The rise of Marketing Intangibles on business value

It has been widely noted, that intangible assets represent a greater proportion of present business value than almost 30 years ago. Looking back for 1990, the three largest sectors in the S&P 500 were: Industrials, Consumer Discretionary and Energy, that relied heavily on tangible assets – Today the top 3 are Technology, Financials and Healthcare – all relying primarily on intellectual property.

In the contemporary business environment, intangible assets have emerged as vital determinants of a company's success and longevity. This scenario has been driven mostly by digital transformation in a first big wave, but the recent advances with generative AI are pushing a massive new wave that will enhanced even more the intangible valuation of business assets – basically the "tech on top" is not a trend anymore, but the driver of the whole present economy.

Unlike tangible assets, which can be quantified and valued based on widely acceptable, comparable and standardized rules, intangibles such as brand reputation, customer loyalty, employee satisfaction, intellectual property, and organizational culture are more challenging (and many not publicly disclosed), yet they became highly influential and strategic for business growth.

As markets become increasingly competitive and customer expectations evolve, companies must focus on these intangible assets to differentiate themselves and sustain growth. Strategic marketing plays a crucial role in enhancing these intangibles.

"The value potential of intangibles will not always be obvious to all leaders and managers in an organization" – Deloitte, "The impact of intangibles—unlock unseen value" (Feb.2024)

How marketing enhances intangibles in the modern business landscape

• Valuation of marketing intangibles: The process of determining the monetary value or worth of intangible assets associated with marketing efforts, that can include brands, trade names, trademarks, and other non-physical assets that contribute to a business advantage within its territory

The influence today of any global marketing operation in the proportion of total enterprise value (TEV) is tremendous but can varies significantly by industry.

A consistent marketing strategy can dictate the overall market understanding about any business value proposition, and how it can be unique from competition and for the eye balls of consumers and investors.

Basically it’s the gold anchor for what the future holds for the business, regarding the market and economy change, whether the ultimate goal is to take the business public or not.

Effective marketing transcends traditional boundaries, impacting not only external perceptions but also internal dynamics within a company. By consistently communicating a brand's values and promises, marketing helps build a strong and positive reputation that resonates with customers, stakeholders, and employees alike.

Moreover, personalized and engaging marketing efforts foster deep customer loyalty, which is essential for repeat business and long-term profitability. Internally, marketing initiatives that highlight company culture and values contribute to higher employee satisfaction and stronger employer branding for attracting and retaining top talent.

The power of marketing extends to leveraging intellectual property and fostering a culture of innovation within the organization. Through strategic promotion of new technologies and proprietary assets, companies can establish themselves as industry leaders and protect their competitive advantage.

Additionally, marketing's role in building trust and credibility cannot be overstated. Transparent communication, social proof through testimonials, and active corporate social responsibility efforts all serve to enhance a company's reputation and credibility:

• Employer branding: Promoting the company as a great place to find a purpose for career path and to significantly impact employee satisfaction and retention, which are critical intangible assets connected with the human element;
• Leveraging intellectual property: Intellectual property (IP) includes patents, trademarks and related rights, to the exclusive use of technical, commercial and industrial information regarding (but not limited) to design creations for distinguish products and companies in the market;
• Innovation: Adopting new technologies and innovations experiments to establish market leadership and cultivate a sustainable mindset for ideation process, using institutional knowledge and intellectual capital, that are becoming increasingly important for growth and value creation across various industries;
• Leadership visibility: Showcasing the leadership team’s commitment to company values through public statements and actions. A strong and positive organizational culture attracts talent, boosts productivity, and fosters innovation;
• Transparency and Social proof: Providing clear and honest information about products, services, and business practices, as well on Corporate Social Responsibility (CSR) initiatives to demonstrate the company’s commitment to ethical practices and social good

Marketing is not merely about selling products or services; it is about creating and nurturing assets that underpin a company's success in today's complex and dynamic marketplace

Maximizing business value with MIP: The Marketing Intangible Portfolio

Intangibles management that takes the broadest view of where value resides and how intangibles can be enhanced and commercialized will bring advantages to every organization. This proactive approach can help a company find its best growth path, while also avoiding pitfalls that might squander the investment it has made

Valuation of marketing intangibles requires (apart of marketing) expertise in finance, accounting and legal to properly assess and quantify the value of these assets, but the efforts should go beyond the traditional focus on the legal protection of IP rights.

This open up a new way of co-collaboration between marketing leaders and these departments to foster not only a more in depth accounting purpose for marketing investments, but a new mindset for marketing teams toward sustainable goals that can be quantifiable.

Setup a Marketing Intangible Portfolio:

1. Identify intangibles across the organization that is influenced by marketing initiatives: intellectual capital (knowledge, relationships, strategic partnerships, human skills, etc.), organizational culture and reputational assets, proprietary technologies and customer data, research and development insights;
2. Review and maintenance: Necessary to keep marketing strategies up to date and aligned with business objectives, regarding new trends, emerging technologies and disruptive methodologies and processes that can leverage marketing intangible assets to create value;
3. Education on marketing intangibles: A broader understanding of marketing teams about these assets is key to cultivate a more responsible and accounting marketing about the sources of business value and how to drive them for good and growth;
4. Protect to significant risks: Many intangibles are not protected by traditional IP rights, making it essential to focus on secure policies and internal controls: Cybersecurity, reputation damages and brand threats is paramount

Time to empower brands for every industry

A brand is a crucial intangible asset for a company as it often embodies the company’s reputation, consumer perception, and market positioning. All is important for various financial, strategic, and operational purposes, including financial reporting, mergers and acquisitions, licensing agreements, and more.

"Branding" is a popular topic for marketing industry, but not so much for other industries

A study about the brand value based on the most widely recognizable sources on this topic – Brand Finance, Forbes, Interbrand and Millward Brown – shows that brands are concentrated in a relatively small number of industry sectors, where more than 50% come from just 5 of the 24 sectors considered (based on GICS – the Global Industry Classification Standard).

Two conclusions from this:

1. Measured by the number of brands, the 5 sectors are: Software, Automotive, Food & Beverage, Banks and Telco;
2. Measured by brand value, Banks is replaced by Technology Hardware in the top 5

Having covered more than 3,700 mergers over 10 years, a complementary analytical perpective of the study found 3 primary forms of intangible asset, alocated according each sector:

• IP assets with a sizeable proportion of the value of Technology and Healthcare companies;
• Contracts (such as supply contracts or landing rights, etc.) are a dominant form of intangible asset in industries like Energy and Transportation;
• Brands (copyrights and trademarks) are the intangible assets that matter most in consumer-first industries like Media, FMCG and other consumer durables

In marketing history, brands where always a typical element close to people, and today emerge again or reinforced in a kind of an “humanization process”. However, as the studies shows brands are not the primary driver of business value in a number of economically significant industries.

The industries that have the majority of their business value represented by intangible assets, marketing teams must consider how much of this intangible value is represented by brands against other intangible asset.

Start a MIP process today to envision tomorrow business value

In today modern business landscape, the role of marketing extends far beyond promoting products and services. It is a strategic tool that enhances intangible assets, which are vital for a company’s sustained success.

By building brand reputation, cultivating customer loyalty, enhancing employee satisfaction, leveraging intellectual property, fostering organizational culture, and building trust, marketing drives comprehensive business growth and ensures a competitive edge in the market.