Ipsos Corporate Reputation

The ins-and-outs of equity flow

Equity flow is an important way to leverage value from a strong reputation.
It can be used to build business when market opportunities arise, or as a defence when reputation turbulence hits.
Above all, the management of equity flow should be seen as a strategic process that brings together people across the marketing, communications and leadership spectrum.

We live in a world where corporate behaviour has never been under greater scrutiny and where judgement of a company can be transmitted around the world at a touch of a button. This reality presents both a threat and an opportunity from a corporate perspective.

Companies that are seen to do the right thing and imbue their corporate brand with positive equity can harness that very same equity to endorse the products they deliver. Indeed, equity flow can work both ways and a corporate brand can also receive equity from its product brands as long as they are meeting or exceeding customer needs.

Equity flow is therefore the extent to which stakeholders understand and value the connection between the corporate brand and subsidiary or product brands.

While nearly all of our Reputation Council members (80%) find equity flow to be important, the reasons for this importance are nearly as varied as the number of companies represented in the Council.

However, a careful analysis of the responses points to three main concepts when it comes to equity flow:

 

The Golden Thread – equity that entwines itself between the corporate and product brands. This equity can flow up from the product brands as well as flowing down from the corporate brand. Reputation Council members who espouse this concept tend to come from companies with a very strong and visible corporate mission. Achieving a golden thread requires strong alignment between corporate brand communications and product marketing.

"Given the interdependence, I think that you want to manage them all in the right way. There should be a golden thread that runs through them and that reflects your values, even if they serve different parts of the market with slightly different propositions or price points."
"WE’RE A BRAND THAT HAS A LOT OF BRANDS. OUR PURPOSE IS TO CONTRIBUTE TO HEALTHIER LIFESTYLES, TO A BETTER FUTURE. ALL OF OUR BRANDS NEED TO POINT TO THIS BESIDES BEING DELICIOUS, CLOSE TO OUR CONSUMER, MAINTAIN A FUNCTIONAL GOAL… THEY NEED TO BE COMPLETELY ALIGNED TO THE ‘MEGA’ BRAND."

Seal of Approval – the corporate brand acts as a quality mark for sub-brands or sub-categories. This concept is similar to the golden thread, but is specifically focused on leveraging equity around the key themes of quality and reliability. The seal of approval is particularly useful when expanding into new categories or geographies. In fact, some companies that may not display their corporate brand prominently in their home markets will place the corporate brand front and centre on products in developing markets, in order to draw upon the reputation for quality and reliability that is associated with products from developed markets.

"IN A CATEGORY LIKE OURS, WHERE TRUST IS VERY IMPORTANT, WE WANT TO BE IN A SITUATION OF PEOPLE GOING TO OUR PRODUCT BECAUSE IT CAN BE TRUSTED. YOU SHOULD NOT HAVE TO START FROM SCRATCH, BUILD UP THAT TRUST FROM ZERO EACH TIME. HAVING THE HALO OF THE BRAND IS VERY IMPORTANT."

Transparency Agenda – in last year’s Reputation Council report, members were urging their organisations to be transparent in order to meet the information needs of stakeholders in the interest of promoting open and honest communications. This transparency agenda unfolds when discussing equity flow as well. Stakeholders want to know more about the companies they interact with and part of this understanding is knowing all of the brands and categories that are present.

"WITH THE WORLD BECOMING A GLOBAL VILLAGE, CONSUMERS — AS NEVER BEFORE — CARE ABOUT THE CORPORATION BEHIND THE PRODUCT.

THEY DO NOT SEPARATE THEIR OPINIONS ABOUT THE COMPANY FROM THEIR OPINIONS OF THAT COMPANY’S PRODUCTS OR SERVICES.

THIS BLENDING OF CORPORATE AND PRODUCT/SERVICE OPINIONS IS DUE TO INCREASING CORPORATE TRANSPARENCY, WHICH GIVES STAKEHOLDERS A DEEPER AND CLEARER VIEW INTO A CORPORATION’S ACTUAL BEHAVIOUR AND ACTUAL PERFORMANCE."
"EXPECTATIONS OF TRANSPARENCY FOR ANY BRAND OR SERVICE PEOPLE BUY IS INCREASING. WE ARE EXPERIENCING A GREATER LEVEL OF EXPECTATIONS WITH REGARD TO HOW PRODUCTS ARE MADE, INGREDIENTS AND VALUES OF THE CORPORATE PARENT."

