Low-Efficiency Brand Enhancers. Both brand values and advertising expenditures are rising; however, expenditures are rising at a faster rate than values. Even though the absolute brand value for these firms shows an increasing trend, the advertising turnover is volatile because the relationship between advertising dollars and brand value is less clear. C. Brand Future Unknown. Brand values are rising; advertising expenditures are decreasing. The advertising turnover shows a rapid increase, but one wonders how long the trend can continue. D. Brand Deterioration. Brand values are decreasing; advertising expenditures are rising. The advertising turnover shows a downward trend. E. Brand Neglect. Both brand values and advertising expenditures are decreasing. The advertising turnover might increase or decrease, depending on the decline rate of each variable. To see more readily the relationship between a firm’s brand value and its advertising expenditures, the advertising turnover factor was calculated for each firm for each year that both were available. This calculation was done for several reasons: (1) to confirm the statistical results; (2) to visualize the relationship through a simple indicator to understand it better; and (3) to suggest that a simple indicator of the relationship might be appropriate for managers to use for internal monitoring as well as external reporting of marketing performance, along with other performance measures (discussed more thoroughly later). The advertising turnover trends for the companies used in this study are illustrated in Figure 1. In Category A, the relationship is unambiguous. All the firms in this category demonstrate a strong relationship between their advertising expenditures and their brand values. The advertising turnover indicates high efficiency and effectiveness as the brand value shows a strong Business Horizons / May-June 2000

trend of continuing to increase at a much higher rate than the advertising expenditures. Any change in this trend would require a more thorough investigation to determine what corrections are needed. In Category D, the relationship is unambiguous. Advertising turnovers of all firms show a less than desirable trend between their advertising expenditures and brand values and suggest room for improvement. In Category B, the relationship is ambiguous and appears to be inefficient. There is no clear trend, so the results indicate volatility and problems in managing advertising dollars. It is not clear what the effect is on brand value when the firm advertises. However, in all cases the indicator of advertising turnover suggests that a more thorough investigation is desirable to pinpoint the concerns. In Category C, the relationship appears to be ambiguous but could be misleading. If a firm can build brand value by cutting advertising expenditures, it might be reaping benefits from past investments, or it might be using some other marketing support to increase brand value. However, this also might be a short-term effect suggesting an eventual deterioration in brand value due to lack of continued support. A more thorough investigation is necessary. Although we have identified four categories based on this sample, a fifth category would

likely be found in a broader sample of firms. This would be a potential Brand Neglect category in which the firm is no longer supporting its brand through advertising. Up until now, the discussion has been primarily on trends; however, the absolute numbers derived from the advertising turnovers are also important. Although the company sample was too small for a study of industry relationships, it is still possible to make a few industry comparisons. Nike and Reebok are in the same industry, with Nike as the industry leader (No. 1 in market share) and Reebok as the close follower (No. 2 in market share). When the absolute numbers are presented, one can see that both brands have shown volatility, though a comparison can be made with the advertising turnovers of competitors. From 1992-1996, Nike’s advertising turnovers were 18, 9, 15, 15, and 17, respectively (average 15). During the same years, Reebok’s were 14, 15, 23, 17, and 10 (average 16). Nike’s brand value increased 218 percent from 1992 to 1996, while its advertising expenditures grew by 237 percent. Reebok’s brand value decreased 11 percent while advertising expenditures showed a 27 percent increase. Thus, this calculation gives a benchmark for advertising expenditures and provides valuable information for managing marketing performance. Wendy’s, for example, has provided advertising comparisons with its competitors in its annual

Figure 1 Brand Management Categories A. High Efficiency Brand Enhancers

B. Low Efficiency Brand Enhancers 90

75

Wrigley Coke Kellogg

60 45

Advertising Turnover


90

30 15 0 1991

1992

1993

1994

1995

75 HP Nike Compaq Avon

60 45 30 15 0 1991

1996

1992

1993

90

75

75

Kodak

60

1995

1996

D. Brand Deterioration

90



C. Brand Future Unknown

1994

45 30 15

Coors Polaroid

60

Reebok

45

Intel

30 15 0

0 1991

1992

1993

Linking Advertising and Brand Value

1994

1995

1996

1991

1992

1993

1994

1995

1996

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report (in a different manner) for several years.

Table 2 Kellogg

Year 1991 1992 1993 1994 1995 1996

Year 1991 1992 1993 1994 1995 1996

Brand Value 8,413 9,678 9,372 11,003 11,409 10,668 Brand Value 8,413 9,678 9,372 11,003 11,409 10,668

Advertising Expense 708 782 772 857 892 779 Advertising Turnover 12 12 12 13 13 14

Part A Advertising Turnover 12 12 12 13 13 14

Rounding Out the Performance Measurement System Brand as % of Assets 214 241 221 246 258 211

Part B Market Brand Share Turnover 36.9 .69 36.4 .64 35.0 .68 34.8 .60 34.5 .61 33.8 .63

Percentage of increase (1991-1996) in brand value Percentage of increase (1991-1996) in advertising Average brand as a % of assets Average advertising as a % of sales Average return on sales

