Company behind the brand

Last week I came across something that stopped me in my tracks. Actually I was going nowhere because I was on the subway but it struck me (and I shuddered) that I had a moment of insight into a news story that had tremendous implications for companies and their abilities to create lasting reputations. The Pulitzers were announced last week and The New York Times won four. What was so startling to me was that two of the highly prestigious and acclaimed Pulitizers (50%) were for indepth, investigative reporting on the overseas behavior of two different companies. One was a series of reports on alleged corruption at one company and another Pulitzer was won on the costs of human capital in a company’s manufacturing products abroad.

Here is why this is so important — leading companies, the best we have to offer, must safeguard their reputations at all times and not let up for one minute because the spotlight on them is only growing brighter. And just because business operates differently in other cultures or regions, if the behavior does not align with the company’s values or is morally correct, it’s reputation-damaging and wrong no matter where on earth it happens. Earning the right to operate is given to companies through governments or regulators but the license to operate is still very much dependent on the perceptions of communities and consuming public around them and online. How a company behaves matters today and consumers buy based on how companies treat their employees, vendors, customers, communities and others everywhere. Our recent research on the company behind the brand shows that in spades.

These Pulitizers are an early warning sign to companies to carefully consider their behavior on all counts if they want their reputations to be shatterless.

I was taking a look at the new Harris Poll RQ study that was released this week. Reputations of U.S. companies are always important to review in order to see how companies or sectors are improving while others are declining. The survey has some reptuational nuggets worth sharing here.

This year, 16% of the U.S. public said that the reputation of corporate America was improving, an increase of 7% over one year earlier. That is positive news despite the fact that 49% of consumers say it is declining. That is not a surprise because trust in business has reached its lowest depths over the past few years of economic decline. But it is a good sign that reputations are making somewhat of a comeback.

But what really has left me thinking twice is not the finding that Amazon.com is the most highly reputable company in America this year, a notch above Apple. What has me in a state of awesome disbelief is that Amazon earned nearly 100% positive ratings on all measures related to Trust and that among Americans who have discussed Amazon with their family and friends, nearly 100% of these conversations were positive about the online retailer. I have rarely, if ever, seen a company ever get that close to 100%. I’ve been conducting research for a long long time and this is an amazing feat. 100% satisfaction! A rarity.

The Harris Poll also found that more than 60% of consumers say that they now “proactively try to learn more about how a company conducts itself”  before they consider buying that company’s products and services. Again, the world of reputation is seriously changing when people care this much about a company’s treatment of employees, customers and communities. Values are increasingly playing a greater role in reputational perceptions and this market force is only going to continue. Mark my words.

An article in the New York Times on purpose-marketing echos my firm belief that the company behind the brand matters more than ever. In fact, Stuart Elliott says it himself: “Purpose marketing is becoming popular on Madison Avenue because of the growing number of shoppers who say that what a company stands for makes a difference in what they do and do not buy.” These socially conscious buyers are avid researchers and they know whether the companies behind the products they are considering treat their employees well, have high quality products and are well-led. The article is about Panera’s new advertising campaign that is based on the company’s core values — “Live consciously. Eat deliciously.” Has a nice ring to it.

Take a quick look at our research on the company behind the brand for hard evidence that corporate and product reputations are blending.  Perhaps I should coin a new phrase called reputation-marketing to join the marketing folks who now call reputation-building campaigns with a conscience purpose-marketing. Just about a year ago, I wrote a proposal for some new business and dubbed it reputation with a purpose. Has a nice ring to it too!

A new study was just released called the Champion Brand Index from APCO, another PR Firm. It caught my interest because it ties corporate reputation to sales which we all know to be true. The survey was conducted among 10,000 consumers around the world. If you follow my work, you know that we also examined the link between corporate and brand reputation in our Company behind the Brand research. The Champion Brand Index found similar strong ties between the two and I am happy to report them here in defense of the indivisibility today between the corporate and brand reputation:

• 40% of respondents say they decided not to buy a company’s products or service because they did not agree with the company’s practices, policies or activities
• 77% of respondents believe that corporations have a greater impact on their lives today than 10 years ago
• Nearly half say that global companies have a bigger impact on their lives than the government
• 67% say that it is as important to know how a company operates as it is to know what it sells

Good stats for continuing to make the case that corporate and product brand reputation are increasingly one and the same today with the vast penetration of the Internet and globalization shrinking the world. The fact that over three-quarters of consumers notice how corporations have become tabletalk in our lives is a good one to save.

