/nav-logo-desktop.webp "Marketing Architects"){kind=logo}
Episode 183
What's a Brand Actually Worth? with Professor Dave Reibstein
Buy a brand, and it shows up on your balance sheet. Build one, and it doesn't. Wharton professor Dave Reibstein thinks that's backwards.
This week, Elena, Angela, and Rob are joined by Dave Reibstein, the William S. Woodside Professor of Marketing at the Wharton School and co-author of Marketing Metrics. Dave explains how to put an actual number on brand value, whether you take it in price premium, volume, or some mix of both. He shares 10 years of research on how country branding shapes trade, tourism, and investment, plus why "Made in Italy" still sells shoes. Plus, hear the team pitch which country they'd take over as CMO.
Topics Covered
• [03:00] Research on customer capital and talent risk
• [06:00] Why marketing metrics need standard definitions
• [07:30] What brand value looks like as a number
• [09:30] Balancing promotions against long-term brand building
• [12:00] The management behavior that moves results most
• [13:30] Why every country should manage its brand
• [19:30] Dave's case for brand value on the balance sheet
Resources:
2021 Journal of Finance Study
Dave Reibstein's LinkedIn
Today's Hosts
Elena Jasper
Chief Marketing Officer
Rob DeMars
Chief Misfit
Angela Voss
Chief Executive Officer
Dave Reibstein
Author and Professor of Marketing at Wharton
Transcript
Elena: I'm Elena Jasper. I'm on the marketing team here at Marketing Architects, and I'm joined by my co-hosts, Angela Voss, the CEO of Marketing Architects, and Rob DeMars, the Chief Misfit at Misfits & Machines.
Rob: Hello, hello.
Angela: Hello.
Elena: Hello, and today we have a guest joining us. Dave Reibstein is the William S. Woodside Professor of Marketing at the Wharton School and a nationally prominent marketing expert. He has expertise in competitive marketing strategy, branding, marketing measurement, and marketing research methods. He's the past chair of the board of directors of the American Marketing Association and the former executive director of the Marketing Science Institute. He's consulted on marketing strategy for companies including GE, Google, Johnson & Johnson, and more. He's also the author or co-author of numerous books, including "Marketing Metrics: The Manager's Guide to Measuring Marketing Performance." His research has received coverage in "The New York Times," "Forbes," "Marketplace," and more, and he's an award-winning educator of more than four decades, honored over 30 times for excellence in teaching, with academic appointments at Stanford and Harvard Business School along the way. Dave, you are a busy person, so thank you for joining us on the show. You've got a lot going on.
Dave: It helps that I've been doing this for four decades, so I've had a lot of time to get a lot of things in there.
Rob: Gosh, it's a lot of smart stuff. But before we get to the smart stuff, I gotta ask a question. So I'm just doing a little Midwest recon here. So Kansas undergrad, PhD from Purdue, and Angela and Elena and I are sitting here in Minnesota. We've got a little Midwest kinda vibe going on here.
You've done a lot of studying on brand value, and I'm thinking about the Midwest. Like, is the Midwest pretty underrated in terms of brand value? I mean, we're kind of the flyover state. We've got great mental availability, but terrible share of voice. So what do you think?
And have you written off the Midwest altogether? Do you consider yourself kind of a Philly guy?
Dave: No, actually everybody here thinks of me as from the Midwest. Once you come from the Midwest, they brand you as such. But I totally agree with you. The Midwest is not understood at all by the East and the West Coast. We've all seen those maps of the, you know, the view of the country from a New Yorker, and it's just New York is everything, and the rest of the country is sort of gone.
And then, of course, there's a little bit of California. But it is misunderstood for sure. And we get a little bit of attention with the ice up there in Minnesota, and I'm not referring to the weather.
Elena: Oh no.
Rob: Yeah, right? I mean, Minneapolis has all kinds of things going on, and everyone knows us for Fargo, which is actually not in Minnesota, but we do talk like that.
Elena: Yeah. Oh my gosh. All right. We're very happy to have you here and to have a fellow Midwesterner on the show. We are back with our thoughts on some recent marketing news, always trying to root our opinions in data, research, and what drives business results. And, Dave, I like to open with research when we start the show, and today's research comes from you. The paper is titled "Inalienable Customer Capital, Corporate Liquidity, and Stock Returns," which was published in the "Journal of Finance." It starts with a concept called customer capital, which is customers' brand loyalty to a firm. The research explains that customer capital comes from two places. One is pure brand recognition built through things like advertising and product quality. The other is talent — your star performers, innovators, and managers whose personal contributions keep customers loyal. And that second kind can disappear when those people leave the firm. So the research measured how talent-dependent each company's customer capital is, and firms that depend on talent rather than brand carry more risk. They have higher talent turnover, they have to hoard more cash to protect themselves, and investors actually demand higher returns to hold their stock. Brand is the version of customer loyalty your company actually owns. And that is just one example of the kind of knowledge Dave is gonna bring to the podcast today, so I'm not gonna try to explain any more of it. Thank you again for joining us. You've done a lot of work like this research to measure the value of marketing in a way that executives beyond just the marketing department can understand. So I wanted to start with, that's an interesting, niche, challenging topic of research, so what originally interested you in that challenge of linking marketing to financial outcomes?
Dave: So Elena, first I wanna say I'm so impressed that you got further in that article than most anybody. So, you know, you got further in that than my mother, and certainly further than most anyone who picks up that article, 'cause it's a pretty technical article. But you did a great job of summarizing that.
So thanks for going through that, and many people thank you so that they don't have to read the article, 'cause they got the essence of it.
Rob: Some people watch Netflix. Elena reads these studies.
Elena: So it's kind of my thing.
Dave: Well, I'm impressed. But to your question, which is why is it I started looking at linking marketing and marketing metrics to financial consequences, it's 'cause we spend a lot of money on marketing, and there's a whole bunch of the organization that's saying, "We're just wasting our spend. We're spending our money and, you know, it's just lowering our overall profitability. Why should we be doing that?" Probably the best evidence of it is when the economy gets weak, when there's any downturn in the economy, companies often just cut marketing because, you know, it was a luxury.
