Creating and managing a corporate image

Managing the corporate image is a twofold activity. Firstly, the image needs to be consistent across the organisation. Secondly, it should be possible to maintain the image in the face of outside influences, notably in emergencies and crises.

Creating consistency in the image is dependent on having accurate information about public perception of the organisation and feeding this back to the members of the organisation. Avoidance of multiple images is a concern for many organisations, but in practice the inherent diversity in the workforce makes it difficult to achieve. The most practical approach is probably that of developing a strong corporate culture based around a clear vision statement.

In this theme we explore some of the tools that are available for creating and managing the corporate image and consider the implications of employing an outside agency to help.

You will:

Explore how the corporate image adds to stakeholder value

Explore the benefits and considerations of sponsorship and word-of-mouth communication as image development techniques

Identify ways of handling complaints so as to increase customer loyalty

Understand the issues surrounding the appointment and control of outside agencies

Identify the key factors in choosing an outside agency.

Corporate image and added value

Corporate image is not a luxury. The image of a corporation translates into hard added value for shareholders. This is partly because of the effect that image has on the corporation's customers, but is also a function of the effects it has on staff, and is very much a result of the influence the image has on shareholders. High-profile companies are more attractive to shareholders, even if the company's actual performance in terms of profits and dividends is no better than average. Since the central task of management is to maximise shareholder value, image must be central to management thinking and action.

Maximising shareholder value is not the same as maximising profits – see Figure 2.1 for a comparison. Profit maximisation tends to be short-term, a matter of cutting costs, reducing investment, downsizing, increasing sales volumes at the expense of long-term customer loyalty, and so forth. Adding value to the shareholders’ assets is about creating a secure, growing, long-term investment. Since the dot.com bubble burst, investors have become painfully aware that investments in companies with spectacular profits but little underlying solidity is a quick way to lose money. City analysts look more and more towards using measures such as customer loyalty, brand awareness and investment levels when judging the long-term prospects for companies. Taxation structures now discourage speculation on the markets and the increase in the number of small private investors has resulted in much more long-term thinking.

Figure 2.1 Comparison between adding value and maximising profits

The counter-argument to this is that the shifting global marketplace has reduced survival prospects for companies. The life expectancy of a company is now less than 20 years (De Geus, 1997). Maintaining a profitable competitive advantage is also problematic. If a company finds a profitable market niche, competitors respond rapidly and profits fall to the point where it is almost impossible to maintain an adequate return on the original capital investment (Black et al., 1998).

Obviously some well-established companies have maintained their shareholder value year after year, sometimes by using profits to increase capital value rather than pay dividends. Companies with good reputations are regarded as safe investments because they maintain steady growth, even if the dividends are small. Some investors regard large dividend payouts as a sign that the company is buying shareholder goodwill rather than building the business. However, even blue-chip companies are not immune to environmental shifts.

In recent years, business thinking has become customer orientated, on the basis that pleasing the customers is the best way to get their money from them. In fact, customer orientation does not necessarily mean that the company gives its customers everything they want. It does mean that it ensures that customers are satisfied and loyal in order to maximise the long-term survival potential of the company.

The value that accrues from image management has always been accounted for under the heading of ‘goodwill’ on the company's balance sheet. The goodwill element of the company's value is the difference between the value of its tangible assets and its value on the stock market. For some companies, the value of its goodwill is actually the bulk of its overall value. For example, Coca-Cola's goodwill value is more than 80 per cent of the company's total value. Much of this goodwill value comes from the Coca-Cola brand itself. This approach to valuing a company's reputation and image is now regarded as being somewhat crude, and new measures are being developed to take account of brand value, customer loyalty values, and so forth in order to move away from the reliance on financial measures when assessing a company's success.

Techniques for managing corporate image

Sponsorship

Sponsorship has been defined as:

Source: Meenaghan (1991)

Sponsorship of the arts or sporting events is an increasingly popular way of generating positive feelings about organisations.

Sponsorship in the UK grew a hundredfold between 1970 and 1993, from £4m to £400m. It has continued to grow ever since, with estimates for 2001 ranging between £l,000m and £l,400m. A large part of this increase has come from tobacco firms, due to global restrictions on tobacco advertising. Sponsorship of Formula One motor racing, horse racing, cricket and many arts events such as the Brecon Jazz Festival would be virtually non-existent without the major tobacco companies. Organisations sponsor for a variety of different reasons, as shown in Table 2.1.

Table 2.1 Reasons for sponsorship   Source: Zafer Erdogan and Kitchen (1998)

The basis of sponsorship is to take customers’ beliefs about the sponsored event and link them to the organisation doing the sponsoring. Thus an organisation wishing to appear middle-class and respectable might sponsor a theatre production or an opera, whereas an organisation wishing to appear to be ‘one of the lads’ might sponsor a football team. As far as possible, sponsorship should relate to the organisation's existing image.

