Marketing Accounts

With Xin Wang I have recently published a piece which we called Marketing Accounts. I’m pleased to say that the full text of this research article is available free of charge at the link below (thanks to SSHRC/the Canadian government).

The problem we seek to address is that: “Marketing actions frequently create long-term value yet this is often not recorded in financial accounts” (Bendle and Wang, 2017, page 1). Much of the research in marketing that tackles this issue proposes a simple solution — financial accountants should change the way they do their jobs. While I have no problem with this recommendation it may be some time before the change occurs. Marketers and customers suffer most from the problems that not recoding marketing assets creates, not accountants. It is perhaps less than surprising that accountants are generally not rushing towards embracing change.

Our suggestion is better internal accounting for marketing. We argue that marketers should seek to take control of a set of management accounts and make them useful for marketing managers. (Which is want they are supposed to be but often aren’t, because internal reports typically follow external reporting rules). To help marketers effect the change we outline principles of internal “Marketing Accounts” and how these differ from current accounting practice. We suggest that:

“Marketing accounts capture the value of market-based assets, applying accounting’s matching concept as consistently as possible to treat marketing as an investment where appropriate. These accounts are based upon expected value, and are feasible within accounting rules given they aim only to aid management, not investor, decision making. Marketing accounts vary between, but not within, firms, and are comprehensive and regular. Finally, they are controlled by marketers with assumptions and models recorded and approved by the chief marketing officer.” (Bendle and Wang, 2017, page 1).

A key difference between financial and marketing accounts is that we seek to apply the matching principle from accounting much more consistently than it is applied in financial accounting. If a marketing investment creates a marketing asset, then this asset’s value should be accounted for rather than simply pretending it wasn’t an investment and no asset was created.

Marketers might not be able to unilaterally change financial accounting rules but they can create formal systems to record marketing assets — marketing accounts — today. We suggest they do so.

Read: Neil Bendle and Xin (Shane) Wang (2017) Marketing Accounts, International Journal of Research in Marketing, http://www.sciencedirect.com/science/article/pii/S0167811617300290

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