We had excess money that was available. We could go ahead and cut it. And, you know, when we've got too much cash, okay, let's spend it frivolously on marketing.
Elena: Yeah, no, you're right. I actually — someone was commenting on my LinkedIn today talking about how marketing investments in brand sound great until the company's not doing well, and then typically the first thing that gets chopped is marketing. So Dave, you're also very well known for a popular book, which is called "Marketing Metrics: The Manager's Guide to Measuring Marketing Performance." What inspired that book? And you've actually had four different editions of it, so what's changed the most across those four editions?
Dave: So those four editions are not — I want to say it four different ways. It's just over time, we've added more and more measures that we weren't typically looking at. But the reason that we started that book — and I've got three great co-authors on that book — but the reason we started that book is we kept seeing things where someone would talk about market share and somebody else would talk about market share, and they're talking about different things.
And so there were lots of terms that were being bandied around that had different ways of possibly defining them, and it was with an attempt of, could we have a centralized way that this is the standard, this is how, when we measure market share, what it is that we mean, or what's the right expression to use.
So think like, think of awareness. Here's what our awareness is of our brand. Is that aided awareness? Is it unaided awareness? There's different ways that we could talk about it. Share of wallet is one of my favorite, all-time favorite measures, but sometimes referred to as share of requirements.
It's a favorite term of mine, and it's often misunderstood and miscollected.
Elena: Yeah, we marketers love a rebrand, don't we? We like to have a million different names for different things. Well, speaking of something that probably has a lot of different definitions in the minds of marketers, you've done a lot of work on brand value, and that can feel very abstract. So what is brand value, and how should a company, in your opinion, in your research, actually measure the value of its brand?
Dave: So I've been very involved for numerous companies measuring what's the value of their brand. And there are some, actually some other marketing academics that say brand value is, here's the essence of the brand. Here's what it means to people. When I think about brand value — and actually I love when I'm speaking to a group of executives and I say, "So what's your brand value?"
And they start telling me, "Oh, we represent trust, and we represent..." And I go, "No, no, I'm looking for a number." When I think about value, I'm looking for a number, and that number often comes in one of three forms. Either how much more could you charge for your product because of your brand name?
And sometimes when I talk to executives, they say, "I'm able to charge 10% more than my competition because of who I am." That is just part of it, because sometimes we take the brand value in terms of incremental price, but sometimes we take it in terms of incremental volume, and most of the time we take it as some combination of those two. And so, you know, not to get too technical on the podcast, but what we're doing is, you take a demand curve, and as you build your brand, you shift that outward, which means you can charge more money, you can get more volume.
And as I say, if you're Walmart, you're taking it in terms of volume. If you're Rolls-Royce, you're taking it in terms of price. But most of the time it's some combination. So those executives that answer me and say, "I'm able to charge a 10% premium," are only capturing part of that picture.
And there are methodologies that are commonly used for trying to measure what that economic value is of a brand.
Angela: I love what you're saying here, Dave, because to your point earlier, we do spend, as marketers, a lot of money on marketing. And I think we all come from a place of wanting to justify that spend, but I think sometimes it's hard for marketers to get there. We talk about how marketing works on two timelines, stealing language from Les Binet and Peter Field with "The Long and the Short of It." And I think it's a great idea in theory, but like I said, we struggle to do that sometimes. So how, in your view, should brands balance their short-term results versus something like longer-term brand building or getting to an understanding of what, you know, pricing power you might have because you do have a stronger brand than your competitors?
Dave: Angela, that's a great question. And part of what happened is we started seeing promotions, and I'm thinking of things like coupons, for example, or this week, you know, 10% off. Those types of promotions, you get to see that short-term effect. And so you get to see what that bump is.
When you spend on building your brand, that generally has an impact over time. And so what started happening is we saw a real shift of taking money away from brand building to spending it on those short-term things, such as promotions. And I think we're starting to see that move back. And the answer to your question is you need to have some balance.
Yeah, we need to continue to have customers. We need to continue to get revenue in now, but we need to think about what's its impact on the long term. So a lot of what the movement has been has been to think about the lifetime value of a customer, which is, we need to acquire customers, and that sort of gives us a short-term bump, but we need to retain those customers.
And so we think about, how long am I gonna keep these customers so that I can have that revenue stream into the future. And so the real answer is a balance. Specifically, which should you be doing? It depends on where you are. And if you're already doing well on acquisition and you're not retaining customers, you need to be investing more in that long term.
Angela: That makes sense. I think you had mentioned before, you know, metrics like share of wallet, and maybe proxies for those, looking at things like share of search. I know our clients have gotten energy from that, and it helps really kind of build that case. It's just one example of more of that long-term view that we're moving in the right direction. Some of the research that you've done looks at the actions that either marketers or management takes and tries to connect them to specific outcomes. I'm curious, which management behaviors do you feel actually move marketing results?
Dave: I'm a believer that the number one answer is having good products and services. And so you can spend a lot of money on advertising, but if you don't have a good product, you're not being very effective and efficient. And once people buy it, they're not gonna come back and buy it again.
And the word of mouth isn't gonna be very strong. So building that brand means what it is that we need to do is we really need to make sure that people have a good experience. And we need to be consistent with that. And it's with the product, it's with the service that ends up going with it as well.
And that's what has, I think, the overall biggest impact across B2B and B2C, both of them.
Angela: 100%. I think we've all had that experience. Rob, what do you say? You got a quote, or maybe you stole it. "Nothing will kill a company faster than great marketing and a bad product," or something like that. Can't remember exactly.
Dave: Yeah. Yeah. I'll copy it. You know, I'll plagiarize that.
Elena: It's definitely not from Rob.
Angela: Okay. Shoot.
Rob: But I'm still gonna take it. If you steal from me, you've stolen twice.
