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.

Read more from the Reputation Council...

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The AI Paradox: Businesses must not overlook their responsibility to reputation as investment in this technology grows

Digital technologies, from social media to Artificial Intelligence (AI), have undoubtedly altered peoples’ lives – some for the better, some for the worse. We’ve seen the rise of intelligent assistants like Siri and Alexa, grown reliant on communication platforms to keep in touch with friends and family, and have witnessed the positive impact of wearable technology in healthcare.

According to a 2017 PwC report[1], AI technology could deliver a 10% increase in the UK’s GDP by 2030, provided that different types of AI technologies are invested in. To nurture this potential, in early March the government outlined a plan to position the UK as the global leader of artificial intelligence[2]. The plan incorporates investing in R&D, helping people develop skills for the new age of AI, and supporting sectors in boosting their use of AI and data analytics technologies. The hope is to create resilience among the UK’s workforce as the use of AI becomes widespread across sectors and helps boost the economy.

The indication that AI is the future is evident among business leaders too. In a recent study by Ipsos, the authoritative Captains of Industry, three in five stated they have already invested in digital technologies such as machine learning and artificial intelligence. Another third plan to invest in the next five years, as businesses prepare for the utilisation of AI technologies, align with government priorities, and foster the potential for economic growth – especially in a post-pandemic world

However, while the benefits that could be reaped from digital technologies are limitless, it doesn’t come without its challenges. In an Ipsos poll published by the World Economic Forum, four in ten adults across the world said they are worried about the use of artificial intelligence, and nearly half of adults globally agree that the use of AI by companies should be regulated more strictly than it currently is[3]. In another poll, less than one in five adults in the UK believe their job will be automated in the next 10 years, and almost four in five feel confident they already have the skills to carry on with their current employment in the future – contrasting senior leaders’ perspective of digital technologies potential.

While government and businesses are working toward unlocking AI’s potential, efforts will need to be put in place to convince employees of AI’s positive societal impact, the need for upskilling, and the benefits it could bring to jobs in the UK. Uplifting the reputation of AI and automation will need to be at the forefront of the government’s transformational strategy – especially as trust in the sector[4] hit an all-time low in 2020, according to the Edelman Trust Barometer.

Companies such as Microsoft have already taken some steps toward convincing the public in their efforts toward responsible technology by publishing six ethical principles to guide the development and use of artificial intelligence[5], with focus on working closely with employees and teams across the company to enable this effort. The government is also taking steps on this by launching an independent Centre for Data Ethics and Innovation that will advise on the ethical use of data, ranging from evaluating its social and economic impacts through to its fair and responsible application across businesses.

These efforts are a step in the right direction. Digital technologies are notorious for their fast evolution, with policies and regulations coming too late to resolve issues that have already left a negative mark on society and employment. Governments, businesses, and industry experts will need to work coherently and transparently when implementing AI, and work toward foreseeing issues with its implementation before they happen.

Building trust with the public will be key, alongside convincing the UK workforce of the benefits for upskilling, with a focus on fully communicating how utilising digital technologies would affect society and employment, both positively and negatively. Turning the UK into a global AI leader will be a challenging endeavour, but as long as we remember that having the capability to create technology is not all it takes for its success, realising all of its social and economic benefits are very much within our grasp.

Article links

[1] https://www.pwc.co.uk/economic-services/assets/ai-uk-report-v2.pdf

[2] https://www.gov.uk/government/news/new-strategy-to-unleash-the-transformational-power-of-artificial-intelligence

[3] https://www.ipsos.com/en-us/wef-artificial-intelligence-press-release

[4] https://www.linkedin.com/news/story/were-losing-our-trust-in-tech-5042340/

[5] https://www.microsoft.com/en-us/ai/responsible-ai?activetab=pivot1:primaryr6

For more information please contact:

Nadya Valkova
Research Manager, Corporate Reputation

Nadya.Valkova@Ipsos.com

What drives judgement of an organisation’s reputation?

An important focus for Ipsos Corporate Reputation is to help our clients understand what drives their reputation, in other words, what are the issues stakeholders think about when they make judgments about companies and organisations. In this article we will show what are the key aspects organisations should be mindful of according to MPs and business journalists who we regularly interview.

What exactly drives reputation will vary from one organisation to another – there isn’t a single, off-the-shelf answer to this. Feeding into an organisation’s reputation will be elements of what it does (for example, product quality and innovation), what it stands for (such as business acumen, ethics, corporate social responsibility and ESG performance), expectations and perceptions of the sector it’s in, expectations of business and industry, and other wider context issues. Furthermore, an organisation’s delivery against its corporate promise needs to match or exceed the expectations it creates.