Sponsorship will only work if it is linked to other marketing activities, in particular to advertising. Hefler (1994) estimates that two to three times the cost of sponsorship needs to be spent on advertising if the exercise is to be effective. The advertising should tell customers why the organisation has chosen this particular event to sponsor so that the link between the organisation's values and the sponsored event is clear. A bank which claims to be ‘Proud to sponsor the Opera Festival’ will not do as well as it would if it were to say: ‘We believe in helping you to enjoy the good things in life – that's why we sponsor the Opera Festival’. A recent development in sponsorship is to go beyond the mere exchange of money as the sole benefit to the sponsored organisation or event. If the sponsored organisation can gain something tangible in terms of extra business or extra publicity for its cause, then so much the better for both parties.

There is evidence that consumers feel gratitude towards the sponsors of their favourite events, although of course this may be an emotional linking of the sponsor and the event rather than a feeling of gratitude that the sponsor made the event possible. The difference between these emotions is academic in any case – if sponsorship leads to an improvement in the organisation's standing with customers, that should be sufficient. There are also spin-offs for the internal PR of the organisation: most employees like to feel that they are working for a caring organisation, and sponsorship money often leads to free tickets or price reductions for staff of the sponsoring organisation.

The following criteria apply when considering sponsorship (Hefler, 1994):

Another recent development in sponsorship is ambush marketing. This is the practice of linking one's product to a sponsored event without actually sponsoring anything. For example, during the 1998 FIFA World Cup soccer tournament, some companies ran World Cup competitions or World Cup promotions without actually contributing anything to the event. There is very little that can be done to prevent this, although sponsoring companies can console themselves with the thought that the TV cameras at the event itself will focus on their company names, not on those of the ambush marketers.

Word of mouth

People often discuss products. We like to talk about the things we have bought, the films we have seen and the holidays we have been on or are about to go on. We like to ask our friends’ opinions and to air our own. This type of communication is extremely powerful as a marketing tool, but it is also difficult to control.

The main advantage of word-of-mouth communication is that it comes from a reliable source. People tend to trust the word of their friends and acquaintances much more than they do advertising. This is perhaps a little strange considering that advertisers are constrained by law to be legal, decent, honest and truthful. Few people can say that about their friends.

Another advantage is that word-of-mouth communication is interactive. It allows for discussion and for asking questions if a particular aspect of the communication is unclear.

The main disadvantage of word of mouth is that it is difficult to control. The evidence is that bad news travels twice as fast as good news, and that most word of mouth is actually negative.

Word of mouth can be encouraged and, to an extent, directed by the following means:

Press releases News stories about the organisation will generate discussion, to a greater or lesser extent.

Bring-a-friend schemes In such a scheme, a reward is given for recruiting a friend. Since some people feel uncomfortable about being rewarded for recommending a friend to do something, the reward is often given to the friend instead. The Dutch railway system, Nederlands Spoorweg, ran a very successful campaign to recruit more people to its senior citizens’ railcard. The company simply sent out packs containing trial-period railcards to its retired workers asking them to pass these on to their friends.

Awards and certificates Trophies, certificates and awards are often displayed or at least talked about. The Blood Transfusion Service uses this to good effect by giving donors awards for giving 10 pints, 20 pints, and so forth.

Some people are more useful than others in terms of word-of-mouth communication because they are more influential. Identifying these influential people is not easy, but some general principles have been established.

Firstly, demography has very little influence for most products. Although age might have some bearing on, say, purchase of trainers, it is far from being the most influential factor. Social activity shows a better correlation, since opinion leaders and influencers are usually gregarious. Typically, influencers are positive towards new ideas and are innovative. This is not surprising, since in order to recommend a product one might assume that the individual will have tried it, read about it or taken some interest in it. There is a low correlation between personality characteristics and opinion leadership, but influencers are more interested in the product area than other people. This means that someone might be an influencer for one product category and not for another – again, not surprising. One might consult a computer enthusiast about computers, but not expect the same person to be able to advise about musical instruments.

In view of the fact that most word of mouth is negative, managers might be better employed in trying to prevent dissatisfied customers from voicing their complaints to others.

Three basic types of complaining behaviour have been identified (Singh, 1988): voiced response, in which the customer comes back and complains to the supplier; third-party response, in which the customer enlists the aid of lawyers, consumer organisations, trading standards officers, and so forth; and private response, in which the customer complains to friends. These are summarised in Table 2.2. Customers who come back with a complaint actually give the organisation a chance to put things right before they move on to one of the other two options, so complaints should really be encouraged whenever possible. This is why waiters always ask if the meal is all right – waiting until the food has been eaten or until a complaint has been made is probably counterproductive.