Angela: I was just gonna say he always says that, so this came from somewhere. I don't know where it came from. But you truly believe that marketing should go beyond just brands and businesses. You've taken brand value beyond the company view with your Best Countries ranking.
I'm curious, why do you believe every country should prioritize its brand? Is it just so they get travelers, people are going on vacation? Help us understand that.
Dave: So I've been doing that research for now 10 straight years. Every year I collect data about people's perceptions of countries, and I believe countries should do that not just for their ego — "Look, look how well we're doing in people's eyes" — but I think it does have an impact on the economy of a country.
And you mentioned, Angela, you mentioned one of them. That one is, you know, it attracts tourists, but also it attracts foreign trade. Imagine that you're looking at two pairs of shoes. One says, "Made in Italy," and the other one says, "Made in..." I don't wanna, you know, taint any particular country, but made in Bulgaria.
Angela: Sure.
Dave: Okay? Look at the two. I can't see any difference. I try them both on. I can't feel any difference. Which one are you more likely to buy? You're much more likely to buy the one that says Made in Italy. Which one are you more likely to be willing to pay more for? The one that says Made in Italy. And so it helps in that foreign trade, and it actually helps in foreign direct investment.
So I have a paper coming out real soon in which I'm gonna empirically show how much the image of countries on various different dimensions has an impact on foreign direct investment, foreign trade, tourism, and overall gross domestic product. And so it has an impact on all those. I think it's really, really important.
I've been looking at it for countries. We have seen cities that have been branding themselves for a long, long time, and my favorite example is Las Vegas. It has a very, very distinct brand. And it draws people to that adult playground.
Rob: Okay, so our Bulgarian listenership is gonna take a little bit of a hit, but that's okay. Let's take a little bit of a pivot here and talk about a topic that has all kinds of good spiciness to it, which is cryptocurrency. Some people love it, some people hate it, some people don't understand it. I happen to be one of those that often is confused by it, and you've studied it a ton, and it sounds like you've done some really recent research on it through the Cryptocurrency Confidence Index.
Say that four times. What have you found in terms of, does consumer confidence drive crypto prices, or do prices drive the confidence?
Dave: So I've given long answers. I'll give a short answer to that one. Yes.
Rob: Right? Okay.
Dave: When I originally started doing this research, I was thinking, "Do people have confidence in the currency, therefore prices are gonna go up?" And I've tried teasing out, is it that confidence that drives the prices, or is it the prices that drive the confidence? And my answer is yes.
As people become more confident, prices go up. No surprise. As prices go up, confidence goes up. No surprise. And I was trying to get a sense of, you know, the relative levels of those, and those are actually fairly equal. But you know, there's the Michigan study that does have consumer confidence in general about the economy that comes out every year, and it sort of is a leading indicator of what's gonna happen with the economy.
I think what it is that I have with the confidence interval, consumer crypto confidence interval — I had to say it slower, couldn't do it four times. But that confidence interval is a leading indicator, but it also is recursive and comes back to affect us.
Rob: Well, you are in the epicenter of teaching the next generation of marketers. And, you know, obviously you have your hand on the steering wheel of how kids can continue to learn, or young adults. If you could still advance that further and just redesign how marketing education is happening in the US from scratch, what would you change?
Dave: I think one of the things that has evolved over time is people have started reducing their definition of marketing to advertising. And based on what it is that I've been talking about so far, I view marketing as so, so much more and so much tied to what products it is that we're developing.
I see some companies that have — like Google. Elena, you mentioned in my introduction I've done some work with Google. They have product managers. They don't call them marketing managers. They have product managers that are there. And so Google Pay — there is a product manager for Google Pay, and they don't even think of that as part of marketing.
And there are many companies, particularly in the tech sector, but others, that have product managers. They're not in marketing, maybe don't even have marketing training. I wanna bring that back and say, "Boy, the products that we're developing, the service that we have, is all a critical part of understanding what marketing's all about."
And whoever is in charge of marketing needs to have their eye on not just what message we send or are we gonna be in the Super Bowl or not, but what is it that we're offering and how does that connect with what consumers really want? And to some degree, it's full circle back to where we were when I started my career.
Rob: Right? Wow. Well, let's wrap this up by opening up a jar of picante sauce. What is your most contrarian marketing opinion, Dave?
Dave: My most contrarian one, at least the one I get the biggest pushback on, is I think brand value ought to appear on a balance sheet. And so if you think about the different questions you've been asking me, it started off with, you know, some of the work I've done in marketing metrics and linking it to financial consequences.
That's not something that should be reserved for editions one through four. It should be something that is very, very visible, and it should be in a balance sheet. And something that's really, really weird is if a company buys a brand — Procter & Gamble buys Vicks — Vicks' brand value shows up on their balance sheet.
If they build a brand, that doesn't show up on the balance sheet. And we ought to be able to recognize that we've got these assets called brand. And some of the pushback I get is, "Well, we can't agree on how we're gonna measure it." Well, I'm willing to agree on it. Just follow my opinion. Okay, not everybody agrees with my opinion.
Well, brand value fluctuates. Okay. We've got real estate that shows up as an asset, and real estate values fluctuate all the time. We've got inventory. Well, are we gonna measure it with LIFO? Are we gonna measure it with FIFO? We've got different ways of measuring that. Okay, we've got different ways of measuring brand.
So put brand out there and specify, "This is how it is that I measure it." You know, that's probably the most controversial one that I have. The second one would be every country needs a chief marketing officer, including the United States, and it should not be the sole responsibility of the CEO or the president of that country. Somebody who's in charge of measuring and managing the brand of that country. Really important.
Elena: I think we definitely agree with you on that brand value piece, and it is silly. I was thinking that when you teed that up, that when companies buy other brands, they value brand value. You wouldn't want that to not be a part of the sale, but when they're just evaluating how their brand is doing, they don't always, and it makes me think about the stuff going on with Nike right now and how much of their devaluation has to do with their brand. But that's probably a whole separate conversation we could have. So you mentioned this, being like the CMO of a country, which perfectly leads me into my final question for you, Dave. I really did find your research into the brand of countries super interesting, and it's very unique stuff. So if you could be CMO of any country for a year, which one would you choose, and what would your first campaign be?