There will be many tangible benefits that an organisation gets from building reputation value. It will, for example, help ensure your point of view is heard in policy making and regulation, make stakeholders more receptive to communications, build resilience to draw upon during times of crisis, and strengthen your employer brand.

Factors shaping reputation will vary from company to company, as reputation isn’t formed in a vacuum. It is shaped by perceptions of the sector, by the ongoing socioeconomic climate and policy agenda, as well as the behaviour, performance and communications effectiveness of a company. However, MPs and journalists have told us which issues they tend to consider when they from opinions about companies and organisations, which we’ll discuss here.

The most common consideration for business journalists when judging an organisation tends to be its financial performance. Often, this is seen to be a hygiene factor which an organisation needs before it can start to credibly engage with other issues. As one national business journalist states;

“If you haven't got that [financial performance] you can't do anything else. If you're not a viable business nothing else really matters. You can be as nice as you like to everyone else but if you're going to go bust, there's no point.”

Other common considerations today among business journalists include quality of management, treatment of customers, treatment of employees, and how it engages with journalists.

Journalists tell us that there are three key benefits for an organisation from engaging well with them; it allows journalists to get an organisation’s message across in the pieces they write, it could position an organisation in a more favourable light, and it helps journalist to report more accurately and less one-sided. As a regional business journalist explains;

“You're never going to stop bad headlines if things go badly but engagement on a number of specific issues such as remuneration, climate change, you know if I have a full understanding of a company's policy and why it's doing something, I'm much less likely to shot from the hip. If I have a full understanding of that company's strategy and why something has happened, I'm probably going to have a more holistic, a fuller appreciation of what that is rather than just writing "This is a bloody disaster"”

Indeed, between 2015 and 2017 we saw that engagement with journalists rose in importance as an important factor (see illustration below), and it has maintained its importance ever since. It’s also interesting to note how treatment of employees has become an increasingly important factor for journalists; as Covid-19 lockdown restrictions start to ease and companies announce their plans for their employees (a return to office working or a continuation of remote, flexible or hybrid working), companies need to be mindful of how their demands of employees might be perceived and how this might impact on their reputations.

Meanwhile, the factors that MPs most commonly consider when judging organisations are treatment of employees, track record, financial performance, social responsibility and environmental responsibility.

When asked to rate each aspect in terms of importance, treatment of employees has over time continuously been rated as an important attribute by MPs, while social and environmental responsibility is becoming increasingly important:

However, which aspects are of most importance does to some extent depend on which side of the House an MP sits on.

For Conservative MPs, a company’s track record and financial performance are the key considerations – and financial performance is far more commonly mentioned by Conservative MPs than Labour MPs. As one Conservative Backbencher states;

“Longevity is important, successful track record in either financial terms or stuff they sell or market. The reality is you don't really know about their CSR. The brand reputation is hugely important.”

Meanwhile, the key aspect for Labour MPs is treatment of employees (a far greater consideration among Labour MPs than Conservatives), followed by social responsibility. As one Labour Shadow Minister sates, the way a company treats their employees can be seen to be a reflection of the wider ethos of a company;

“First and foremost, in terms of the management and the whole ethos, the way they treat their employees… how employees are treated is very important to me, are they on proper contracts, are they paid properly, do they have security of employment, do they have things like pensions.”

In line with the views of Labour MPs, our most recent wave of the Reputation Council showed that corporate communicators commonly view employees as a stakeholder group which is increasingly influential on company reputations (legislators, such as MPs, are also seen to be increasingly influential by corporate communicators). Employees are no longer an afterthought for corporate communicators and are increasingly treated “much more seriously as a sophisticated stakeholder audience” and a trusted and credible source of information about a company.

Once organisations understand how key stakeholders form their opinions of them and their competitors, and how they perform against these criteria, they can then put plans in place to target communications more effectively – as well as identifying how (and if) an organisation needs to ‘course correct’ to deliver against stakeholder expectations. In terms of planning a communications strategy, further insight on how best to engage with MPs can be found in our recent post: Creating relevant and engaging comms with MPs for effective corporate planning.

Ipsos MORI can help you better understand what drives opinions about your organisation among various stakeholder groups, and the steps you need to take to bolster the way you are perceived to perform on those key attributes. We provide tailored advice through bespoke research and/or through our syndicated stakeholder surveys among legislators, journalists, business leaders and investors.

Want to know more about our MPs and Business Journalists syndicated surveys (or our wider bespoke surveys)? Get in touch with Ipsos MORI….

For more information please contact:

Guto Hunkin
Associate Director, Corporate Reputation

Guto.Hunkin@Ipsos.com