Brands are market-based assets, that is, they live out there in the world, in the minds of the population. Not only that, but they are probably the most important financial asset of a business in terms of their effect on its economics. Despite this, marketing investment is amongst the first to go when a business begins to struggle – too often framed as an expense rather than much-needed maintenance of this fundamental asset.
Tim Ambler, of the London Business School, defines ‘brand equity’ as a marketing asset ‘between the ears’ of consumers, trade customers, staff and other stakeholders, which stimulates long term demand, cash flow and value. He uses the analogy of a reservoir that needs to be topped up if the outflow of water is to be maintained at a constant or increasing rate. If the ‘brand equity’ reservoir is depleted revenues and cash flows may remain strong for a period, but eventually the reservoir empties and cash flows dry up. A great visual analogy, but we need to really understand the flow process.