Reputation & Brand Management: The Role of Corporate Communications in Building and Retaining   Value Public Relations Lea...
Situation <ul><li>There has been a steady erosion in corporate credibility and trust; </li></ul><ul><li>All companies have...
Key Points <ul><li>Companies with good reputations have greater financial success, they attract and keep the best talent, ...
Approaches to Reputation &  Brand Management <ul><li>Marketing/Communications Approach :  focuses on identity and image an...
Brand & Reputation Defined <ul><li>For organizations, both Brand and Reputation can be defined similarly:  </li></ul><ul><...
Conceptual Model of Reputation © <ul><li>Company Attributes </li></ul><ul><li>  </li></ul><ul><li>Stakeholder Values </li>...
Determinants of Reputation Source:  Fombrun & Van Riel, 2004 Reputation Social Responsibility Familiarity/ Favorability Pr...
Reputation is a Differentiator of Value <ul><li>Employees  </li></ul><ul><ul><li>Attracts and keeps talent </li></ul></ul>...
Factors that Affect Reputation <ul><li>Visibility </li></ul><ul><li>Honesty </li></ul><ul><li>Keeping Promises </li></ul><...
Reputation Builds Financial Success Reputation Rating  Low  60.1  High  80.2 1 Year Measures Cost of Goods Sold 60.8 49.0 ...
Employee and Customer Satisfaction Drive Financial Results <ul><li>Employee Satisfaction  Customer Satisfaction  </li></ul...
Importance of Values <ul><li>A 2005 study by the Aspen Institute and Booz Allen Hamilton of 365 international companies fo...
Why Reputation Needs to be a Corporate Process Reputation Consistent, Trustworthy Behaviors Consistent Communications Empl...
Three Key Reputation Goals for All Companies <ul><li>Be disproportionately valued (financially, as a provider of goods and...
Primary Reputation Drivers <ul><li>For Most Companies : </li></ul><ul><li>Quality Products & Services (including customer ...
Intangible Assets Increasingly Drive Reputation <ul><li>From a strategy perspective, an asset can be defined as anything a...
Sources of Organizational Value— Types of Assets Value Physical Capital Financial Capital Intellectual Capital Reputation ...
Normalized Earnings   Source: Feng Gu and Baruch Lev, “Intangible Assets: Measurement,  Drivers, Usefulness”, April 2001  ...
Fear, Uncertainty & Doubt Complexity of Information in Decision Low    High High Marketing & Advertising is Not Always the...
Creating an “Umbrella” Strategy Corporate Reputation Goal Strategy & Vision Objective 2 Business Units various business & ...
Others Need to Change to Make Reputation Management a Success <ul><li>Strategic Planning  needs to focus on leading and in...
What Corporate Communications Must Do to Make Reputation Management a Success <ul><li>Focus on outcomes, not outputs—stop ...
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Elliot S. Schreiber, Ph.D.

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Elliot S. Schreiber, Ph.D.

  1. 1. Reputation & Brand Management: The Role of Corporate Communications in Building and Retaining Value Public Relations Leadership Forum Atlanta, Georgia January 26, 2006 Elliot S. Schreiber, Ph.D. [email_address] The information and slides in this presentation are copyrighted materials and should not be copied, duplicated or used without the expressed written consent of the author or without appropriate reference. Elliot Schreiber 2004©
  2. 2. Situation <ul><li>There has been a steady erosion in corporate credibility and trust; </li></ul><ul><li>All companies have been impacted by corporate scandals, whether or not they have done anything wrong; </li></ul><ul><li>Trust is the underlying “currency” in the market economy; </li></ul><ul><li>Without trust, investors stay on the sideline, customers do not buy, employees don’t join, etc.; </li></ul><ul><li>Companies will not regain trust through compliance and governance alone. </li></ul>Elliot S. Schreiber©
  3. 3. Key Points <ul><li>Companies with good reputations have greater financial success, they attract and keep the best talent, the attract and keep better customers, and their cost of capital is less; </li></ul><ul><li>Good reputation gives companies greater “resiliency” to weather “storms” of negative publicity; </li></ul><ul><li>Companies cannot succeed long-term by focusing only on their financial success—they must balance the needs and interests of a variety of stakeholders; </li></ul><ul><li>Reputation management should be a strategic process that guides the corporation—an “umbrella” strategy unifying activities of the corporation and its business units; </li></ul><ul><li>Reputation management goes to the heart of the debate about the theory of the firm—whether it is a purely economic organization, or if it is a social, economic and political organization. </li></ul>
