Brand investment heavily influences analyst sentiment

Marketing is the highest scoring factor that financial analysts consider “very important” when appraising a listed company.

New research from the Institute of Practitioners in Advertising (IPA), conducted among more than 200 financial analysts covering publicly listed UK and US companies, found marketing to be a more significant factor that a business’s leadership, technologies or reported profit.

In the poll, 79% said the strength of a company’s brand/marketing was a “very important” factor, compared to 76% who stated it was the leadership of a business. Technological innovation  was considered very important by 72% of respondents and reported profit by 71%.

“This survey provides news that investors are placing increasing interest and importance on investment in brands,” said Laurence Green, director of effectiveness at the IPA.

“It is incumbent on brand owners to provide the relevant data and evidence to investors, and to engage with them in order to make the most compelling case for marketing as a long-term investment.” 

The survey found more analysts view advertising as an investment (37%) than those who see it as a cost (24%), despite how international accounting regulations say they should be documented.

The research found that the need for education is critical. When analysts in the survey were asked for their thoughts on instances where a company announced a cut in marketing spend, 52% agreed that they saw this as a ‘positive cost-saving measure’, without any further clarification.

Annie Brown, general manager at Brand Finance, said: “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.”

The full report is available here.