Dave: Oh, so you're gonna throw it back at me? I — you know, I —
Rob: We already know the answer is Bulgaria.
Dave: But with that, oh, make better shoes. No, so that's a hard question, by the way. And so you have thrown it back at me. So I would not want to be the brand manager of one of the top 10 countries in the world because there's only one direction to go, and that's down, you know?
So at the end of that year, I definitely would be fired. I would not want to be the chief marketing officer of the United States. I don't think that we would get the resources or the devotion to defer that to somebody who is the chief marketing officer when there's other people that feel like they're in charge of the brand.
I think there's a couple directions that one could go in. I look at India, for example, and I think it is misunderstood. And India has made so much progress, and the rest of the world doesn't fully understand it. And so I think there's lots of upside if people would only understand how progressive India is, all the business opportunities that exist there, what a beautiful country and people are there.
And actually, one of the fun things that I do is I look at how people internally evaluate the brand versus externally, and the perceptions are misaligned for India. Indians think more positively about their country than happens to be the case externally. And I think it's just because brands take a long time to change, so we need to change that.
The other answer to your question — I know you asked me one. If I was brand manager, or if I was the chief marketing officer of a country, I might choose a country like Vietnam. And I think there's a lot of opportunity within Vietnam, but what I wanna do is I wanna change the product.
And I wanna work internally with not the external message as much as first an internal message. The general perception of Vietnam is that it is relatively not environmentally friendly. It's got a lot of good business activities that are going on. It's very — by the way, it's very friendly to Westerners. A great place to visit, not that well understood, but breathing some of the air in Hanoi is a hazardous endeavor. And so I wanna clean up the air, and so I wanna work internally to improve the product, and then I wanna make people try and understand that.
Elena: Nice. Good marketers — they improve the product too, so there you go.
Dave: There you go. Exactly right.
Elena: All right, well, we challenged ourselves to do the same thing, so we didn't just leave you hanging. Ang, Rob, what countries did you pick?
Angela: I chose one that I think has a very distinctive element to it. Not in a logo or anything like that, but France has a distinctive branding of just being the French, right? Are they a-holes? I don't know. I've never been there. I think it's probably great, but, like, that just seems super fun to me, that they've got this distinctive asset and this kind of cultural confidence and that you could, like, really play into that.
But I'm also with Dave that picking a little bit of a project, something like Mexico, maybe could be fun — kind of a "look again" campaign. There's, like, manufacturing and there's cuisine and there's entrepreneurship and art and tourism, and maybe it gets overlooked.
Dave: So, let me jump in just for a second, Angela. France — most countries rate themselves higher than the rest of the world rates them. Not France.
Angela: Really?
Dave: And that's been a recent change. And the internal attitude towards France right now, it's a very pessimistic country. And some of it might be because of some of the turmoil that's going on. It is the country that is least optimistic about the future of AI.
Angela: Wow. Okay.
Dave: And it is the country that has the least hope for — one of the questions I ask people is, "Are your children gonna grow up in a better life than you've experienced?" And most people say yes. Not France. And so France was sort of an outlier this past year.
And so, we externally think positively of France, just as you were saying, but the reality is they need to work on the internal marketing.
Angela: Interesting. So they've had this, like, cultural confidence, but you're saying that just in the last year it's shifted.
Dave: That's right.
Angela: Wow. Okay.
Elena: Well, Angela's gonna fix that.
Angela: I guess. Like, but it's just gonna be an internal marketing campaign instead of a worldly campaign.
Rob: Well, I was gonna say that, that's kind of an interesting point Dave's bringing up — like, who is the target audience, right? So are we talking about the internal audience? Are we talking... So I answered this question with the external audience. And I too, I like going for underdog brands, right? 'Cause like you said, Dave, it's hard to champion a brand that's already won 'cause you know, you can only go down. So I picked a country that's an underdog and that has some spicy distinctive assets, and that is Scotland. All right?
Elena: Rob, that was mine.
Angela: Oh, oh, jeez.
Rob: Did you share that ahead of time? 'Cause I don't think you did. So, but you think about it and you're like — and you probably are gonna have a much more intellectual reason why you chose it, Elena. I'm just thinking, you know, kilts and, you know, you're talking bagpipes and castles, and you got a lot to work with there in terms of distinctive assets. And Scotland's not the place people, you know — it just doesn't roll off people's tongues in terms of who wants to, you know, who's — where's your next travel destination? So I'm going Scotland.
Elena: Rob, you missed the most important part of Scotland, which is their national animal is the unicorn. So that —
Rob: Is it really?
Elena: Yeah, that's their national animal. I agree with you. I've heard actually amazing things from people that have gone to Scotland. I've never gone, but I think that... And they have the Loch Ness Monster, right? They've got a lot you could be working with. But yeah, the unicorn, I think that's so fun.
Rob: I keep telling people unicorns are real, and everyone tells me I'm wrong. So apparently they're with me on this.
Elena: Yeah. So we're gonna shift that.
Rob: I've always wanted to eat a unicorn. I tell that to my family a lot. I'm like, "I want a unicorn steak. Wouldn't that be amazing?"
Dave: Oh my gosh. You're gonna kill a unicorn so you can —
Rob: I see, absolutely, I see the campaign right there. We, nation — world uprising.
Elena: Now you're never gonna be the CMO of Scotland. That's like killing a bald eagle while being the US CMO. You do that. Oh, gosh, fun. Well, Dave, thanks so much for joining us. That was really fun to go through your research and hear how you think about brand value and, yeah, country branding, and a lot of fun stuff you professors get to get up to. So thanks so much for joining us.
Dave: Well, thank you. Thanks so much. It's actually been a really fun interview for sure.
Elena: Awesome. All right.
Rob: Thank you, Dave.
Angela: Thanks, Dave.