I could tell that it must have been the one year anniversary of the Costa Concordia because I started hearing about the shipliner crash in the past few days.  Reputations keep rolling along throughout the year but especially hit home one year later. Whereas they might be fleeting memories at first, they all come together on the year one anniversary to make us take notice. Today I started hearing more about the memorial service for survivors and families of those who lost their 32 dear ones in Giglio, Italy and it started to stick more than two days ago. There were 846,000 mentions on Google when I searched for Costa Concordia anniversary today.

For reputation, one year anniversaries are part of the reputation process.  It is almost like it fits into the five stages of grief. The one year anniversay is a day of reflection and return to the reputation demise that caused the loss in the first place. All the pictures of the cruise ship on its side off the shores of the little Tuscan city are back in view. Debates over raising the ship and removing it are back in the news. Anniversaries are important because they remind us that reputations should not restored overnight. The bigger the loss (especially when lives are lost),  the longer reputation takes to repair. That should be law.

I especially remember the Costa Concordia because we were launching our survey on how corporate and brand reputations have become nearly indivisible. The parent company of the cruise liner pushed media requests over to the Costa Concordia CEO — the brand leader — in an effort to disentangle the corporate reputation from the brand reputation. Due to the ease of information flow and the Internet’s reach, much of the media coverage mentioned the parent company in the coverage which only proved that corporate and brand reputations have definitely converged. Because the entire incident happened just as we launched the survey, it is forever lodged in my mind.

Talking about reputation, tomorrow’s Oprah Winfrey interview with cyclist Lance Armstrong will be another one for the record books.  I am not sure how Lance’s confession that he used drugs to help him win the Tour de France several times will go over. My sense is that an apology might not curb his rapid reputation decline and Lance’s reputation might not just keep rolling along but might face a hard stop for awhile. No telling where it will be, however, in three or four years.  I will be interested to tune in and watch.

I attended a Council of PR Firms Critical Issues Forum about one week ago. However, I can now only think in terms of PHS (pre-Hurricane Sandy) and PostHS.  It feels like the world has been turned upside down since life has not yet to normal. My neighborhood is basically fine (meaning we have power) but everything seems different in some indescribable way. Since I cannot get to the office, I have been working at home. We will see what Monday brings.

I wanted to write about the survey that Harris Interactive did with the Council on the connection between brand and corporate reputation. This topic was the theme of the forum. As you know, this is a subject we at Weber Shandwick also know well — take a look at our report on The Company Behind the Brand: In Reputation We Trust.  The Harris Interactive study analyzed results from several of their own studies (50,000 consumers) and VP Robert Fronk concluded: “Marketers might profitably think of themselves as operating in the corporate reputation business, while corporate communicators might think of themselves as operating more deeply in the product marketing business.” As we also found, brand and corporate reputation are now indivisible. The Harris Interactive analysis looked at three industries — auto, B2B and Food/Beverage. It is worth looking at their brochure, Hidden Harmony, which I highlighted above because it shows what drives purchase consideration and recommendation. To give you a taste, below are the drivers of purchase consideration for the auto industry. I was fascinated by the importance given by consumers of how employees are treated when it comes to perceptions of reputation in the auto industry. And no surprise that trust is high on the list for both brand and reputation. Brand consideration appears to be very me-centric (how it fits with my own image, seeing it everywhere, brand is exciting). For reputation, in constrast, the drivers are very company-centric. They are different but when strengthened together, they are a powerful punch. They should not be siloed.

Faking reputation. Hard to believe! YELP knows so. The review site says that 20% of reviews never see the light of day. They are considered either suspect or fraudalent.  Some businesses even try to commission people to write reviews or bribe product users to write something positive.  You can solicit these reivewers-for-hire people on craigslist. What gets me, however, is that there is an entire cottage industry of reviewers-for-hire who will write bad reviews that knock a business’s competition. An article in Ad Age last week presented a slew of facts that makes me wonder where this will all end – a Gartner study reported that fake reviews would grow to to nearly 15% in the next two years.  They even forecast that the FTC will be taking a few Fortune 500 companies to court for faking reviews within the next few years. These reputation fake outs will weaken credibility of review sites when they’ve never been so important.

