Walk into any boardroom and the contrast is obvious.
A manufacturing plant is justified with precision. How much capacity will it add? What cost advantage will it create? What demand will it serve? What is the payback period? What is the return on invested capital?
Every assumption is explicit. Every dollar is accountable.
Now listen to how brand investment is often argued.
We need to raise awareness. We need a brand awareness strategy. We need to refresh the brand. We need to strengthen emotional connection. We need to stay relevant.
This is not wrong. But it is incomplete.
Brand spend is usually argued in marketing language, while it is judged in financial language.[i] That gap explains why brand investment so often struggles when it reaches the CEO, the CFO, or the board.
The issue is not that brand does not create value. It clearly can. The issue is that the causal logic is rarely made complete enough to compete with other uses of capital.
The shoulders we stand on
A great deal of work has already been done. The issue is not lack of evidence. It is that the evidence comes from different intellectual traditions, each looking at a different part of the problem. At least five streams matter.
1. Marketing science: regularities in market behavior
Long before Byron Sharp, a large body of work in marketing science — rooted in scanner data, consumer panels, and econometric observation — documented stable patterns in how markets behave.
This tradition, associated with Andrew Ehrenberg and extended by many others, shows that:
- brand growth is largely driven by penetration
- buyer behavior follows regular, predictable distributions
- brands compete in repertoires, not exclusive relationships
Sharp and the Ehrenberg-Bass Institute synthesized and popularized these findings. At the same time, others have called into question some of the findings. For example, Joel Rubinson and his later work around the Movable Middle showed that these regularities do not mean all buyers are equally responsive. At any given moment, some consumers are far more open to change than others. This stream explains what markets look like when observed at scale.
2. Psychology and behavioral economics: how decisions are made
A different tradition, led by Daniel Kahneman and Richard Thaler, starts from controlled experiments and cognitive theory rather than market data. It shows that:
- decision-making is often fast, intuitive, and context-dependent
- preferences are constructed in the moment
- small cues and framing effects can shift behavior
This work does not describe market-level regularities. It explains the mechanisms of individual choice.
3. Brand and marketing theory: how meaning and response are structured
A third stream focuses on how marketing activities shape customer response over time. Kevin Lane Keller and Donald R. Lehmann mapped the link between marketing actions, customer mindset, and market performance. John Philip Jones demonstrated how advertising can drive short-term sales effects. Les Binet and Peter Field showed that brand building and activation operate on different time horizons and must be managed together. Shuba Srinivasan extended this work by showing that marketing effects persist and accumulate over time, linking brand activity more directly to long-term value. This stream explains how marketing influences demand and how those effects evolve.
4. Econometric attribution: isolating incremental impact
Another stream focuses on causality. Mike Hanssens and Koen Pauwels developed models to isolate the incremental effect of marketing actions and track their carryover over time. This work answers a different question: not just what happens in markets, but what portion of that change is caused by marketing.
5. Financial perspective: linking marketing to value
Finally, a stream of work connects marketing to financial outcomes. Rajendra K. Srivastava reframed marketing as an asset that affects the level, timing, and risk of cash flows. Peter Doyle linked marketing decisions to shareholder value. David A. Aaker and Robert Jacobson showed empirically that brand strength is reflected in market valuation. This stream explains why marketing and brand equity matters economically.
Taken together, this is substantial progress. The pieces exist. But the system still does not.
What is still missing
In practice, companies do not have a single operational model that connects:
brand investment → behavioral change → incremental demand → cash flow → economic profit → capital allocation
Marketing explains behavior. Analytics measures lift. Finance values outcomes. But no one owns the full chain. Without that chain, a marketer arguing for a budget is like an engineer presenting a bridge that stops halfway across the river. The design may be sound. The analysis may be rigorous. But it never reaches the point where value is realized.
And no one funds half a bridge.
Where the problem starts: upstream
Most companies start too late, with campaigns, media budgets, and execution. But the real logic of brand investment begins much earlier.
Brand performance is not a single lever. It is a layered system of value creation. As I have argued elsewhere, it unfolds across five interdependent layers:[ii]
- Layer 1 — Category Meaning. Why the category matters in people’s lives. This determines willingness to pay, price sensitivity, and whether a brand can command a premium at all.
- Layer 2 — Demand Logic. How demand is structured across needs, occasions, moments and current and future demand spaces. This is where growth is designed and where profit pools are shaped long before a campaign runs.
- Layer 3 — Brand Strategy, Portfolio and Positioning. Where and how the brand or the portfolio of brands and products compete. Positioning determines which advantages compound and which dissipate. It focuses capital and prevents dilution.