Episode 183
What's a Brand Actually Worth? with Professor Dave Reibstein
Buy a brand, and it shows up on your balance sheet. Build one, and it doesn't. Wharton professor Dave Reibstein thinks that's backwards.
This week, Elena, Angela, and Rob are joined by Dave Reibstein, the William S. Woodside Professor of Marketing at the Wharton School and co-author of Marketing Metrics. Dave explains how to put an actual number on brand value, whether you take it in price premium, volume, or some mix of both. He shares 10 years of research on how country branding shapes trade, tourism, and investment, plus why "Made in Italy" still sells shoes. Plus, hear the team pitch which country they'd take over as CMO.
Topics Covered
• [03:00] Research on customer capital and talent risk
• [06:00] Why marketing metrics need standard definitions
• [07:30] What brand value looks like as a number
• [09:30] Balancing promotions against long-term brand building
• [12:00] The management behavior that moves results most
• [13:30] Why every country should manage its brand
• [19:30] Dave's case for brand value on the balance sheet
Resources:
2021 Journal of Finance Study
Dave Reibstein's LinkedIn
Today's Hosts
Elena Jasper
Chief Marketing Officer
Rob DeMars
Chief Misfit
Angela Voss
Chief Executive Officer
Dave Reibstein
Author and Professor of Marketing at Wharton
Subscribe on
Enjoy this episode? Leave us a review.
Transcript
Elena: I'm Elena Jasper. I'm on the marketing team here at Marketing Architects, and I'm joined by my co-hosts, Angela Voss, the CEO of Marketing Architects, and Rob DeMars, the Chief Misfit at Misfits & Machines.
Rob: Hello, hello.
Angela: Hello.
Elena: Hello, and today we have a guest joining us. Dave Reibstein is the William S. Woodside Professor of Marketing at the Wharton School and a nationally prominent marketing expert. He has expertise in competitive marketing strategy, branding, marketing measurement, and marketing research methods. He's the past chair of the board of directors of the American Marketing Association and the former executive director of the Marketing Science Institute. He's consulted on marketing strategy for companies including GE, Google, Johnson & Johnson, and more. He's also the author or co-author of numerous books, including "Marketing Metrics: The Manager's Guide to Measuring Marketing Performance." His research has received coverage in "The New York Times," "Forbes," "Marketplace," and more, and he's an award-winning educator of more than four decades, honored over 30 times for excellence in teaching, with academic appointments at Stanford and Harvard Business School along the way. Dave, you are a busy person, so thank you for joining us on the show. You've got a lot going on.
Dave: It helps that I've been doing this for four decades, so I've had a lot of time to get a lot of things in there.
Rob: Gosh, it's a lot of smart stuff. But before we get to the smart stuff, I gotta ask a question. So I'm just doing a little Midwest recon here. So Kansas undergrad, PhD from Purdue, and Angela and Elena and I are sitting here in Minnesota. We've got a little Midwest kinda vibe going on here.
You've done a lot of studying on brand value, and I'm thinking about the Midwest. Like, is the Midwest pretty underrated in terms of brand value? I mean, we're kind of the flyover state. We've got great mental availability, but terrible share of voice. So what do you think?
And have you written off the Midwest altogether? Do you consider yourself kind of a Philly guy?
Dave: No, actually everybody here thinks of me as from the Midwest. Once you come from the Midwest, they brand you as such. But I totally agree with you. The Midwest is not understood at all by the East and the West Coast. We've all seen those maps of the, you know, the view of the country from a New Yorker, and it's just New York is everything, and the rest of the country is sort of gone.
And then, of course, there's a little bit of California. But it is misunderstood for sure. And we get a little bit of attention with the ice up there in Minnesota, and I'm not referring to the weather.
Elena: Oh no.
Rob: Yeah, right? I mean, Minneapolis has all kinds of things going on, and everyone knows us for Fargo, which is actually not in Minnesota, but we do talk like that.
Elena: Yeah. Oh my gosh. All right. We're very happy to have you here and to have a fellow Midwesterner on the show. We are back with our thoughts on some recent marketing news, always trying to root our opinions in data, research, and what drives business results. And, Dave, I like to open with research when we start the show, and today's research comes from you. The paper is titled "Inalienable Customer Capital, Corporate Liquidity, and Stock Returns," which was published in the "Journal of Finance." It starts with a concept called customer capital, which is customers' brand loyalty to a firm. The research explains that customer capital comes from two places. One is pure brand recognition built through things like advertising and product quality. The other is talent — your star performers, innovators, and managers whose personal contributions keep customers loyal. And that second kind can disappear when those people leave the firm. So the research measured how talent-dependent each company's customer capital is, and firms that depend on talent rather than brand carry more risk. They have higher talent turnover, they have to hoard more cash to protect themselves, and investors actually demand higher returns to hold their stock. Brand is the version of customer loyalty your company actually owns. And that is just one example of the kind of knowledge Dave is gonna bring to the podcast today, so I'm not gonna try to explain any more of it. Thank you again for joining us. You've done a lot of work like this research to measure the value of marketing in a way that executives beyond just the marketing department can understand. So I wanted to start with, that's an interesting, niche, challenging topic of research, so what originally interested you in that challenge of linking marketing to financial outcomes?
Dave: So Elena, first I wanna say I'm so impressed that you got further in that article than most anybody. So, you know, you got further in that than my mother, and certainly further than most anyone who picks up that article, 'cause it's a pretty technical article. But you did a great job of summarizing that.
So thanks for going through that, and many people thank you so that they don't have to read the article, 'cause they got the essence of it.
Rob: Some people watch Netflix. Elena reads these studies.
Elena: So it's kind of my thing.
Dave: Well, I'm impressed. But to your question, which is why is it I started looking at linking marketing and marketing metrics to financial consequences, it's 'cause we spend a lot of money on marketing, and there's a whole bunch of the organization that's saying, "We're just wasting our spend. We're spending our money and, you know, it's just lowering our overall profitability. Why should we be doing that?" Probably the best evidence of it is when the economy gets weak, when there's any downturn in the economy, companies often just cut marketing because, you know, it was a luxury.