Starting this past week, YELP is going to shame businesses that pay for fake reviews to shine up their reputations. Read this article to learn more. By setting up a sting operation (the stuff of spy novels), YELP is said to be exposing eight companies by placing the following consumer alert on their profiles:  “We caught someone red-handed trying to buy reviews for this business.” (See above picture for the real deal) Potential customers will see the incriminating e-mails trying to hire a reviewer. And don’t expect these alerts to go away soon. Definitely a red-faced moment if caught.

This all makes me think again about how important reputation is in this information age where everything is accessible and disclosable. Reviews that lead to positive and negative reputation are their own form of currency and wealth. The lengths to which businesses will go to protect or heighten their reputations are endless (and sometimes deviant). 

I can’t say I am surprised. Recent research we did on corporate reputation found that online reviews were nearly as important as word of mouth and recommendations from friends and family.  I think that weeding out the fake outs is going to be a big business itself to maintain the credibility of reviewers.

You have probably read enough about our survey The Company behind the Brand: In Reputation We Trust. The first segment of the study, released in early 2012, reported on the growing interdependence of product brand and corporate reputation. The findings alerted marketing and communications executives to a tectonic shift in communicating the voice of the “enterprise” to key stakeholders. The survey, conducted with KRC Research, was among nearly 2,000 consumers and executives in two developed markets (U.S. and U.K.) and two developing markets (China and Brazil). The second release focused on CEOs and their role in reputation-building from the viewpoint of consumers and executives. This third release, just issued today, explores how executives in companies that market their products under multiple brand names differ from those companies who market mostly under one single brand name in their approach to building reputation. It addresses why it may be critical for product brands to be transparent about their ownership, even in cases where a company has made thoughtful and strategic decisions to lessen the exposure of the corporate brand.

We learned that 75% of executives at companies that manage products under multiple brand names now believe that a strong parent brand reputation is as important as the company’s individual product brands. As I was quoted in today’s release and executive summary: “Historically, multi-brand organizations more extensively marketed their product brands over their corporate brands, but their future success might entail determining how to bring the corporate brand forward to realize the full potential of all their reputational assets.”

I always get asked what surprised me. First, despite the advantage of leveraging the parent brand to enhance the reputation of the product brands, the survey found that many multi-brand executives aren’t fully embracing consumers’ increased scrutiny of the company behind the products they buy. While more than eight in 10 single-brand executives recognize that consumers are increasingly checking labels and doing research to identify the company behind the brand, significantly fewer multi-brand executives recognize how proactive and discerning consumers are about what they buy.

 The second surprise was that despite the fact that multi-brand executives say they are promoting company reputation as much as product reputation (81 percent and 80 percent, respectively), they fall short in communicating some key drivers of company reputation compared to their single-brand counterparts, particularly how employees are treated. There was a particularly large gap between single- and multi-brand companies when it comes to communicating about their workplace (73 percent vs. 52 percent, respectively). Companies that are proud of their records for employee satisfaction should not be reluctant to communicate these qualities and tout their awards or placement on ‘best of’ lists. These credentials help drive the overall reputation of a company, regardless of how many brands it markets, and possibly influence purchasing behavior.

Take a look at the summary for greater detail. When I was talking to PRWeek about the findings, they said they were surprised how little information was available on this topic. We agree. When we did the background research on the increasing indivisibility of the corporate and brand reputation today, we were floored by how little had been done and how companies had been relying on “this is how we’ve done it” thinking. We hope that we at Weber Shandwick are filling in some critical gaps on this dimension of corporate vs. brand reputation in a no-secrets-consumer-is-in-the-driver’s-seat Internet world.

Caught up on some reading this week. Lucky me.

One study comes from Echo Research and Reputation Dividend. They found that corporate reputations contribute to a total of $3.2 TRILLION to market cap in the S&P 500. Big number.