- Layer 4 — Go-to-Market Execution. Advertising, distribution, media, pricing, and activation. This is where most companies focus. It matters, but it follows the structure set upstream. This is also what most managers get wrong: execution cannot compensate for weak meaning or flawed demand logic.
- Layer 5 — Market Performance and Economics. Share, margins, ROIC, economic profit. This is the scoreboard. It reveals whether value was created. It does not create it.
Why this matters
Most brand investment cases operate almost entirely at Layer 4. This is where the empirical evidence of the Ehrenberg-Bass Institute becomes so important. But capital allocation decisions are made at Layer 5. And the real drivers of those outcomes sit upstream: category meaning, demand logic, and the positioning of brands or a portfolio of brands.
That is the disconnect.
What good looks like in practice
The companies that get closest do not treat brand as a communication function.
They treat it as a system.[iii] One that begins with meaning, shapes demand, focuses positioning, and is then amplified through execution. The economic results follow from that alignment.
Take Nike. Nike did not grow by simply increasing reach or optimizing campaigns. It built a clear idea of what sport means in people’s lives. The brand identity elements are performance, achievement, identity. Nike then expanded that meaning across everyday contexts. Running, training, lifestyle, and culture all became part of a continuous demand system. Its positioning around performance leadership is reinforced through athletes, product innovation, and cultural presence. The result is not just awareness or share. It is the ability to command premium prices at scale and to generate demand repeatedly without relying on promotions.
A similar logic can be seen at BMW, but expressed differently. BMW anchored itself in a very specific idea: driving as a performance experience and luxury. It did not try to stretch into every possible interpretation of mobility. It focused the brand tightly, aligned engineering and design to that promise, and reinforced it consistently over decades. In doing so, it shaped how demand in the premium segment is defined. Customers are not just buying transportation — they are buying the ultimate driving experience. That clarity translates directly into pricing power and margin stability.
At Unilever, the logic operates at a portfolio level. This is a textbook example of a house of brands architecture in practice. Rather than treating brands as interchangeable assets, Unilever assigns each one a distinct role grounded in a specific need or belief. Demand is structured around occasions and routines, not just products. Investment is then balanced between short-term activation and long-term brand building. The result is not explosive growth in a single brand, but a system of steady, resilient cash flows across the portfolio.
The same pattern appears in more extreme form at LVMH. Here, the starting point is not volume but meaning. Luxury is defined as identity, status, and craftsmanship. Demand is shaped by scarcity and aspiration, not functional need. Each maison is tightly controlled, and execution follows strict rules — no discounting, controlled distribution, and continuous investment in heritage and storytelling. The outcome is not just high revenue, but extraordinary margins and a steady increase in value per customer over time.
L’Oréal represents a different model, but one built on the same principles. L’Oréal structures demand across a wide range of needs, price tiers, and usage occasions. Each brand in the portfolio has a clear role, and investment is scaled globally with strong integration between product innovation, media, and digital. What looks like execution at scale is actually the amplification of a well-defined demand system. The result is consistent market share gains and a growth engine that works across geographies.
Across all of these companies, the pattern is the same. They do not start with campaigns.
They start with meaning. They do not chase demand. They design it. They do not rely on execution to create advantage. They use execution to reinforce it.
And that is why their brand investment does not just generate returns. It compounds them.
What failure looks like
If the successful examples show what happens when all layers align, Nokia shows what happens when they don’t.
At its peak, Nokia had everything that most marketing frameworks would consider decisive. It had dominant global share, unmatched distribution, and enormous scale. Its devices were everywhere. Its brand was widely known. And yet, it collapsed.
The reason was not execution. Nokia continued to execute well. It kept launching products, maintaining distribution, and operating at scale. What changed was the system.
The meaning of the category shifted. It went from communication device to personal digital hub. The structure of demand shifted. It went from hardware to ecosystems. Apple redefined what the category was for and how value was created, via platforms or ecosystems rather than pipelines.[iv]
Nokia continued to optimize within the old system. Execution remained strong but it was now reinforcing the wrong logic. The economic consequences followed quickly. Market share declined.
Margins eroded. Value disappeared.
The lesson is clear. Nokia did not fail because it lacked awareness, reach, or distribution, call it mental and physical availability or because it failed to focus on penetration and increase the number of customers who buy the brand. It failed because the upstream layers changed and it did not adapt.
Now imagine Google had responded the same way.
In the early 2020s, when OpenAI launched ChatGPT, it could have insisted on defending its dominant position in search. It could have focused on penetration, on reaching more users, even light users, optimizing distribution and usage within the existing model.
Instead, it recognized that AI was changing the playing field. Not just the tools, but the category itself, how people search, how information is accessed, and where value is created. The CEO did not treat this as a marketing or execution problem. He treated it as a shift in category meaning and demand logic.