Table 2.2 Types of complaining behaviour

In the case of a physical product, simple replacement of the faulty item is the usual remedy for a complaint. In service industries, the situation is more complex because services are difficult to replace. In general, services fall into three categories as regards redress for complaints (Blythe, 1997):

The key factors in deciding how to handle the complaint are the strength of the complaint, the degree of blame attaching to the supplier (from the customer's viewpoint) and the legal and moral relationship between the supplier and the consumer. Failure to handle complaints will almost certainly lead to damage to the organisation's reputation. Research shows, on the other hand, that customers whose complaints are handled to their satisfaction are likely to become even more loyal than those who had no complaint to begin with. This is logical. People understand that things go wrong occasionally, but knowing that they are dealing with an organisation that will put things right is reassuring.

Using outside agencies to build
corporate image

Outside public relations agencies are frequently used for developing corporate image. The reasons for doing this might be that:

the organisation is too small to warrant having a specialist PR department

external agencies have expertise which the organisation lacks

the external agency can provide an unbiased view of the organisation's needs

external agencies often carry greater credibility than internal departments or managers

economies of scale may make the external agency cheaper to use

one-off events or campaigns can be more efficiently run by outsiders and the organisation's attention is not deflected from its core activities.

What an outside agency might do

The Public Relations Consultants’ Association lists the following activities as services that a consultancy might offer:

Source: Public Relations Consultants’ Association

This list is not exhaustive. Since outside agencies often specialise, an organisation may need to go to several different sources to access all the services listed above. Even organisations with an in-house public relations department may prefer to subcontract some specialist or one-off activities. Some activities which may involve an outside agency are:

You can decide which tasks the agency should carry out for you by a process of elimination. Begin by deciding which tasks you are able to carry out in-house, and then whatever tasks are left can be contracted out to the agency – see Figure 2.2.

Figure 2.2 Deciding which tasks to contract out

Choosing an appropriate agency or consultancy begins with looking at the agency's ability to carry out the specific tasks you need. Table 2.3 shows some of the trade-offs involved in choosing a PR consultancy.

Table 2.3 Choosing a PR consultancy

Unless the outside agency has been called in as a result of a sudden crisis, which is possibly the worst way to handle both PR and consultants, the consultancy will be asked to present a proposal. This allows the consultancy time to research the client's situation and its existing relationships with its publics. The proposal should contain comments on the following aspects of the task:

Client organisations will often ask several agencies to present, with the aim of choosing the best among them. This approach can cause problems, for several reasons. Firstly, the best agencies may not want to enter into a competitive tendering situation. Secondly, some agencies will send their best people to present, but will actually give the work to their more junior staff. Thirdly, agencies may not want to present their best ideas, feeling (rightly in some cases) that the prospective client will steal their ideas. Finally, it is known that some clients will invite presentations from agencies in order to keep their existing agency on its toes. Such practices are ethically dubious and do no good for the client organisation's reputation. Since the whole purpose of the exercise is to improve the organisation's reputation, annoying the PR agencies is clearly not an intelligent move. To counter the possibility of potential clients stealing their ideas, some of the leading agencies now charge a fee for bidding.

Relationships with external PR consultancies tend to last. Some major organisations have used the same PR consultants for over 20 years. Frequently changing consultants is not a good idea. Consultants need time to build up knowledge of the organisation and its personnel, and the organisation needs time to develop a suitable atmosphere of trust. The consultancy needs to be aware of sensitive information if it is not to be taken by surprise in a crisis, and the client organisation is unlikely to feel comfortable with this unless the relationship has been established for some time.

Developing a brief

The purpose of the brief is to bridge the gap between what the client needs and what the consultant is able to supply. Without a clear brief, the consultant has no blueprint to follow, and neither party has any way of knowing whether the exercise has been successful or not.

Developing a brief begins with the organisation's objectives. Objective setting is a strategic decision area, so it is likely to be the province of senior management. Each objective needs to meet SMARTT criteria:

The objectives will dictate the budget if the organisation is using the objective-and-task method of budgeting. This method means deciding what tasks need to be undertaken to achieve the final outcome and working out how much it will cost to achieve each task. Most organisations tend to operate on the all-we-can-afford budgeting method, which involves agreeing a figure with the finance director. In these circumstances, the SMARTT formula implies that the budget will dictate the objectives since the objectives must be achievable within the available resources.

Setting the objectives is, of course, only the starting point. Objectives need to be translated into tactical methods for their achievement, and these tactics also need to be considered in the light of what the organisation is trying to achieve.