Reputation Institute released a new global survey report among corporate reputation officers (CROs), Navigating the Reputation Economy. The respondents are those senior officers who identify themselves as the senior-most person responsible for “setting their company’s corporate reputation, marketing, corporate communications/public affairs and business strategy.” One of their most important findings mirrors what we learned in our study on the company behind the brand. RI found that 80% of CROs say people’s willingness to recommend their company as a place to work or as an investment is driven by the perceptions of the company overall. Same for direct purchases — 38% say that purchase decisions are driven by the company behind the product or brand rather than what is actually for sale.

What is most particularly illuminating about the RI study is their depiction of where companies fall on the reputation management continumm. They describe a five-phase journey that companies go through from phase 1 (exploring reputation) to phase 5 (integrating reputation into  business planning and company strategy). Phases 2 (customization of measurement and management) and 3 (business planning integration) come before phase 4 (cross functional implementation and accountability).  Not surprisingly, only 13% of companies fall into the Advanced Phase among the 318 companies in the study.  Most companies fall into phases 2 and 3 (69%). Eighteen percent fall into the phase 1 exploration phase. My experience agrees with this assessment. Most companies are in the phase 2 and 3 phase. Few really fall into the most advanced stage.

The distinctions between Early Phase and Advanced Phase companies could not be clearer, according to RI’s results . Advance Phase companies are 2-3 times more likely to:
1.    Understand reputation across stakeholders and markets
2.    Understand specific business impact of reputation
3.    Have an internal council or steering committee to champion action
4.    Have senior executives accountable for corporate reputation KPIs
5.    Have reputation integrated into long-term enterprise vision, goals, and priorities

The favorite communications channels for reputation management are the company website, the annual report, stakeholder events and CSR reports. Advanced phase companies are more intense in their usage of nearly all the channels. However, as we have seen in elsewhere and in fact our own research, social media is the one channel where early phase and advanced phase companies are nearly the same. My sense is that this is because social media is still fairly new and experimental in the eyes of CROs and everyone is using it in the same way without being sure about what works and what does not work. All they know is that they have to do it!

Every week I think nothing new is happening in the world of reputation. And I am always wrong. There are always CEOs coming and going, companies that get into trouble and lose reputation points and new things to learn. That’s the best part. Here’s a few:

1.     Booz Allen released their fabulous CEO Succession report. I read it every year and welcome the insights. This year they focused on new CEOs, a topic dear to my heart and book. This year they found that 14.2% of CEOs of the world’s 2500 largest public companies changed over. This is a sizeable increase from last year when the turnover rate was 11.6%. This increase makes sense because as boards battled the recession, it was not the opportune time to change chief executive reins. Better to batten down the hatches when times are tough. Strikingly, Bozo found that outsider CEOs are making a comeback. In 2011, 22% of all new CEOs were outsiders compared to 14% in 2007. That’s definitely surprising to me since the trend has been in favor of insiders for a while now. The possibility is that companies need fresh new ideas and outsiders with global experience as they now look to grow. You should check out the report because there always is a lot of fascinating information on the world of CEO transitions. For example, outsider CEOs are more likely to lose their jobs, the number of CEOs being appointed chairman has declined and nearly 90% of new CEOs have not been a CEO before. That last fact is astounding and perhaps why we get asked about our services on CEO First 100 Days as often as we do. In another post, I will provide Booz’s insights on advice on CEO’s first year in office.

2.     Reputation Institute released its worldwide reputation findings on the Most Reputable Companies. Their headline reads, “Reputation Is Impacted More By What You Stand For Than What You Sell.” In their research, they found that “People’s willingness to buy, recommend, work for and invest in a company is driven 60 percent by their perceptions of the company and only 40 percent by their perceptions of their products.” That’s an important finding and mirrors Weber Shandwick’s results on the importance of the company behind the brand. We are on the same wavelength, clearly.  They also found that only 11% of the top 100 companies have better reputations abroad than at home. “It’s because reputation isn’t something that’s easy to export,” says Nicolas Georges Trad, Executive Partner at Reputation Institute. Love that quote.

3.     I also attended Spencer Stuart’s CMO Summit this week on innovation. It was illuminating in how innovation gets baked into companies from the head marketing honcho. Whereas one company CMO panelist was analytical in her approach, another was more artistic and qualitative. Goes to show that culture drives execution. From the panel, I learned about another usage of HIPPO which is always a bonus to me – it is a reference to the Highest Paid Person’s Opinion. Everyone in business knows what that means.