Google reorganized around AI, accelerated investment in foundational models, integrated AI into its core products, and was willing to disrupt its own search experience rather than defend it.
In other words, it did not optimize within the existing system. It moved early to redefine the system. That is the difference.
When markets are stable, execution and penetration matter. When markets shift, the question is not how well you execute. It is whether you are operating in the right system at all.
The four parts of a real investment logic
To make brand spend investable, four layers have to be connected.
1. Behavioral reality
This is where Sharp, Ehrenberg-Bass, Kahneman, Thaler, and Rubinson and others matter. Who buys? How do they choose? What triggers behavior in real situations, moments and episodes? Who is actually movable? This is not about abstract attitudes alone. It is about how demand is activated.
2. Causal impact
This is where Hanssens, Pauwels, and the work of Binet and Field matter. What portion of demand is truly incremental? How much of the effect is short-term? How much carries over? When does it pay back? This is where marketing stops being narrative and starts becoming measurable.
3. Financial translation
This is where Srivastava, Aaker, and Jacobson matter. How does the investment affect the level, timing, durability, and risk of future cash flows? How does it shape valuation? Does it improve the economic quality of the business, or just create temporary noise? This is the bridge from marketing outcomes to financial meaning.
4. Capital allocation
This is where the CFO lens takes over. Is this the best use of capital? Better than price? Better than distribution expansion? Better than product innovation? Better than acquisitions? Better than doing nothing? This is the test brand investment almost never faces rigorously enough.
The four tests of capital allocation
Once the full chain is in place, brand spend can be judged as any other investment should be judged. Here are the four kings that matter to get a budget approved:
First, incrementality. Does it create new demand, not just activity? Second, alternatives. Is it superior to other uses of capital? Third, payback. How long does it take, and how reliable is the return path? Fourth, structural advantage. Does it make future demand easier to generate and harder for competitors to take away?
That fourth test is often the most important. A campaign that produces a short-term spike but leaves no stronger position behind is not strategy. It is just spend.
Why the argument cannot stop at cash flow
Some people say brand cases should be translated into cash flow and left there. That is necessary, but not sufficient. Marketers already defend brands and budgets in the same way. We know since the days of John Murphy in the 1980s how to value brands by discounting future cashflows.
And finance already uses discounted cash flow to value brands as well. So the issue is not that finance ignores time. It does not. DCF is already multi-period.
But DCF assumes compounding, it merely values the outcome. It does not explain the mechanism.
What is usually missing is a clear account of how today’s brand investment changes the trajectory of future returns.
Brands build over time. They make future demand easier to create. They improve willingness to pay. They support distribution. They reduce vulnerability. They can improve the quality of cash flows, not just their quantity.
That means the real question is not: Did this campaign generate cash flow?
The real question is: Did this investment improve our ability to generate economic profit again and again?
The compound economic profit loop
This is where I believe the discussion must go. Brand is not just a driver of revenue. And it is not just an intangible asset that shows up in a valuation model. Brand is part of a compound economic profit loop:
brand investment → incremental demand → stronger cash flows and margins → higher economic profit → reinvestment into stronger demand positions → stronger future demand
That is why stopping at cash flow is too narrow.
The real issue is whether a brand investment changes the system in a way that compounds returns over time. A plant can do this through scale, cost, and capacity.
A strong brand can do it through demand, price realization, distribution pull, lower acquisition friction, and stronger competitive insulation. The logic is different, but the standard should be the same.
The shift that matters
The shift is not from brand to performance. And it is not from creativity to analytics or back to creativity as some so strongly believe.
The real shift is from fragmented and siloed thinking to a complete causal system. I call this the compound economic profit loop.
From category meaning and demand logic upstream, to behavioral reality, to causal evidence, to financial translation, to capital allocation, to compound economic profit. Only then can brand be treated not as protected spend, but as a serious investment. That is the standard it should meet. Because brand is not just a campaign. It is a capital allocation decision.
[i] Securing marketing budgets is one of the most important processes: https://journals.sagepub.com/doi/10.1177/00222429261431239
[ii] https://medium.com/@ejoachimsthaler/what-ai-teaches-us-about-strategy-and-brands-498064d3d47e
[iii] See my article in WARC in 2025: https://www.warc.com/en/article/reinventing-brand-strategy%3A-the-holistic-brand-model-6317a55a61214b6786e6e388d29cd065
[iv] See my book where I wrote about ecosystem business models: Erich Joachimsthaler, The Interaction Field, PublicAffairs, 2020.
To discuss how these insights apply to your organization, get in touch with our team.