Ipsos Global Reputation Centre

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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Unlocking the Value of Reputation: Full Report

THE DEFINITIVE LINK BETWEEN CORPORATE REPUTATION AND BETTER BUSINESS EFFICIENCY

Looking to make your company run more effectively and efficiently?

Management teams around the world face a variety of complex business situations daily. A great place to start boosting your business is by leveraging the power of your reputation.

Ipsos Global Reputation Centre research across 31 countries shows conclusive proof of the relationship between a good reputation and better business efficiency.

Our research explores:

BUILDING TRUST GIVES COMPANIES AN ADVANTAGE IN TELLING THEIR STORY IN TIMES OF CRISIS, MARKETING THEIR PRODUCTS EFFICIENTLY, AND TURNING STAKEHOLDERS INTO ADVOCATES.

Reputation and trust are powerful forces in business efficiency.

The social media landscape may be changing how people interact with companies. There may be regulatory issues impacting some sectors more than others. You may be doing business in a region that’s inherently more skeptical than the rest of the world.

But the bottom line remains the same: building trust builds reputation. And having a good reputation will result in better business efficiency.

Methodology: The latest wave of the Ipsos Global Reputation Monitor, conducted in September 2017, measured attitudes of more than 23,000 consumers from 31 countries toward 66 companies across nine industries.

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The link between trust, reputation and benefit of the doubt

BUILDING TRUST BUILDS REPUTATION. A GOOD REPUTATION BUILDS BENEFIT OF THE DOUBT, AND ENSURES YOUR VOICE IS HEARD IN A CRISIS.

Trust matters. When you trust someone, you give them the benefit of the doubt. If that person gets in trouble, you will hear their side of the story before jumping to conclusions.

Companies seek to build the same benefit of the doubt among their stakeholders. Without a strong reputation, companies risk not having a receptive audience for their story when they need one the most.

Globally, people are generally willing to give companies the benefit of the doubt (24% definitely and 48% probably). This willingness to give the benefit of the doubt is tightly linked to overall trust.

Among people who trust a company a great deal, more than half (59%) say they would definitely give that company the benefit of the doubt in a crisis. Among people who are feel neutral toward a company, that percentage shrinks to just 10%.

How benefit of the doubt varies by industry

The imperative to build a strong reputation to get the benefit of the doubt is greatest in high risk sectors. However, EVERY company has risk and can obtain a competitive advantage by building a reputation that they can draw on in times of trouble.

At the industry level, technology companies are much more likely to get the benefit of the doubt than others. Highly regulated industries are viewed more skeptically.

Globally, technology and automotive companies have the strongest reputations and consequently the strongest benefit of the doubt.

Benefit of the doubt and trust are highly correlated. When companies build trust, they are building up benefit of the doubt.

The link between trust and benefit of the doubt are most tightly related at the ends of the spectrum - companies with the best reputation get the most benefit of the doubt, and least trusted companies generate very little benefit of the doubt. Companies in the middle (trust-wise), have more variance when it comes to getting the benefit of the doubt.

Airlines, telecommunications, and oil and gas companies have the greatest challenges.

How benefit of the doubt varies by region

Overall, Europeans are more skeptical of companies, while Latin Americans are more likely to give companies the benefit of the doubt.

Generally, a majority of people in every region say they would “probably” give companies the benefit of the doubt during times of crisis. This likelihood to extend the benefit of the doubt is why it is so important for companies to make sure they react appropriately to crises. An over-reaction due to a few hard-core skeptics can cause more harm than good. Companies need to remember that they generally have the benefit of the doubt and should therefore be forthcoming, rather than defensive.

Skeptical Europeans are a tougher audience than people from other parts of the world.

The impact of regulation on trust and benefit of the doubt

Oil and gas, pharmaceuticals, and telecommunications companies face the greatest amount of regulatory risk, and have the lowest trust and benefit of the doubt scores. While risk is also high for insurance and banking, there is also some evidence of people feeling these industries are over-regulated.

The desire for regulation is highest in Europe and North America, and lowest in APAC.

Methodology: The latest wave of the Ipsos Global Reputation Monitor, conducted in September 2017, measured attitudes of more than 23,000 consumers from 31 countries toward 66 companies across nine industries.

Read more from 'Unlocking the Value of Reputation'...

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