Tenet Partners, a leading brand innovation and marketing firm, is pleased to announce the release of a new report, “The Strong Link Between Advertising and Stock Value,” by Chairman Jim Gregory. Published by the American Association of Advertising Agencies (4A’s), the report is an updated edition of Gregory’s and CoreBrand’s 1997 landmark report “The Impact of Advertising on Stock Performance.”
The field of advertising and marketing communications has changed dramatically since 1997. Despite the advances in technology, data, and analytics, Gregory argues that advertising is still commonly viewed as a burdensome cost with vague returns. Based on his breakthrough research utilizing Tenet Partners’ CoreBrand® Index (CBI), a quantitative research vehicle that has continuously tracked since 1990 the reputations and financial performance of nearly 1,000 publicly traded companies across 50 industries, the report reveals a stunning correlation between advertising and brand image – 30 percent of brand image is attributable to advertising spending. Moreover, a longitudinal analysis of 220 public companies in the CBI reveals that brand image has a direct impact on earnings growth and stock performance.
The report is divided into three key sections, in which Gregory skillfully explores the effect of a company’s brand communications on its image and its return on investments.
Over many years of research and analysis, Gregory has identified quantitative relationships between advertising and corporate brand image and between corporate brand image and stock price. The report examines the most significant factors driving corporate brand image, including advertising spending, attributing 30 percent, the most important factor in determining image with other forms of communications, such as public relations, investor relations, employee relations, and social media contributing an additional 23 percent. Additionally, the findings reveal how different levels of advertising spending affect stock price, and therefore, shareholder value. As a result, the report sheds light on how a benefit/cost ratio can then be developed, providing valuable insights and methods for helping to set communication strategies as well as offering practical evidence of how a company’s advertising expenditure works in driving corporate reputation.
The Solid Link Between Corporate Brand Advertising and Corporate Brand Image
This section identifies The Advertising Efficiency Curve, presenting several relationships between corporate brand image and advertising. The findings show that as companies begin to advertise aggressively, a very high rate of return often immediately follows. This momentum begins to slow down over time as the company builds a strong image, and then moves from a position of creating an image to one of maintaining it. As a company moves along the curve, the report provides key strategies for companies to consider for maximizing the return of their advertising dollars.
Speaking a Common Language: CEOs & Communicators on the Same Page
With a demand for corporations to fully understand and to use brand image as a tool to give their company a distinct competitive advantage, this section explains how the frameworks and models presented can be applied to decipher advertising’s impact on corporate image and the resulting effect on ROI. Furthermore, it explains how these models offer a common language between the communications department, CEO and CFO, providing a venue for mutual respect and common interest for the sometimes adversarial relationship of the CEO and communicator.
Commenting on the release of “The Strong Link Between Advertising and Stock Value,” Gregory said: “Given how high the stakes are in the investment world, companies cannot afford to dismiss anything that can support enterprise value – and that means the role of advertising is crucial. This finding is consistent with that we saw in 1997 with the release of ‘The Impact of Advertising on Stock Performance.’ However, with this updated edition, we offer an analysis on larger scale – enlarging our base to 220 companies and quantifying our image and stock-price models in even greater detail.”
Marsha Appel, 4A’s Senior Vice President, Research, added, “The original 1997 paper was one of the 4A’s most popular publications, so we are proud to issue the new report. It documents a stunning correlation between advertising expenditures and brand image, and between image and stock price, proving what good marketers have always known—that advertising works.”
This updated edition contains also two case studies that illustrate the impact of advertising on stock performance, Aflac and a B2B case study in a commodity industry. Both cases help to demonstrate that when strategically allocated, paid media has proven to be a strong contributor to brand growth.
To purchase “The Strong Link Between Advertising and Stock Value,” visit the 4A’s bookstore.
##About the Author
Jim Gregory is the Chairman of Tenet Partners, a brand innovation and marketing consultancy. Jim is credited with developing pioneering and innovative tools for measuring the power of brands and their impact on a corporation’s financial performance. He has written four books on creating value with brands: Marketing Corporate Image, Leveraging the Corporate Brand, Branding Across Borders, and The Best of Branding. Jim is also a founding member of the Marketing Accountability Standards Advisory Council (MASAC) and is a member of the Marketing Accountability Standards Board (MASB), where he is the co-chair of the Improving Financial Reporting Committee. Jim’s newest book, POWERHOUSE – The Secrets of Corporate Branding, will be released in January 2016.
About Tenet Partners
Formed from the merger of Brandlogic and CoreBrand, Tenet Partners is a brand innovation and marketing consultancy that helps companies create brand value and unearth business opportunities by putting customers at the center of their business strategies. For more information, please visit us at tenetpartners.com and follow us on Twitter and Facebook.
About the 4A's
The 4A's is the catalyst for bringing together the right people in the right place at the right time to address the advertising industry's most critical business issues. We provide leadership, advocacy, guidance and community to our members and the industry at large, with proprietary access to the people, information and tools needed to make smarter management decisions. Our mission is to help agencies become more successful. www.aaaa.org.
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