Other applications of equity flow – entering new markets can be challenging for companies on a number of levels, and establishing equity flow can ease entry among both regulators and consumers. Many companies who do not prominently display their corporate brand on product brands within their home market may do so in new/developing markets in order to provide a seal of approval to their product brands. Knowing that a global company stands behind a brand gives regulators and consumers the confidence that products are of high quality.

"WE KNOW THAT THERE IS DEFINITE COMMERCIAL BENEFIT FROM OUR REPUTATION, PARTICULARLY IN EMERGING MARKETS… THAT THEN FEEDS INTO BUYING SPECIFIC CONSUMER PRODUCTS."

Council members are divided on the effects of equity flow in crisis management situations. Some members worry that strong equity flow could have an adverse impact during a crisis, as brands that may have escaped negativity could be drawn in or contaminated. However, other members argue that a strong corporate brand can help a product brand recover from a crisis more quickly and that a broader awareness of a company’s categories helps to insulate the company as a whole from isolated incidents.

"WHEN THERE ARE INCIDENTS THAT OCCUR IN ONE PART OF THE BUSINESS OR ANOTHER, THEN OF COURSE YOU WISH THAT NOBODY KNEW, BUT YOU CAN’T HAVE YOUR CAKE AND EAT IT TOO. AGAIN THE UPSIDE WITH STAKEHOLDERS IS BETTER THAN THE DOWNSIDE."
"EVERY TIME THIS ASSOCIATION BETWEEN THE CORPORATE BRAND AND THE SUBSIDIARY BRANDS IS STRONG, IT IS IMPORTANT TO STRESS IT. INDEED, IN OUR CASE THIS ASSOCIATION HAS HELPED SUPPORT LOCAL BRANDS DURING THE CRISIS PERIOD. THE GOOD REPUTATION OF THE HOLDING COMPANY SUPPORTS AND INCREASES THE REPUTATION OF ALL ITS BRANDS."

For many companies, one of the roles of the corporate brand is to carry the company’s sustainability message. The sustainability message has more impact, though, if there is strong equity flow – otherwise the benefit for the product brands is minimal.

"IT IS ESSENTIAL THAT WE ALWAYS WORK ACCORDING TO OUR BRAND VALUES. EVERYTHING IS ABOUT CREDIBILITY AND TRUST. FOR EXAMPLE, SUSTAINABILITY IS A BRAND VALUE BENEFITING OUR CORPORATE BRAND. THEN WE NEED TO WORK ACCORDING TO THIS WHEN WE SET UP OUR PRODUCTS. THE PRODUCTS HAVE A POSITIVE IMPACT ON THE CORPORATE BRAND AND VICE VERSA."

Methodology: 127 interviews conducted with Reputation Council members between April and August 2017.

Final thoughts

Equity flow is important across companies and industries. The way that importance is gauged varies by company and industry. The concepts we have identified should provide corporate communicators with a way to understand their own equity situation, helping facilitate discussions with internal stakeholders. The benefits we have identified can provide communicators with avenues for improving or directing their equity flow, leading to improved brand and business performance.

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The Reputation Council Report 2018: Full Report

Welcome to the latest briefing from the Ipsos Reputation Council.

This – our thirteenth sitting – has been the biggest and most international yet, involving 154 senior communicators from 20 countries.

As Paul Polman, CEO of Unilever, once said: “reputation has a habit of arriving on foot and departing on horseback”. In the past year, a welter of high-profile reputation scandals affecting businesses, their leaders and even whole industry sectors has, once again, focused our minds on the risks and rewards of this powerful but potentially volatile asset.

Some of these scandals have posed a genuine threat to companies’ continued survival or licence to operate. Others have fizzled out. In this edition, we examine how Reputation Council members distinguish between issues which might blow up into a genuine reputation crisis, and others that are just day-to-day turbulence. What indicators or early warning systems can communicators draw on, to help them build resilience?

