Neworld, Great relationships build great brands

Every successful business invests a considerable amount of time and money into building and nurturing their brands. As with any cost the management and shareholders need to know whether this expenditure is essential for the success of the business.

Branding Cost and Amortisation

The costs involved in branding can be easily quantified. They include marketing department and senior management hours and costs, design and marketing consultancy fees, and advertising costs. It is important to note that a significant portion of the costs should be considered a medium to long term investment and written off as an expense over several periods. 

Key Performance Indicators

The indicators that management need to look out for to inform them whether they have gained a return on their investment are:

Market Share

Price Premium

Brand Awareness

Market Share

Market share is the percentage of a market (defined in terms of either units or revenue) accounted for by a specific entity. Market share growth or decline is the simplest indicator whether brand building has been successful. Static or moderate decline, despite being undesirable, can still be an indicator that branding has been necessary to stand still or slow decline.

Price Premium

Price premium is the percentage by which a product’s selling price exceeds (or falls short of) a benchmark price. Marketers need to monitor price premiums as early indicators of competitive pricing strategies. By comparing a brand’s price with a market average, managers can gain valuable insight into its strength, especially if they view these findings in the context of volume and market share changes. Indeed, price premium – also known as relative price – is a commonly used metric among marketers and senior managers

Brand Awareness

Brand awareness refers to the extent to which customers are able to recall or recognise a brand. Brand awareness is a key consideration in consumer behaviour, advertising management, brand management and brand strategy development. The consumer’s ability to recognise or recall a brand is central to purchasing decision-making.

Conclusion

The first step in deciding whether the brand building undertaken by a business is a success is quantifying the outlay involved and determining the period with which it should be written off over. Next the business needs to collate all relevant performance indicators and if possible quantify. An excess of return over costs would indicate that the branding is a successful exercise and is going in the right direction. A deficit would indicate a change of direction is required or that there is some other problem that needs to be addressed.

Rob Madigan FCA CTC BCOMM, Financial Controller
Rob, a chartered accountant, is the FC for Neworld, a creative branding & design agency based in Dublin with over 30 years’ experience developing brands to position them for future growth. He has worked with Neworld since September 2008 and guided the company through interesting waters. Rob admires greatly his colleagues’ creativity, energy, and enthusiasm for their work and is happy to be a little part of the show. He previously worked in accountancy with PWC and Madigan + Co and in hedge fund administration with Citco Fund Services Dublin.