The brief will be fine-tuned in consultation with the PR agency. From the position of its specialist knowledge, the agency will be able to say whether the budget is adequate for what needs to be achieved or, conversely, say whether the objectives can be achieved within the budget on offer. The agency can also advise on what the appropriate objectives should be, given the organisation's current situation.

Figure 2.3 outlines the process of establishing a brief.

Figure 2.3 Establishing a brief

Measuring outcomes

If the outcomes from the PR activities do not match up with the budgeted objectives, conflict between the client and the agency is likely to result. The most common reason for the relationship breaking down is conflict over the costs and hours billed compared with the outcomes achieved. From the agency's viewpoint, much of what happens is outside its direct control. Sponsored events might not attract sufficient audiences, press releases might be spiked as a result of major news stories breaking and special events might be rained off. Many a carefully planned, reputation-enhancing exercise has foundered when the celebrity athlete involved has been caught taking drugs, for example.

Measuring outcomes needs to be considered at the objective-setting stage. A good PR agency will not offer any guarantees of outcomes, but it should be feasible to assign probabilities to the outcomes and to put systems in place for assessing whether the objectives were achieved.

Table 2.4 gives some examples of evaluation methods for PR activities. This list is by no means comprehensive, of course.

Table 2.4 PR evaluation methods

Although market research is a complex topic which is outside the scope of this book, it is possible to identify the stages in the process of measuring PR outcomes. An outline of the approach has been provided by Rossi and Freeman (1999), which is shown in Table 2.5.

Table 2.5 The evaluation research process    Source: Rossi and Freeman (1999)

If these questions are answered in the negative, questions should be asked either about the realism of the objectives or about the tactics the agency has used. If everything goes wrong, it is tempting to fire the agency and try another firm, but in practice this may not be the best answer. Both agency and client will have learned from the experience, possibly at some expense, and it is probably better to stay together and learn the lesson than to split up and have to ride the learning curve all over again with another agency.

Recap

Explore how the corporate image adds to stakeholder value

The corporate image should add value to the stakeholders’ assets by creating a secure, growing, long-term investment, rather than a short-term gain.

The value that accrues from image management is accounted for as ‘goodwill’ on the balance sheet. The goodwill element of a company's value is the difference between the value of its tangible assets and its value on the stock market.

Explore the benefits and considerations of sponsorship and word-of-mouth communication as image development techniques

Sponsorship works by transferring the positive feeling that a customer has for the sponsored event to the sponsor organisation. The event or organisation being sponsored should be consistent with the sponsor's brand image and offer a strong possibility of reaching the desired target audience.

People trust word-of-mouth communication, especially from people that they regard as opinion leaders or as knowledgeable about a particular product. However, word-of-mouth communication is difficult to control and can be negative.

Organisations use press releases, bring-a-friend schemes, and awards and certificates to encourage positive word-of-mouth communication.

Identify ways of handling complaints so as to increase customer loyalty

There are three types of complaining behaviour: voiced response, third-party response and private response.

Redress is usually provided as a replacement product or repeat service, refund or voucher and, in some cases, compensation for consequential losses.

The key factors influencing how to handle a complaint are the strength of the complaint, the degree of blame attaching to the supplier and the legal and moral relationship between the customer and supplier.

Understand the issues surrounding the appointment and control of outside agencies

Consultancies and agencies exist for two reasons: firstly, to carry out activities for which the organisation does not have resources, and, secondly, to carry out activities which, because of its specialist expertise, it can do better than the organisation.

External agencies take time to build up their knowledge of your organisation so be prepared to invest more time at the start of your relationship. Create a brief with SMARTT objectives and put in place an evaluation process to measure whether these have been achieved.

Identify the key factors in choosing an outside agency

These factors include length of time in the business, size, full service or specialist, degree of fit with your organisation, its client list, calibre of staff and how well it understands the results that you need.

More @

Balmer, J. and Greyser, S. (eds) (2003) Revealing the Corporation: Perspectives on Identity, Image, Reputation and Corporate Branding, Routledge

The book draws on articles from leading journals in the field and includes important recent articles as well as classics, written by recognised masters of the genre, which still inform current debate and practice.

Schultz, M., Hatch, M. and Larsen M. H. (2000) The Expressive Organization: Linking Identity, Reputation and the Corporate Brand, Oxford University Press

According to the authors, the future lies with ‘the expressive organization’. Such organisations not only understand their distinct identity and their brands, but are also able to express these externally and internally.

www.sponsorship.com There are a number of interesting resources at the IEG Inc. site, including a good Learn About Sponsorship section, a news section and even job information. Some areas require registration.

Find comprehensive best practice guides on finding an external communications partner and on the construction of a brief at the website for the Public Relations Consultants’ Association, www.prca.org.uk/sites/prca.nsf/homepages/homepage. These free guides are downloadable.