Return on Sales 10.5 7.0 10.8 10.8 7.0 8.0

Advertising as % of Sales 12.2 12.6 12.3 13.1 12.7 11.7 Brand ROI 7.22 4.46 7.35 6.45 4.27 5.01

27 10 232 12.4 9

Table 3 Coca-Cola

Year 1991 1992 1993 1994 1995 1996

Year 1991 1992 1993 1994 1995 1996

Brand Value 24,402 33,446 35,950 39,050 43,427 47,978 Brand Value 24,402 33,446 35,950 39,050 43,427 47,978

Advertising Expense 988 1,107 1,126 1,142 1,333 1,437 Advertising Turnover 25 30 32 34 33 33


Brand as % of Assets 239 303 299 281 289 297

Part B Market Brand Share* Turnover 41.3 .47 NA .39 40.5 .38 41.5 .41 NA .41 42.0 .39

Return on Sales 14.0 12.7 15.6 15.8 16.6 18.8

Advertising as % of Sales 8.5 8.5 8.1 7.1 7.4 7.8 Brand ROI 6.57 4.96 5.92 6.47 6.79 7.34

*For United States. Market share data were not available for all years, and different sources report different percentages for Coca-Cola’s exact market share. However, all sources show the general trend is that Coca-Cola is maintaining or slightly increasing its market share.

Percentage of increase (1991-1996) in brand value Percentage of increase (1991-1996) in advertising Average brand as % of assets Average advertising as a % of sales Average return on sales

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97 45 285 7.9 15.6

Even though the advertising turnover measurement meets many of the requirements of a good performance measure, it has its limitations. In financial analysis, it is risky to rely on only one measure to predict a company’s financial health. It is equally risky to use a single calculation to determine the health of the company’s brand. The interrelationships among measures are what allow for a full analysis of company health—either financial or brand value. Moreover, as mentioned before, achieving customer loyalty and thereby reducing risk (or volatility of brand value) involves several steps, of which providing advertising is only one. So a performance measurement system should attempt to consider all elements in this process. Thus far, we have considered brand value and marketing support in the form of advertising expenditures. Even though customer loyalty is one of the aggregated factors considered in brand value, it is such an important element that it needs to be isolated and considered separately (or its surrogate market share). Finally, brands derive their value because they return either operating income or cash flows to the firm well above industry averages. Therefore, some measure involving returns needs to be used. Market share needs little discussion here and tends to be measured in terms of volume. However, volume might increase at the expense of eroding margins or selling prices. So a measure of both sales and margins should be considered. Ideally, to isolate a brand’s effect on returns compared to other factors of management, a marketing margin should be calculated and used in the analysis. For this analysis, only net income was available, so it is used in the performance measurement system. Again, to draw an analogy to a financial health analysis, one very well-known and accepted calculation is return on investment (ROI). If a brand has value, it should return sales to the firm and do it efficiently and effectively. In other words, after considering resources used in the sales process, the firm should provide a net income higher than industry averages. To determine how to improve ROI (calculated as net income/investment), it is necessary to disaggregate the measure into asset turnover and return on sales: Business Horizons / May-June 2000

ROI = Turnover ROI =

x Return on Sales

Sales Investment

x

Net Income Sales

To convert financial ROI into brand ROI, we would substitute brand value for investment, as follows: Brand ROI =

Brand Sales x Brand Value

Net Income Brand Sales

This provides us with two measures: brand turnover, indicating how effectively the brand value converts to sales dollars, and return on sales, indicating how efficiently those brand-generated sales dollars are converted to operating income. Let’s see how these measures work for the three companies showing the strongest relationship between their advertising expenditures and their brand values: Coke, Wrigley, and Kellogg. These brands have been rated consistently superior by organizations such as FW and Interbrand. However, a more thorough analysis will show that simply stating the absolute value of a brand and/or its ranking against others is not sufficient for either internal or external reporting of brand performance. Data were available for all three firms for 1991–1996 (see Tables 2, 3, and 4). The averages discussed below are for those years. Wrigley increased its advertising expenditures 39 percent over this period and produced a 103 percent increase in its brand value. What return did the asset value provide? Wrigley averaged a 12 percent return on sales during the same period. Over a similar period, Kellogg increased its advertising expenditures an average of 10 percent and produced an increase of brand asset value of 27 percent, which resulted in a 9 percent average return on sales. Coke increased its advertising expenditures an average of 45 percent and produced a 97 percent increase in brand value, resulting in a 16 percent average return on sales. Using the numbers reported in Parts A and B for each company, it is evident that multiple measures and their interrelationship will offer more insight into a company’s brand performance than simply one measure. Kellogg showed a healthy advertising turnover factor with steady growth over the six years (see Figure 2). However, the absolute value of the brand as well as the advertising expense decreased in 1996. Thus, using the advertising turnover factor alone can be misleading. A look at the market share trend suggests a steadily declining trend and an erosion of customer loyalty. Brand turnover, indicating the power of the brand to produce sales dollars (effectiveness), and return on sales, indicating the power of the brand to produce net income (effiLinking Advertising and Brand Value