  4. 4. Approaches to Reputation & Brand Management <ul><li>Marketing/Communications Approach : focuses on identity and image and how company represents itself to external stakeholders. Focuses on identity, “image” and messages; </li></ul><ul><li>Holistic Approach : focuses on a wide list of internal and external stakeholders and emphases the importance of coordinated strategy to manage reputation. </li></ul>Elliot Schreiber 2004 ©
  5. 5. Brand & Reputation Defined <ul><li>For organizations, both Brand and Reputation can be defined similarly: </li></ul><ul><li>the perception by a given stakeholder that a product, service or organization possesses certain attributes; </li></ul><ul><li>A good reputation occurs when the organization’s attributes (its value proposition) coincide with the needs and interests of key stakeholders better than the value propositions available from competitive offerings. </li></ul>Elliot S. Schreiber 2004©
  6. 6. Conceptual Model of Reputation © <ul><li>Company Attributes </li></ul><ul><li> </li></ul><ul><li>Stakeholder Values </li></ul>X Experience Elliot S. Schreiber 2004©  Reputation = Time Where: Company Attributes = Organization’s value proposition (attributes) to stakeholders Stakeholder Values = The importance of the company’s attributes to stakeholders Experience = How stakeholders perceive they have been treated by the organization and whether its Promise is valid
  7. 7. Determinants of Reputation Source: Fombrun & Van Riel, 2004 Reputation Social Responsibility Familiarity/ Favorability Products & Services Vision & Leadership Financial Performance Workplace Environment
  8. 8. Reputation is a Differentiator of Value <ul><li>Employees </li></ul><ul><ul><li>Attracts and keeps talent </li></ul></ul><ul><ul><li>Builds pride </li></ul></ul><ul><ul><li>Makes jobs more attractive and motivates employees </li></ul></ul><ul><li>Customers </li></ul><ul><ul><li>Attracts new customers </li></ul></ul><ul><ul><li>Encourages repeat purchases </li></ul></ul><ul><ul><li>Builds market share </li></ul></ul><ul><ul><li>Opens new market opportunities </li></ul></ul><ul><li>Investors </li></ul><ul><ul><li>Lowers cost of capital </li></ul></ul><ul><ul><li>Attracts new investments </li></ul></ul><ul><li>Media </li></ul><ul><ul><li>Generates more positive coverage </li></ul></ul><ul><li>Government </li></ul><ul><ul><li>Enhances support </li></ul></ul><ul><ul><li>Minimizes chance of enhanced scrutiny </li></ul></ul><ul><li>Communities </li></ul><ul><ul><li>Builds support </li></ul></ul><ul><ul><li>Minimizes concerns </li></ul></ul>Elliot Schreiber 2004 ©
  9. 9. Factors that Affect Reputation <ul><li>Visibility </li></ul><ul><li>Honesty </li></ul><ul><li>Keeping Promises </li></ul><ul><li>Transparency </li></ul><ul><li>Clarity </li></ul><ul><li>Good communications </li></ul><ul><li>Consistency </li></ul><ul><li>Experience </li></ul><ul><li>Expectations </li></ul><ul><li>Continuity of words and actions (“Walking the talk”) </li></ul><ul><li>Good or bad activities of competitors </li></ul><ul><li>Political or business climate </li></ul><ul><li>Public or social issues </li></ul><ul><li>“ Crusades” by stakeholder groups </li></ul>Elliot Schreiber 2004©
  10. 10. Reputation Builds Financial Success Reputation Rating Low 60.1 High 80.2 1 Year Measures Cost of Goods Sold 60.8 49.0 Growth in Employment 2.8% 6.9% Market to Book Value 0.81 1.1 Net Margin 4.3 8.0 Return on Assets 4.3% 8.4% Beta 1.07 1.11 5 Year Averages Cash Flow to Sales 12.8 18.1 Price-Earnings Ratio 21.7 32.5 Return on Equity 16.8 38.4 Equity as % of Total Assets 35.3 44.9 Long-term Debt to Capital 29.9 24.8 Quick Ratio 0.82 1.01 EPS Growth 7.3 16.5 Sales Per Employee $2.46M $4.55M Source: Fombrun & Van Riel, 2004, p 78
  11. 11. Employee and Customer Satisfaction Drive Financial Results <ul><li>Employee Satisfaction Customer Satisfaction </li></ul>r =.80 r =.55 Stock Price r = .45 Organizations included : Nortel, Ford, IBM, Xerox, 3M, Carlson, H-P, etc. Employee & Customer Satisfaction are strongly correlated and together drive stock price, BUT, stock price does not necessarily drive employee & customer satisfaction Elliot S. Schreiber© Source: Competitive Advantage through Customer Satisfaction & Excellence (CATCSE)
  12. 12. Importance of Values <ul><li>A 2005 study by the Aspen Institute and Booz Allen Hamilton of 365 international companies founds values linked to success in reputation & relationships: </li></ul>Source: Strategy + Business, June 2005 Ethical behavior Concern for Employees Honesty/Openness Adaptability 98% 88% 88% 68% 85% 47% 42% 9% VALUES Financial leaders Others
  13. 13. Why Reputation Needs to be a Corporate Process Reputation Consistent, Trustworthy Behaviors Consistent Communications Employee Commitment Policies & Practices Business Objectives Values © Elliot Schreiber 2006 Internal Controls & Governance Stakeholder Perceptions Resource Allocation
