Our Marketing Accounts Paper Is Free To Read
Xin Wang and I have published a piece in the International Journal of Research in Marketing. We called the article Marketing Accounts. I’m pleased to say that the full text of this research article is available free of charge at the link below. (We would like to thank SSHRC/the Canadian government for this as they provided the funding).
The Value Marketing Creates Is Often Missed
In the marketing accounts paper we address a widespread problem. “Marketing actions frequently create long-term value yet this is often not recorded in financial accounts” (Bendle and Wang, 2017, page 1). Research in marketing that tackles this issue often proposes a simple solution. The instruction is that 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 financial accountants. Perhaps, given this, it is less than surprising that accountants are generally not rushing to embracing change.
Markets Can Do Better Without Financial Accounting Change
Our suggestion is better internal accounting for marketing. We argue that marketers should take control of a set of management accounts. The marketers can then make them useful for marketing managers. (To be clear this is what management accounts are supposed to be. Sadly, management accounts often aren’t that useful to managers, because internal reports typically follow external reporting rules). To help marketers effect the change we outline principles of internal “Marketing Accounts”. We show how these principles differ from current accounting practice.
In a critical bit of the paper we note 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).
Differences Between Financial And Marketing Accounts
There is one key difference between financial and marketing accounts that it is worth highlighting. We seek to apply the matching principle from accounting much more consistently than it is applied in financial accounting. We believe that if a marketing investment creates a marketing asset, then this asset’s value should be accounted for. Our position contrasts with simply pretending it wasn’t an investment. A consequence of that pretense is that no asset was created. (The current general approach in financial accounting).
Marketers cannot unilaterally change financial accounting rules. Yet, they can create formal systems to record marketing assets — marketing accounts — today. Marketers can, and should, change the way marketing is accounted for internally.
Read: Neil Bendle and Xin (Shane) Wang (2017) Marketing Accounts, International Journal of Research in Marketing, http://www.sciencedirect.com/science/article/pii/S0167811617300290