LONDON (AdAge.com) -- Only two companies, Procter & Gamble and Reckitt Benckiser, have figured out how to communicate the importance of brand to the bottom line in their annual reports, according to a survey of these documents from major marketers.
The lesson: If marketers want to win the battle for company resources, they must work harder to promote their contribution to the bottom line in annual reports, according to a new global survey by the Institute of Practitioners in Advertising in the U.K.
The IPA has analyzed reports for the 2008-2009 financial year from 50 companies, including the top 10 consumer-marketing spenders in the U.S., Europe and Asia. A majority of the reports were taken from Advertising Age's Top 100 Global Marketers report. Of the 50 companies, which included Ford, Johnson & Johnson, Coca-Cola, Time Warner, Kraft Foods, McDonald's, Walt Disney, PepsiCo, Unilever, Nestle, L'Oreal, Sony, Toyota and Volkswagen, only P&G in the U.S. and Reckitt Benckiser in the U.K. were judged to have fully communicated the role and impact of marketing to shareholders.
Annual reports are important, of course, because they provide shareholders, employees, journalists and other stakeholders with a extensive look at the state of the company and its immediate future and often say a lot about corporate culture.
Most of the reports stated the importance of the brand but failed to provide enough information or analysis on why the brands are successful, highlighting an untapped resource for marketers to prove their worth.
Hamish Pringle, director general of the IPA, said: "We hope that this global perspective will inspire more CMOs to engage with financial-reporting practices and to ensure that their voice is heard in the boardroom. It provides new insights, hints and tips for all preparers of annual reports who seek to convey the full intangible value of their brands and improve communication with stakeholders."
P&G's marketing strategy was incorporated into its overall strategy in its chairman's message and throughout its annual report. There was a brand-by-brand explanation of how the company's focus on innovation and understanding of consumer needs delivers value.
Bounty was cited as a good example. The report explained how P&G has created a flexible product that offers sub-brands for different needs such as cost and absorbency, each of which can be successfully marketed to different groups.
Coca-Cola showed one of the strongest understandings of its brand and was praised for its interesting demographic data and market analysis, but the data did not carry over into brand and marketing information. SABMiller excelled by linking its brand message to its wider business strategy, and Ford's "relatively dry" report was nevertheless one of the best at looking at overall market forces, linking them to the company and to trends and strategies.
U.K. based Reckitt Benckiser was singled out for giving a great deal of coverage to its brand outlook and strategies, all of which were incorporated into the company's overall strategy. It was also praised for offering metrics that provided strong factual support for the rest of the brand reporting.
"There's a correlation between how a company talks about its business and how it runs its business," said Seamus Gillen, narrative disclosure specialist for the Institute of Chartered Secretaries and Administrators. "The stronger the role played by brands in generating a company's revenues, the more important it is for there to be appropriate disclosure on the role of brands in developing and delivering the value proposition."
The IPA found that American reports tended be based around a theme or phrase. "When done well, it makes the company more personal and accurately portrays their character to a potential investor," the IPA report said. "However, when done poorly, it can come across as a cheap marketing trick, designed to impress rather than accurately explain the company and its beliefs."
U.S. reports also had the strongest focus on purely financial information and were let down by a failure to use data to explain company performance.
European reports tended to focus most on corporate social responsibility (although Johnson & Johnson rivaled the Europeans for emotive reporting) and provided a lot of quantitative measures and anecdotal examples of consumer brand experience to lighten the tone and create an impression of being customer-focused.
In Asia, research and development was a key focus, giving good insight into the future direction of the company. That partly reflects the nature of the region's most successful companies but also creates a perception of cultural devotion to innovation and development.
You can buy the full report here.