The technology sector has been wrestling with some unprecedented reputation issues recently. Concerns around privacy, data leaks, advertising practices, AI and automation have come together to create the phenomenon of ‘techlash’. We talk to Council members about the implications for their own businesses and the lessons that communicators can learn from the way in which the technology sector is responding to techlash.

We’re also beginning to see greater scrutiny of the role that CEOs should play in external communications, against a backdrop of issues such as pay ratio reporting, gender inequality, shrinking CEO tenures and the ‘celebrity leader’. In this edition, we explore Council members’ playbook for CEO-led communications, and look at how the CCO can ensure that these communications build, rather than destroy, reputation value.

The opportunities and challenges that come with communicating in a global context is a theme we’ve examined in past editions. In this sitting, we ask Council members how they strike the right balance between global and local messaging and narratives, and how they keep a finger on the pulse of their reputation (or reputations) around the world.

Lastly, we’ve introduced some new, ‘quickfire’ sections, in which we analyse Council members’ views on a number of contentious, topical talking points, such as the death of CSR, the distraction posed by social media, the need to pick a side in a polarising society, and whether consumers will overlook poor corporate behaviour if the price is right

I hope you enjoy this edition of the Reputation Council report. Please do get in touch if you’d like to find out more about any of the issues covered or discuss how they might affect your own business.

Milorad Ajder
Global Service Line Leader
Corporate Reputation
milorad.ajder@ipsos.com

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Global Perspectives on Sector Reputations

Which industries are facing the greatest reputation challenges at the moment?

NORTH AMERICA

Media: 44%

Tech: 44%

Pharma: 31%

Despite lingering reputational issues still plaguing the financial services sector, the recent assault on media and tech means that these two industries are seen to be facing the greatest reputational challenges in North America. Each of these industries is named by 44% of Council members.

Beyond these two industries, pharmaceuticals now holds the third position in terms of reputational challenges at 31%. Cost and value continue to drive the conversation, and with the US government putting more of a spotlight on drug costs, these reputational challenges are likely to continue.

"[Media has] got a constant drumbeat of ‘fake news’, how do you overcome that?"
"These are self-inflicted wounds [in the tech industry] – companies are not thinking through the implications of their actions on their customers."
LATIN AMERICA

Construction: 50%

Energy: 41%

Mining: 34%

In Latin America, construction rises to the top as the industry facing the greatest reputational challenges this year (50%). A number of corruption charges have embroiled not only specific companies throughout the region but also politicians and civil servants.

Energy (41%) and mining (34%) round out the top three most challenged industries, predominantly due to environmental concerns and a perception that they bring limited benefits to the local markets.

"There is a public perception that mining pollutes, does not produce profits for the country, and is a group of companies that do not add local value but add value to those who extract the material and take it away."
EUROPE

Finance: 44%

Energy: 43%

Finance remains one of the industries facing the greatest reputational challenge in Europe (mentioned by 44% of Council members). In the words of one Council member, “this crisis has not been solved yet, given that the image reconstruction process appears to be very slow.”

Additional challenges for the financial services sector include cyber security concerns and emerging FinTech players challenging the traditional financial companies.

Energy also continues to face reputational challenges, cited by 43% of Council members in Europe. Issues continue to focus on environmental concerns, climate change, sustainability and consumer costs.

"When energy companies don’t immediately pass on price savings from a barrel of oil to a consumer or to a client, then the negative repercussions are there immediately."
ASIA PACIFIC

Finance: 88%

Energy: 71%

Media: 71%

Consistent with last year, the financial services industry continues to suffer reputational challenges in APAC, though mentions are higher this year at 88% (up from 73% in the last wave). Council members continue to cite the lingering effects of the financial crisis.

The energy sector is also mentioned more frequently than last year (71%), and while affordability and sustainability are still key reasons, government policy is now referenced far more frequently by Council members.

This year, media is also mentioned by 65% of Council members in APAC, with many attributing this to a changing media landscape as well as the resounding cry of ‘fake news’.

"The energy policy is a mess. Can’t separate from political environment."
"The Trump phenomenon and the constant hammering of ‘fake news’."

In full: how Reputation Council members around the world perceived each sector's reputation

Methodology: 154 interviews conducted with Reputation Council members between 25th June and 12th November 2018. Base: All Reputation Council members – Global (145), North America (16), Europe (80), Latin America (32), APAC (17).

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