We had excess money that was available. We could go ahead and cut it. And, you know, when we've got too much cash, okay, let's spend it frivolously on marketing.
Elena: Yeah, no, you're right. I actually — someone was commenting on my LinkedIn today talking about how marketing investments in brand sound great until the company's not doing well, and then typically the first thing that gets chopped is marketing. So Dave, you're also very well known for a popular book, which is called "Marketing Metrics: The Manager's Guide to Measuring Marketing Performance." What inspired that book? And you've actually had four different editions of it, so what's changed the most across those four editions?
Dave: So those four editions are not — I want to say it four different ways. It's just over time, we've added more and more measures that we weren't typically looking at. But the reason that we started that book — and I've got three great co-authors on that book — but the reason we started that book is we kept seeing things where someone would talk about market share and somebody else would talk about market share, and they're talking about different things.
And so there were lots of terms that were being bandied around that had different ways of possibly defining them, and it was with an attempt of, could we have a centralized way that this is the standard, this is how, when we measure market share, what it is that we mean, or what's the right expression to use.
So think like, think of awareness. Here's what our awareness is of our brand. Is that aided awareness? Is it unaided awareness? There's different ways that we could talk about it. Share of wallet is one of my favorite, all-time favorite measures, but sometimes referred to as share of requirements.
It's a favorite term of mine, and it's often misunderstood and miscollected.
Elena: Yeah, we marketers love a rebrand, don't we? We like to have a million different names for different things. Well, speaking of something that probably has a lot of different definitions in the minds of marketers, you've done a lot of work on brand value, and that can feel very abstract. So what is brand value, and how should a company, in your opinion, in your research, actually measure the value of its brand?
Dave: So I've been very involved for numerous companies measuring what's the value of their brand. And there are some, actually some other marketing academics that say brand value is, here's the essence of the brand. Here's what it means to people. When I think about brand value — and actually I love when I'm speaking to a group of executives and I say, "So what's your brand value?"
And they start telling me, "Oh, we represent trust, and we represent..." And I go, "No, no, I'm looking for a number." When I think about value, I'm looking for a number, and that number often comes in one of three forms. Either how much more could you charge for your product because of your brand name?
And sometimes when I talk to executives, they say, "I'm able to charge 10% more than my competition because of who I am." That is just part of it, because sometimes we take the brand value in terms of incremental price, but sometimes we take it in terms of incremental volume, and most of the time we take it as some combination of those two. And so, you know, not to get too technical on the podcast, but what we're doing is, you take a demand curve, and as you build your brand, you shift that outward, which means you can charge more money, you can get more volume.
And as I say, if you're Walmart, you're taking it in terms of volume. If you're Rolls-Royce, you're taking it in terms of price. But most of the time it's some combination. So those executives that answer me and say, "I'm able to charge a 10% premium," are only capturing part of that picture.
And there are methodologies that are commonly used for trying to measure what that economic value is of a brand.
Angela: I love what you're saying here, Dave, because to your point earlier, we do spend, as marketers, a lot of money on marketing. And I think we all come from a place of wanting to justify that spend, but I think sometimes it's hard for marketers to get there. We talk about how marketing works on two timelines, stealing language from Les Binet and Peter Field with "The Long and the Short of It." And I think it's a great idea in theory, but like I said, we struggle to do that sometimes. So how, in your view, should brands balance their short-term results versus something like longer-term brand building or getting to an understanding of what, you know, pricing power you might have because you do have a stronger brand than your competitors?
Dave: Angela, that's a great question. And part of what happened is we started seeing promotions, and I'm thinking of things like coupons, for example, or this week, you know, 10% off. Those types of promotions, you get to see that short-term effect. And so you get to see what that bump is.
When you spend on building your brand, that generally has an impact over time. And so what started happening is we saw a real shift of taking money away from brand building to spending it on those short-term things, such as promotions. And I think we're starting to see that move back. And the answer to your question is you need to have some balance.
Yeah, we need to continue to have customers. We need to continue to get revenue in now, but we need to think about what's its impact on the long term. So a lot of what the movement has been has been to think about the lifetime value of a customer, which is, we need to acquire customers, and that sort of gives us a short-term bump, but we need to retain those customers.
And so we think about, how long am I gonna keep these customers so that I can have that revenue stream into the future. And so the real answer is a balance. Specifically, which should you be doing? It depends on where you are. And if you're already doing well on acquisition and you're not retaining customers, you need to be investing more in that long term.
Angela: That makes sense. I think you had mentioned before, you know, metrics like share of wallet, and maybe proxies for those, looking at things like share of search. I know our clients have gotten energy from that, and it helps really kind of build that case. It's just one example of more of that long-term view that we're moving in the right direction. Some of the research that you've done looks at the actions that either marketers or management takes and tries to connect them to specific outcomes. I'm curious, which management behaviors do you feel actually move marketing results?
Dave: I'm a believer that the number one answer is having good products and services. And so you can spend a lot of money on advertising, but if you don't have a good product, you're not being very effective and efficient. And once people buy it, they're not gonna come back and buy it again.
And the word of mouth isn't gonna be very strong. So building that brand means what it is that we need to do is we really need to make sure that people have a good experience. And we need to be consistent with that. And it's with the product, it's with the service that ends up going with it as well.
And that's what has, I think, the overall biggest impact across B2B and B2C, both of them.
Angela: 100%. I think we've all had that experience. Rob, what do you say? You got a quote, or maybe you stole it. "Nothing will kill a company faster than great marketing and a bad product," or something like that. Can't remember exactly.
Dave: Yeah. Yeah. I'll copy it. You know, I'll plagiarize that.
Elena: It's definitely not from Rob.
Angela: Okay. Shoot.
Rob: But I'm still gonna take it. If you steal from me, you've stolen twice.