  14. 14. Three Key Reputation Goals for All Companies <ul><li>Be disproportionately valued (financially, as a provider of goods and services, etc.) as a company in general and specifically against your company’s competitive set; </li></ul><ul><li>Win the talent war by establishing your company as the company with an engaged, committed and proud group of employees at all levels whose value to society is recognized by others; </li></ul><ul><li>Be recognized as a “winner” and leader within the community. </li></ul>
  15. 15. Primary Reputation Drivers <ul><li>For Most Companies : </li></ul><ul><li>Quality Products & Services (including customer service) </li></ul><ul><li>Quality of Organization as a place to work </li></ul><ul><li>Perception of the CEO and Leadership </li></ul><ul><li>Financial Performance </li></ul>
  16. 16. Intangible Assets Increasingly Drive Reputation <ul><li>From a strategy perspective, an asset can be defined as anything an organization possesses, or is perceived to possess, and which can be leveraged to enhance its value and success; </li></ul><ul><li>Ernst & Young (2003) found that 82% of market value of S&P 500 was comprised of perception of value of intangible assets, with 15% from tangible assets; </li></ul><ul><li>In 1982, intangibles comprised only 35% of the market value; </li></ul><ul><li>Intangible assets are “a claim to future benefits that do not have a physical or financial component” (Lev 2001). </li></ul>Elliot Schreiber 2004©
  17. 17. Sources of Organizational Value— Types of Assets Value Physical Capital Financial Capital Intellectual Capital Reputation Capital Unique Knowledge Unique Skills Brand Equity Stakeholder Relationships Plants & Equipment Net Liquid Assets Elliot S. Schreiber © Accounting “importance” Market “importance ”
  18. 18. Normalized Earnings Source: Feng Gu and Baruch Lev, “Intangible Assets: Measurement, Drivers, Usefulness”, April 2001 Calculating Intangible Assets Return on Physical Assets Subtract: Return on Financial Assets Subtract: Intangible Assets Capitalize: Intangibles-Driven Earnings Equal: Future Earnings + Past Earnings
  19. 19. Fear, Uncertainty & Doubt Complexity of Information in Decision Low High High Marketing & Advertising is Not Always the Way to Build Reputation 6 Driver: Personal need & desire Brand Emphasis: Product Demand: Short-term, basic need Demand Created by: Advertising Value of Corporate Reputation: LOW Examples: Coke, Pepsi, M&Ms, Alka-Seltzer Driver: Social Acceptance Brand Emphasis: Product Demand: Short to long-term Demand Created by: Advertising & product-in-use by endorsers Value of Corporate Reputation: LOW to MODERATE Examples: Air Jordan, Chanel No. 5 Martha Stewart products Driver: Superior Performance Brand Emphasis: Ingredient Branding Demand: Moderate to Long-term Demand Created by: Integrated Communications focused on technical differentiation Importance of Corporate Reputation:HIGH Examples: Intel’s Pentium Chip, Scotch Tape by 3M, pharmaceutical ingredients Driver: Personal or Family Security Brand Emphasis: Masterbrand Demand: Long-term Demand Created by: sales and Integrated communications to create referrals Value of Corporate Reputation: VERY HIGH Examples: GE, IBM, Bank of America Elliot S. Schreiber ©
  20. 20. Creating an “Umbrella” Strategy Corporate Reputation Goal Strategy & Vision Objective 2 Business Units various business & functional activities aimed at reputation Values Stakeholders Primary Secondary & Intermediary Value ©Elliot Schreiber 2006
  21. 21. Others Need to Change to Make Reputation Management a Success <ul><li>Strategic Planning needs to focus on leading and integrating plans of all units and not just providing strategy “roll ups” </li></ul><ul><li>Human Resources needs to move from benefits & compensation to employee motivation and “work brand” leaders </li></ul><ul><li>Finance needs to fully recognize value of intangible assets </li></ul><ul><li>Marketing needs to more fully understand how reputation is built and not rely on advertising </li></ul>
  22. 22. What Corporate Communications Must Do to Make Reputation Management a Success <ul><li>Focus on outcomes, not outputs—stop focusing on the things that you do and focus instead on how to move the “needle” in the right direction; </li></ul><ul><li>Lead the analysis of the attributes of reputation, both inside-out and outside-in; </li></ul><ul><li>Focus on strategy, not on implementation (message development, media relations, etc.); </li></ul><ul><li>Recognize importance of stakeholder relationships to build reputation; </li></ul><ul><li>Continually monitor and interpret the internal and external environment and help keep the organization’s attributes current; </li></ul><ul><li>Understand and advocate for the value proposition desired by key stakeholders; </li></ul><ul><li>Be the catalyst for an “umbrella” strategy that integrates all of the activities aimed at key stakeholders; </li></ul><ul><li>Be the organizational catalyst and change agent, when needed. </li></ul>Elliot S. Schreiber©

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