FPRA 2012 Annual Conference: General Session B, Crisis Diagnostics, James Gregory

Download James Gregory’s Crisis Diagnostics

By: Elise Lipoff-Ramer, MBA

Fact of Note: Many firms only use research after the damage has been done.

A massive study that began in 1990 with GW, Jack Welch, how value is created, how important reputation is to the company.
The study is the CBI, the corporate branding index. It’s the largest reputation management database of its kind. We use marketing research, and the study is a result of that market research
. How branding creates values
. Marketing vs. Accounting
. Case study on AFLAC, product brand and corporate brand
. White Paper, Richard Levick and David Ribstein, Wharton Profession

Branding Creates Values

Every audience views your corporate brand through their own lens and through a series of filters: Business process, culture/behavior and communications. Each of these lenses is a touch point or brand experience.

Unfortunately most firms start benchmarking their brand too late.  Prior benchmark tracking research provides baseline insight info on a crisis, a market event or a change in management.

The CBI, Corporate Branding Index, follows 1,000 companies across 54 industries and does 10,000 phone surveys a year. They measure familiarity and favorability, financial performance and communications spending.

What we know about the brand’s impact on financial performance is this: everything the company says and does impacts brand image. And in return, the brand impacts revenue and stock performance.

Gregory worked with Jack Welch & GE several years back found itself in a battle, a huge battle. Intangible assets, such as the brand, are growing over time, but are unaccounted for by the financial accounting. Brand equity has zero value to your CFO. The gap between marketing and finance is hard to support.

The key is finding the sweet spot of spending and communication that increases favorability and familiarity.
CoreBrand is a part of MASB, themasb.org, and they fight the good fight.  They are working with the SEC and other organizations, for one paragraph that goes into the corporate annual report, to talk about the brand, that would revolutionize marketing and communications as we know it.

AFLAC Case Study

Familiarity & Favorability – The Key to Understanding Brand Equity
Before the duck campaign AFLAC’s image was ok, but after the duck campaign, the familiarity and favorability increased because spending on communication also increased. Prior to the duck campaign AFLAC earned $8,000 premium income per share, after the duck campaign it earned $18,000 premium income per share. AFLAC came from behind the pack to be the leader, and the income and the stock side grew tremendously. The company doubled the brand equity over 8 years – a $2.5 billion dollar swing.

Crisis Diagnostics and Brand Damage

Every corporate crisis has a consistent pattern in terms of the corporate brand. The patterns of familiarity and favorability are the same. Examples of companies that have followed these aptterns are Texaco, BP, IBM, Bridgestone/Ford and PNC Bank.

Crisis is defined as an increase in familiarity with a decrease in favorability.

Overall reputation, perception of management and investment potential are the three attributes/streams that can be categorized, evaluated and monitored. Every crisis has a turnaround point and the effectiveness can be monitored.
You can feel drag or momentum in a company.

Movie Quote of Note: Ghostbusters – “When streams cross, all hell breaks loose.”

Gregory cited the BP Crisis of 2009- 2010 to illustrate an example of waiting too long to respond to a decrease in favorability: When you see your logo made into cartoons, you know you’ve waited too long to turn the crisis around.

When is a crisis NOT a crisis? Take Toyota, for example. When favorability declines, and continues to decline, the determination is that there are bad business practices being conducted. Toyota needed to get quality control under control to turn favorability around.

Companies have resiliency, but changes in processes or policies have to be communicated well. Gregory cited the Bridgestone/Firestone tires & Ford SUV rollover incidents as examples of what happens when you don’t communicate: Familiarity increases with media exposure and favorability declines.

PNC Bank was faced with severed media pressure following an earnings restatement, with bad timing, and heavy media coverage. Customers were lining up around the block asking for their money. While familiarity initially spiked, PNC stopped advertising, creating a media void and not communicating with their general audiences, and so favorability also declined. The brand was carefully managed through corporate advertising, investor relations and public relations. Consistent PR messaging focused on the strength of the business. Executive management and in-person meetings with key clients and employees in all markets was necessary. Consistent and forthright communications from executive management was continued in moving forward. The end result, the increased investment in the corporate brand, had the desired impact – improved perception of management. They rebounded quickly, reducing future spending while getting the same results and the brand equity saw significant gains.

Corporate branding is valuable asset. Continuous research provides ongoing insights, allowing you to compare peer companies and industries. Branding can be managed like other assets: The brand can grow or lose value over time; it can be evaluated on ROI basis.

The four years – what Gregory said is a standard cycle for brand readjustment – Usually has a residual effect and brand turnaround depends on the nature of the crisis. Four years is a fast time for a turnaround. There was one company he spoke of where every time the CEO spoke, the stock went down. How do you tell the CEO not to speak? The CEO took advice from the firm, and talked about the vision and addressed the problem in context of the future. Eventually the brand inspired trust in its audience again.

What about increasing advertising and social media during a crisis? The volume of the communication in general, and SM, plays a major critical role, and is more important than it used to be. Brand equity for not-for-profits are increasingy value to the organization when they build their brands. Nonprofit branding works in a similar way to corporate branding; it’s the value of the organization and its ease and ability to get donations.

At the sustainability conference, the not-for-profits were allowed to be on the stage at the same time. Each gave a 3 minute pitch. They were undifferentiated, all sounded the same.

What happens if a CEO or the Board of Directors don’t seem to get it? Communicators should use CBI data at the board level, show them the health or unhealthiness of the brand, and the need to see the data. It is hard to get them to see the data. The value of the intangible asset is what counts and does have value.

The financial accounting standards board and the marketing accounting standards boards have models of how brand valuation works. They use quantitative research and regression models and tie it into market capital. CoreBrand is the only valuation firm to go through valuation through MASB. An as an independent firm, their competitors use the dollar amount, but it is the percentage (market share) that is important because the stock price can move day to day, but the percentage is more stable and accurate over time. CFOs should be your ally and not your enemy. MASB gets the CFO to understand the value of branding.

James R. Gregory is founder and CEO of CoreBrand, a global brand strategy and communications firm based in New York, with offices in Minneapolis and Los Angeles. With 30 years of experience in advertising and branding, Gregory is a leading expert on brand management and is credited with developing strategies for measuring the power of brands and their impact on a corporation’s potential financial performance. Most notable of the tools that Gregory has developed is the Corporate Branding Index, a quantitative research vehicle that has continuously tracked since 1990 the reputations and financial performances of more than 1,000 publicly traded companies across 49 industries. CoreBrand uses the index to help clients recognize how their brands compare with industry peers and how communications can impact corporate reputation and financial performance, which includes stock price and revenue growth. Visit www.corebrand.com for more information.

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