Angela: I was just gonna say he always says that, so this came from somewhere. I don't know where it came from. But you truly believe that marketing should go beyond just brands and businesses. You've taken brand value beyond the company view with your Best Countries ranking.
I'm curious, why do you believe every country should prioritize its brand? Is it just so they get travelers, people are going on vacation? Help us understand that.
Dave: So I've been doing that research for now 10 straight years. Every year I collect data about people's perceptions of countries, and I believe countries should do that not just for their ego — "Look, look how well we're doing in people's eyes" — but I think it does have an impact on the economy of a country.
And you mentioned, Angela, you mentioned one of them. That one is, you know, it attracts tourists, but also it attracts foreign trade. Imagine that you're looking at two pairs of shoes. One says, "Made in Italy," and the other one says, "Made in..." I don't wanna, you know, taint any particular country, but made in Bulgaria.
Angela: Sure.
Dave: Okay? Look at the two. I can't see any difference. I try them both on. I can't feel any difference. Which one are you more likely to buy? You're much more likely to buy the one that says Made in Italy. Which one are you more likely to be willing to pay more for? The one that says Made in Italy. And so it helps in that foreign trade, and it actually helps in foreign direct investment.
So I have a paper coming out real soon in which I'm gonna empirically show how much the image of countries on various different dimensions has an impact on foreign direct investment, foreign trade, tourism, and overall gross domestic product. And so it has an impact on all those. I think it's really, really important.
I've been looking at it for countries. We have seen cities that have been branding themselves for a long, long time, and my favorite example is Las Vegas. It has a very, very distinct brand. And it draws people to that adult playground.
Rob: Okay, so our Bulgarian listenership is gonna take a little bit of a hit, but that's okay. Let's take a little bit of a pivot here and talk about a topic that has all kinds of good spiciness to it, which is cryptocurrency. Some people love it, some people hate it, some people don't understand it. I happen to be one of those that often is confused by it, and you've studied it a ton, and it sounds like you've done some really recent research on it through the Cryptocurrency Confidence Index.
Say that four times. What have you found in terms of, does consumer confidence drive crypto prices, or do prices drive the confidence?
Dave: So I've given long answers. I'll give a short answer to that one. Yes.
Rob: Right? Okay.
Dave: When I originally started doing this research, I was thinking, "Do people have confidence in the currency, therefore prices are gonna go up?" And I've tried teasing out, is it that confidence that drives the prices, or is it the prices that drive the confidence? And my answer is yes.
As people become more confident, prices go up. No surprise. As prices go up, confidence goes up. No surprise. And I was trying to get a sense of, you know, the relative levels of those, and those are actually fairly equal. But you know, there's the Michigan study that does have consumer confidence in general about the economy that comes out every year, and it sort of is a leading indicator of what's gonna happen with the economy.
I think what it is that I have with the confidence interval, consumer crypto confidence interval — I had to say it slower, couldn't do it four times. But that confidence interval is a leading indicator, but it also is recursive and comes back to affect us.
Rob: Well, you are in the epicenter of teaching the next generation of marketers. And, you know, obviously you have your hand on the steering wheel of how kids can continue to learn, or young adults. If you could still advance that further and just redesign how marketing education is happening in the US from scratch, what would you change?
Dave: I think one of the things that has evolved over time is people have started reducing their definition of marketing to advertising. And based on what it is that I've been talking about so far, I view marketing as so, so much more and so much tied to what products it is that we're developing.
I see some companies that have — like Google. Elena, you mentioned in my introduction I've done some work with Google. They have product managers. They don't call them marketing managers. They have product managers that are there. And so Google Pay — there is a product manager for Google Pay, and they don't even think of that as part of marketing.
And there are many companies, particularly in the tech sector, but others, that have product managers. They're not in marketing, maybe don't even have marketing training. I wanna bring that back and say, "Boy, the products that we're developing, the service that we have, is all a critical part of understanding what marketing's all about."
And whoever is in charge of marketing needs to have their eye on not just what message we send or are we gonna be in the Super Bowl or not, but what is it that we're offering and how does that connect with what consumers really want? And to some degree, it's full circle back to where we were when I started my career.
Rob: Right? Wow. Well, let's wrap this up by opening up a jar of picante sauce. What is your most contrarian marketing opinion, Dave?
Dave: My most contrarian one, at least the one I get the biggest pushback on, is I think brand value ought to appear on a balance sheet. And so if you think about the different questions you've been asking me, it started off with, you know, some of the work I've done in marketing metrics and linking it to financial consequences.
That's not something that should be reserved for editions one through four. It should be something that is very, very visible, and it should be in a balance sheet. And something that's really, really weird is if a company buys a brand — Procter & Gamble buys Vicks — Vicks' brand value shows up on their balance sheet.
If they build a brand, that doesn't show up on the balance sheet. And we ought to be able to recognize that we've got these assets called brand. And some of the pushback I get is, "Well, we can't agree on how we're gonna measure it." Well, I'm willing to agree on it. Just follow my opinion. Okay, not everybody agrees with my opinion.
Well, brand value fluctuates. Okay. We've got real estate that shows up as an asset, and real estate values fluctuate all the time. We've got inventory. Well, are we gonna measure it with LIFO? Are we gonna measure it with FIFO? We've got different ways of measuring that. Okay, we've got different ways of measuring brand.
So put brand out there and specify, "This is how it is that I measure it." You know, that's probably the most controversial one that I have. The second one would be every country needs a chief marketing officer, including the United States, and it should not be the sole responsibility of the CEO or the president of that country. Somebody who's in charge of measuring and managing the brand of that country. Really important.
Elena: I think we definitely agree with you on that brand value piece, and it is silly. I was thinking that when you teed that up, that when companies buy other brands, they value brand value. You wouldn't want that to not be a part of the sale, but when they're just evaluating how their brand is doing, they don't always, and it makes me think about the stuff going on with Nike right now and how much of their devaluation has to do with their brand. But that's probably a whole separate conversation we could have. So you mentioned this, being like the CMO of a country, which perfectly leads me into my final question for you, Dave. I really did find your research into the brand of countries super interesting, and it's very unique stuff. So if you could be CMO of any country for a year, which one would you choose, and what would your first campaign be?
