Brand maintenance is not only a matter for the Marketing Department. The colleagues in Finance should also be interested in a strong brand image. After all, it will help them to reduce the company’s debt ratio and improve its credit rating. These are the findings of Alexander Himme, professor at Kühne Logistics University in Hamburg, and Marc Fischer, professor at the University of Cologne, as published in their study entitled "Financial Brand Value Chain".
The Marketing Department’s main goals are to make brands more recognizable and increase sales. The Finance Department’s work is aimed at safeguarding the company’s financial health. Usually, the two departments speak very different languages. Himme and Fischer’s study shows that it would be better if they were pulling on the same rope.
“We show that marketing activities also have a significant impact on the company’s debt ratio and credit rating,” explained Himme. “A strong brand has an effect on key financial variables such as capital costs and access to fresh capital.” In their study, the scientists evaluated the data from 155 companies.
Coining the term "Financial Brand Value Chain", they show how marketing expenditures impact a company’s financial situation. The higher the investment in advertising and marketing, the higher the customer-based brand equity (CBBE). A higher brand value leads to a lower company debt ratio. After all, a strong brand makes other sources of capital such as the company’s stocks or bonds more attractive to investors. This gives the company greater financial leeway.
And a higher brand value leads credit rating agencies to give the company a better rating. If the company does go into debt, it receives better loan conditions and the costs of borrowed capital are lower. Both the level of debt and the company’s rating from the agencies have an influence on investors’ decisions. A company with a low level of debt and a good rating can acquire fresh capital from investors more easily. On several levels, targeted marketing expenditures help companies to improve their financial situations.
“These findings are new,” said Himme. “For the first time, we are showing that marketing and finance goals are not unrelated but instead, should go hand in hand.” Marketing managers now have new ammunition for their next budget negotiating session. “Our results also indicate that representatives of both departments should get together and work out a joint marketing and finance strategy. This is the only way to achieve optimal results for the company,” added Himme.
He also can quote a few statistics to back up his scientific findings: “If you apply our findings to an average company from our study with annual revenues of $13 billion, a 10% increase in CBBE will translate into a $240 million increase in financial resources.” Himme also says that at the same time, a 10% increase in the market value at this representative company would mean annual interest savings of $58 million.
"Financial Brand Value Chain: How brand investments contribute to the financial health of firms" can be viewed in the pre-print section of the International Journal of Research in Marketing:
For media inquiries:
+49 40 32 87 07-152
Kristina Brümmer | idw - Informationsdienst Wissenschaft
Mathematical confirmation: Rewiring financial networks reduces systemic risk
22.06.2017 | International Institute for Applied Systems Analysis (IIASA)
Frugal Innovations: when less is more
19.04.2017 | Fraunhofer-Institut für Arbeitswirtschaft und Organisation IAO
Just because someone is smart and well-motivated doesn't mean he or she can learn the visual skills needed to excel at tasks like matching fingerprints, interpreting medical X-rays, keeping track of aircraft on radar displays or forensic face matching.
That is the implication of a new study which shows for the first time that there is a broad range of differences in people's visual ability and that these...
Computer Tomography (CT) is a standard procedure in hospitals, but so far, the technology has not been suitable for imaging extremely small objects. In PNAS, a team from the Technical University of Munich (TUM) describes a Nano-CT device that creates three-dimensional x-ray images at resolutions up to 100 nanometers. The first test application: Together with colleagues from the University of Kassel and Helmholtz-Zentrum Geesthacht the researchers analyzed the locomotory system of a velvet worm.
During a CT analysis, the object under investigation is x-rayed and a detector measures the respective amount of radiation absorbed from various angles....
The quantum world is fragile; error correction codes are needed to protect the information stored in a quantum object from the deteriorating effects of noise. Quantum physicists in Innsbruck have developed a protocol to pass quantum information between differently encoded building blocks of a future quantum computer, such as processors and memories. Scientists may use this protocol in the future to build a data bus for quantum computers. The researchers have published their work in the journal Nature Communications.
Future quantum computers will be able to solve problems where conventional computers fail today. We are still far away from any large-scale implementation,...
Pillared graphene would transfer heat better if the theoretical material had a few asymmetric junctions that caused wrinkles, according to Rice University...
The Fraunhofer Institute for Laser Technology ILT and Rapid Shape GmbH are working together to further develop resin-based 3D printing. The new “TwoCure” process requires no support structures and is significantly more efficient and productive than conventional 3D printing techniques for plastic components. Experts from Fraunhofer ILT will be presenting the state-funded joint development that makes use of the interaction of light and cold in forming the components at formnext 2017 from November 14 to 17 in Frankfurt am Main.
Much like stereolithography, one of the best-known processes for printing 3D plastic components works using photolithographic light exposure that causes liquid...
30.10.2017 | Event News
23.10.2017 | Event News
17.10.2017 | Event News
09.11.2017 | Life Sciences
09.11.2017 | Life Sciences
09.11.2017 | Social Sciences