Strong brand puts fizz in business capital raising, study finds

April 21, 2017

Investment in building a company's brand is not just about generating sales but also has a measurable impact on the business's ability to raise funds, a new study has found.

Researchers found that improving perception by just 10 per cent increased the financial resources available to the average business in their study by nearly $US400 million over subsequent years.

The study appears in the latest issue of the prestigious International Journal of Research in Marketing.

"A strong brand sends a positive signal to funders and investors," says Professor Marc Fischer of UTS Business School, who conducted the study with Assistant Professor Alexander Himmer of Kuehne Logistics University, Germany.

At the same time, by contributing to revenue and profit growth, it also reduces the need to take on debt.

The worlds of marketing and finance officers intersect more closely than they might have thought, Professor Fischer says of the findings.

"Marketing and finance executives have different objectives and focus on different stakeholder groups: marketers want to create sales impact, while finance executives are concerned about the financial health of the firm. As a result, their worlds tend to be rather disconnected day to day.

"But our research shows that investment in building a strong brand improves key financial metrics such as financial leverage and cost of capital – lifting the available to companies to run and grow their businesses."

Professor Fischer says this is because a strong brand lowers expected risk, which can translate into a better credit rating, for example. That means fresh capital can be secured at a lower cost from capital markets.

The study is the first to show how marketing and financial metrics dynamically interact with each other in what the researchers have dubbed the "financial brand value chain".

It is also the first to quantify the extent to which brand building activities contribute to capital raising efforts.

This means it has implications for senior executives and for the investor community.

"If marketing and finance officers don't fully appreciate the interplay of their key metrics, companies may be forgoing a substantial amount of money that is crucial for financial wellbeing and growth," Professor Fischer says.

The researchers studied seven years' of brand perception and financial data for 155 business-to-consumer firms from 10 industries, internationally, in conducting the study.

Explore further: Researchers find building innovative capacity led to higher stock prices

More information: Marc Fischer et al. The financial brand value chain: How brand investments contribute to the financial health of firms, International Journal of Research in Marketing (2017). DOI: 10.1016/j.ijresmar.2016.05.004

Related Stories

What do Google search queries reveal about brand attitudes?

January 4, 2017

It has been widely thought that brand search volume—the counts of queries that a search engine receives from users that include specific brand names, like "iPhone"—can predict sales for that brand. Google makes this information ...

Recommended for you

Scientists see order in complex patterns of river deltas

October 19, 2017

River deltas, with their intricate networks of waterways, coastal barrier islands, wetlands and estuaries, often appear to have been formed by random processes, but scientists at the University of California, Irvine and other ...

Fatty bird gland preserved over 48 million years

October 18, 2017

(Phys.org)—A team of researchers from the U.S., Ireland, Germany and the U.K. has found evidence of preservation of a fatty oil gland from a 48-million-year-old fossilized bird. In their paper published in Proceedings of ...

Waiting periods reduce deaths from guns, study suggests

October 17, 2017

(Phys.org)—A trio of researchers with Harvard Business School has found evidence that they claim shows gun deaths decline when states enact waiting period laws. In their paper published in Proceedings of the National Academy ...

0 comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.