Dave: Oh, so you're gonna throw it back at me? I — you know, I —
Rob: We already know the answer is Bulgaria.
Dave: But with that, oh, make better shoes. No, so that's a hard question, by the way. And so you have thrown it back at me. So I would not want to be the brand manager of one of the top 10 countries in the world because there's only one direction to go, and that's down, you know?
So at the end of that year, I definitely would be fired. I would not want to be the chief marketing officer of the United States. I don't think that we would get the resources or the devotion to defer that to somebody who is the chief marketing officer when there's other people that feel like they're in charge of the brand.
I think there's a couple directions that one could go in. I look at India, for example, and I think it is misunderstood. And India has made so much progress, and the rest of the world doesn't fully understand it. And so I think there's lots of upside if people would only understand how progressive India is, all the business opportunities that exist there, what a beautiful country and people are there.
And actually, one of the fun things that I do is I look at how people internally evaluate the brand versus externally, and the perceptions are misaligned for India. Indians think more positively about their country than happens to be the case externally. And I think it's just because brands take a long time to change, so we need to change that.
The other answer to your question — I know you asked me one. If I was brand manager, or if I was the chief marketing officer of a country, I might choose a country like Vietnam. And I think there's a lot of opportunity within Vietnam, but what I wanna do is I wanna change the product.
And I wanna work internally with not the external message as much as first an internal message. The general perception of Vietnam is that it is relatively not environmentally friendly. It's got a lot of good business activities that are going on. It's very — by the way, it's very friendly to Westerners. A great place to visit, not that well understood, but breathing some of the air in Hanoi is a hazardous endeavor. And so I wanna clean up the air, and so I wanna work internally to improve the product, and then I wanna make people try and understand that.
Elena: Nice. Good marketers — they improve the product too, so there you go.
Dave: There you go. Exactly right.
Elena: All right, well, we challenged ourselves to do the same thing, so we didn't just leave you hanging. Ang, Rob, what countries did you pick?
Angela: I chose one that I think has a very distinctive element to it. Not in a logo or anything like that, but France has a distinctive branding of just being the French, right? Are they a-holes? I don't know. I've never been there. I think it's probably great, but, like, that just seems super fun to me, that they've got this distinctive asset and this kind of cultural confidence and that you could, like, really play into that.
But I'm also with Dave that picking a little bit of a project, something like Mexico, maybe could be fun — kind of a "look again" campaign. There's, like, manufacturing and there's cuisine and there's entrepreneurship and art and tourism, and maybe it gets overlooked.
Dave: So, let me jump in just for a second, Angela. France — most countries rate themselves higher than the rest of the world rates them. Not France.
Angela: Really?
Dave: And that's been a recent change. And the internal attitude towards France right now, it's a very pessimistic country. And some of it might be because of some of the turmoil that's going on. It is the country that is least optimistic about the future of AI.
Angela: Wow. Okay.
Dave: And it is the country that has the least hope for — one of the questions I ask people is, "Are your children gonna grow up in a better life than you've experienced?" And most people say yes. Not France. And so France was sort of an outlier this past year.
And so, we externally think positively of France, just as you were saying, but the reality is they need to work on the internal marketing.
Angela: Interesting. So they've had this, like, cultural confidence, but you're saying that just in the last year it's shifted.
Dave: That's right.
Angela: Wow. Okay.
Elena: Well, Angela's gonna fix that.
Angela: I guess. Like, but it's just gonna be an internal marketing campaign instead of a worldly campaign.
Rob: Well, I was gonna say that, that's kind of an interesting point Dave's bringing up — like, who is the target audience, right? So are we talking about the internal audience? Are we talking... So I answered this question with the external audience. And I too, I like going for underdog brands, right? 'Cause like you said, Dave, it's hard to champion a brand that's already won 'cause you know, you can only go down. So I picked a country that's an underdog and that has some spicy distinctive assets, and that is Scotland. All right?
Elena: Rob, that was mine.
Angela: Oh, oh, jeez.
Rob: Did you share that ahead of time? 'Cause I don't think you did. So, but you think about it and you're like — and you probably are gonna have a much more intellectual reason why you chose it, Elena. I'm just thinking, you know, kilts and, you know, you're talking bagpipes and castles, and you got a lot to work with there in terms of distinctive assets. And Scotland's not the place people, you know — it just doesn't roll off people's tongues in terms of who wants to, you know, who's — where's your next travel destination? So I'm going Scotland.
Elena: Rob, you missed the most important part of Scotland, which is their national animal is the unicorn. So that —
Rob: Is it really?
Elena: Yeah, that's their national animal. I agree with you. I've heard actually amazing things from people that have gone to Scotland. I've never gone, but I think that... And they have the Loch Ness Monster, right? They've got a lot you could be working with. But yeah, the unicorn, I think that's so fun.
Rob: I keep telling people unicorns are real, and everyone tells me I'm wrong. So apparently they're with me on this.
Elena: Yeah. So we're gonna shift that.
Rob: I've always wanted to eat a unicorn. I tell that to my family a lot. I'm like, "I want a unicorn steak. Wouldn't that be amazing?"
Dave: Oh my gosh. You're gonna kill a unicorn so you can —
Rob: I see, absolutely, I see the campaign right there. We, nation — world uprising.
Elena: Now you're never gonna be the CMO of Scotland. That's like killing a bald eagle while being the US CMO. You do that. Oh, gosh, fun. Well, Dave, thanks so much for joining us. That was really fun to go through your research and hear how you think about brand value and, yeah, country branding, and a lot of fun stuff you professors get to get up to. So thanks so much for joining us.
Dave: Well, thank you. Thanks so much. It's actually been a really fun interview for sure.
Elena: Awesome. All right.
Rob: Thank you, Dave.
Angela: Thanks, Dave.