Table 4 Wrigley Year 1991 1992 1993 1994 1995 1996

Year 1991 1992 1993 1994 1995 1996

Brand Value 1,454 1,660 2,309 2,826 3,157 3,376


Advertising Expense 159 179 199 225 241 248

Brand Value 1,454 1,660 2.309 2,826 3,157 3,376

Advertising Turnover 9 9 12 13 13 14

Brand as % of Assets 233 233 283 289 287 275

Part B Brand Turnover .79 .78 .62 .57 .56 .54

Percentage of increase (1991-1996) in brand value Percentage of increase (1991-1996) in advertising Average brand as % of assets Average advertising as a % of sales Average return on sales

Advertising as % of Sales 13.9 13.9 13.9 14.1 13.7 13.5

Return on Sales 11.2 11.0 12.2 14.4 12.8 12.5

Brand ROI 8.85 8.56 7.59 8.23 7.14 6.77

103 39 267 13.8 12.4

Figure 2 Kellogg’s Brand Performance Brand Measures 40 30 20 10 0 1991

1992 ROI

1993

1994

Market Share

1995

1996


Brand ROI Elements 12 10 8 6 4 2 0 1991

1992

Brand Turnover

1993

1994

1995

Return on Sales

1996 ROI

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ciency), shows volatility over the years. If we look at Kellogg’s current situation, we know that the condition has eroded even more and the brand continues to lose its value. In effect, it stands as an example of the fifth category, Brand Neglect, which was noted earlier. Coca-Cola’s market share condition is quite different from Kellogg’s. The company continues to maintain its leading positions and maintain or increase its percentage of market share held. Its advertising turnover shows a fairly constant or growing trend. The same is true with brand turnover, return on sales, and brand ROI (except for the first year). Wrigley’s situation shows a steady increase in advertising turnover. The brand’s ability to generate sales has decreased somewhat (probably due to its market saturation). Return on sales (ability of the brand to generate returns) shows a steady increase through 1994, then a slight decline. A more thorough analysis of its disaggregated expenses would explain why, but it appears to be a result of the declining brand’s sales-generating ability compared to its value (perhaps the brand is overvalued) while maintaining the same level of operating expenses.

T

he two measures developed here are not perfect. They are comparable to two widely accepted financial measures: accounts receivable turnover and return on investment. Further, they provide an important first step for firms seeking to evaluate their marketing performance. We recommend that firms use these measures to evaluate the ability of their advertising and market share efforts to enhance their brands’ values. In particular, these approaches allow firms and other users to judge marketing efforts that are similar (in power) to the way they evaluate their financial and production sectors. ❒ References David A. Aaker, Building Strong Brands (New York: The Free Press, 1996). Raj Aggarwal, “Technology and Globalization as Mutual Reinforcers in Business: Reorienting Strategic Thinking,” Management International Review, 39, 2 (1999): 83-104. Paul Anderson, “Marketing Planning and the Theory of the Firm,” Journal of Marketing, Spring 1982, pp. 1526.

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Russ Banham, “Making Your Mark: Time for Finance to Play a Role in Brand Management,” CFO Magazine, March 1998, pp. 34-44. Clorox Company, 1997 Annual Report. George Foster and Mahendra Gupta, “Marketing, Cost Management and Management Accounting,” Journal of Management Accounting Research, Fall 1994, pp. 43-77. Irene M. Herremans and John K. Ryans, Jr., “The Case for Better Measurement and Reporting of Marketing Performance,” Business Horizons, September-October 1995, pp. 51-60. Interbrand, The World’s Greatest Brands, ed. Nicholas Kochan (New York: New York University Press, 1997). Carl F. Mela, Sunil Gupta, and Donald R. Lehmann, “The Long-term Impact of Promotion and Advertising on Consumer Brand Choice,” Journal of Marketing Research, May 1997, pp. 248-261. Leonard Nakamura, “Intangibles: What Put the New in the New Economy?” FRB of Philadelphia Business Review, July-August 1999, pp. 3-16. Alexandra Ourusoff, “Brands: What’s Hot, What’s Not,” Financial World, August 2, 1994, pp. 40-54. John Rutledge, “You’re a Fool if You Buy Into This,” Forbes, April 7, 1997 (Supplement ASAP), pp. 42-45. Rajendra K. Srivastava, Tasadduq A. Shervani, and Liam Fahey, “Market-Based Assets and Shareholder Value: A Framework for Analysis,” Journal of Marketing, January 1998, pp. 2-18. Richard Tompkins, “Assessing a Name’s Worth,” Financial Times, June 22, 1999, p. 7.

Irene M. Herremans is an associate professor of management at the University of Calgary, Alberta, Canada. John K. Ryans, Jr. is the Bridgestone Professor of International Business at Kent State University, Kent, Ohio, where Raj Aggarwal holds the Firestone Chair of Corporate Finance. The authors wish to thank the Chartered Accountants Education Foundation of Alberta for their financial support of this research project, as well as Stacey Strike and Cameron Welsh for help in the statistical analysis, and Jack Kahl for his useful discussion.

Business Horizons / May-June 2000