The Mutual Impact of Brand Equity and Corporate Reputation

November 1, 2016

Why is it that some brands can endure years of bad press without losing substantial sales? Similarly, how do some brands transform into industry leaders, often seemingly overnight? In many cases, it's the result of careful management of brand equity and corporate reputation.

Generally speaking, corporate reputation is the perception of a corporation based on its own agenda—that is, the investments, employment, corporate citizenship, business practices, etc. A strong reputation often allows corporations to implement their brand efforts smoothly. On the other hand, a brand is the promise a product or service makes to consumers that is supported by distinctive associations and experiences. And brand management is about implementing your business strategy by using two-way communication to connect products with the consumers interested in them.

These two terms (brand equity and corporate reputation) may seem interchangeable. When talking about consumer marketing, the line between them is often blurred, especially when a company and its products share a brand identity.

Indeed, an analysis of Nielsen's Harris Poll EquiTrend® and Reputation Quotient (RQ®) confirms that the alignment between brand equity and corporate reputation is quite close, and further, the alignment between them reflects industry differences.

Retail brands, both physical and virtual, are typically highly accessible and transactional with consumers. The storefront (actual or virtual) becomes the company, making it crucial that brand delivery be spot on. As a result, the brands covered in our studies generally had higher brand equity and corporate reputation scores than average.

Financial brands are far more vulnerable to consumers' perceptions about how an institution conducts business versus a familiarity with its services. Brand equity and corporate reputation in financial services generally rank lower than average among consumers, despite improvements, especially in reputation, as the economy continues to recover.

Similar to financial services, the automotive industry has seen its reputation among consumers shaped by high levels of news coverage, both good and bad. The significant time periods between car purchases limits brand-level interactions, which means brands with a high level of loyalty may escape blowback created by a market event. Comparatively, market events and controversy may have a greater impact on brands with lower penetration (and therefore a smaller base of owner-advocates).

Consumer technology represents the new wave of indispensable brands. Technology brands are building corporate reputation and brand equity at an accelerated rate. By branding technology products with the company name, these companies prove the reciprocal relationship between corporate reputation and brand equity: they have leveraged their product brands to build highly-regarded companies. Now, these highly-regarded companies can use their reputation to navigate any brand challenges in this fast-moving industry.

What does this synergistic relationship between brand equity and corporate reputation mean for consumer brands?

Brand marketers will increasingly need to weigh synergies between the brand promise and the corporate mission and image. Consumer technology demonstrates how the line between corporate reputation and brand grows more transparent by the day. Perhaps these brands will serve as an incubator for a new paradigm of brand measurement where reputation metrics are baked in as key performance indicators of brand success—and where reputation initiatives proactively manage company perceptions to maximize brand success.

Source

"The Mutual Impact of Brand Equity and Corporate Reputation." Nielsen, 11/1/16.

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