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The Link Between Corporate Brand Image, Advertising and Stock Price

Written by: Hampton Bridwell | Tenet Partners

The stakes are high in the investment world. Investors cannot afford to overlook opportunities in the market for underpriced assets. Over several years of research and analysis, CoreBrand has identified quantitative relationships between advertising and corporate brand image, and between corporate brand image and stock price.CoreBrand research shows that 30 percent of brand image is attributable to advertising spending. Moreover, a longitudinal analysis of 220 public companies in CoreBrand’s database reveals that brand image has a direct impact on earnings growth and stock performance. However, despite the recent advances in data, and analytics, advertising continues to be viewed as a heavy cost with vague returns.

Corporate Brand Image and Financial Strength

The analysis reveals that brand power accounts for five percent of a company’s stock price on average. This may not sound like much, but it is almost equivalent to the six percent attributable to the financial strength of a company. This represents billions of dollars of market value. Top achievers, such as Coca-Cola, attribute as much as 21% of market cap to their corporate brand alone.CoreBrand examined the relationships linking corporate brand communications, corporate image and shareholder value, and quantified the factors contributing to corporate image. The most important factor is advertising, which weighs in at 30%.

Ad Spending - A Driving Force of Value

Consistent ad spending is a driving force in creating brand value. Other forms of communications, such as public relations, investor relations, employee relations, and social media, contribute an additional 23%.With many events, such as economic uncertainty, falling outside the control of a public company, it would be a mistake to slash advertising, a relatively sure thing that can improve a company’s valuation.

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Communications of all types have an impact on brand image. Whether planned or unplanned, everything you say and do as a corporation will impact the image of your company.CoreBrand research shows the more a company spends on advertising, the better its chances of improving its reputation. The less a company spends on advertising, the more likely its image suffers and the higher its risk during an unforeseen crisis. Earnings growth and stock performance consistently rise and fall with image. Therefore, brand image (Familiarity and Favorability) impacts the financial value of a company in terms of stock price and revenue.To purchase “The Strong Link Between Advertising and Stock Value,” visit the 4A’s bookstore.

CoreBrand Data Science, a Tenet Partners Company

CoreBrand uses quantitative research from 10,000 consumers and business decision makers to measure brand awareness (Familiarity) and perception (Favorability) for each company in its database, which is then combined to calculate a company’s brand strength, or “BrandPower.” This leads to a natural mechanism for optimizing advertising investment and ROI strategy.The CoreBrand methodology is aligned to ISO standards and reviewed by the Marketing Accountability Standards Board (MASB) MMAP auditors. CoreBrand Data Science is leading major changes in how companies evaluate brand performance and actively manage investments for higher returns.