IntroductionThereis a high pressure from corporate stakeholders and government for all types ofcompanies to be more attentive and responsive to their interests and needs. Meanwhile,to maximize shareholder value by achieving highest profits is the primary goalof any publicly-traded company. These opposing forces cause disagreement aboutvalue of reputation. Most people would definitely agree that managing brandequity and building a good reputation is vital to every company. On the otherhand, supporters of Milton Friedman, the winner of Nobel Prizein Economics in 1976, claim that the sole purpose of a firm is to make money 1. Thepurpose of this article is to review academic literature on the strategies ofmanaging brand equity, in particular on reputation. It refers to the publicrelations professionals and marketers who take responsibility for reputation.
Focusing on reputation management helps professional marketing managers tocreate real value for their companies across trust, good relations withstakeholders and successful business model. From this perspective, a fewrecommendations for communication practitioners and marketers will be provided.Basedon academic literature, arguments will be supported by two examples: thesuccessful brand extension of Bentley’s spirit into the world of perfume andthe sweet smell of failure of Harley Davidson perfume. Nowadays there is agrowing trend among car manufacturers to experiment at creating brandextensions. This involves many big auto company, for example, Porsche designsKitchens, Mercedes-Benz creates Apartments and Volkswagen produces GTi Watch. Trustfrom customers and instant brand-awareness makes luxury brand the ideal models ofline and product expansion – as long as producers manage to maintain the samelevel of quality.
BentleyMotors Limited is a British manufacturer of luxury cars and a subsidiary ofVolkswagen AG since 1998 2. People perceive Bentley as luxury auto brand and atrue British classic. Bentley Fragrances ideally match the Bentley Motorsvalues: a mix of rum, musk and patchouli makes the fragrance refined and masculine inspired by the woods andleather synonymous with the handcrafted interior of a Bentley.Harley-Davidson,Inc. was founded in 1903 and become one of the world’s largest motorcyclemanufacturers 3. Harley has its own iconic brand, moreover, company is knownfor its brand community. Harley is famous around the world for its events andmotor clubs. Moreover, thousands of people visit a brand-focused Harley museumthat is sponsored by company.
However, not all brand campaigns were successful.CEO of the Interbrand Group claimed that “Harley Davidson values are strong,masculine, very rugged values” 4. Brand extension to baby clothes andperfumes destroyed brand image and led to loss of certain share of customers.
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The strategicmanagement of a brand and its brand equityIn general, key concepts of corporateidentity, image and reputation related to the company’s target audience build acorporate brand 5. It is a summary image that represent umbrella overcompany’s marketing activities, as well as its communications with differentstakeholders, including government, business partners, suppliers, currentemployees, potential employees, the media and customers. The fusion ofcorporate identity, image and reputation provides the foundation for corporatebrand equity.
Current perception of company Attributes of company Corporate identity Perception of company over time Corporate image Corporate reputation Corporate brand Source: Larry Percy (2008). Strategic Integrated Marketing Communications. Accordingto Gary Armstrong and Philip Kotler, Brand equity is the differential effectthat knowing the brand name has on customer response to the product and itsmarketing 6. Measuring brand equity can be viewed in two ways. Some expertsdetermine the financial value for accounting, merger, or acquisition aims.
Others concentrate on behavior aspect and the brand’s ability to captureconsumer preference, satisfaction and loyalty. As reported by Dowling (2001), Brandpositioning is fundamental element to build a successful and well-known brand.The positioning of the brand includes Brand reputation, Brand identity, Brandimage and Brand attitude. Grahame Dowling describes corporate identity assymbols (name, logo, slogan, advertising and others) that help to identify thefirm. Corporate image is personal evaluation that can be both positive and negative,whereas Brand Attitude is more general term that involves feelings, knowledgeand experience 6.Thefocus of this review of the academic literature is on corporate reputation. Accordingto Dowling (2001), corporate reputation is based on the values the personassociates with their understanding of a company’s image 6. Interms of company’s financial position reputation is intangible asset: as anintangible, reputation represents a firm’s past actions and describes a firm’sability to deliver value outcomes to multiple stakeholders (Mahon, 2002;Fombrun, 1996) 7.
On the other hand, reputation can be considered as aderivative of other actions and behaviors of the firm. Stigler (1962) claimsthat reputation is the way in which stakeholders, who know little about anorganization’s true intent, determine whether an organization is worthy oftheir trust 8. Basedon these various definitions, reputation can be considered from two points ofview. In terms of company, reputation isan intangible asset that allows the company to respond consumer’s needs andexpectations and to create creating differentiation and barriers againstcompetitors. In terms of stakeholders, reputation shows how company deal withexpectations of its various stakeholders, their behavioral and emotionalreactions.
The role of brand equity/reputation on the company’s performanceManaging business’s reputation isvital to business success regardless of the company’s size. For internationalcorporations having a good reputation is important to get the trust andconfidence of the consumer as well as to compete against competitors.Reputations prevent competitive mobility and create returns to companiesbecause of difficulty to imitate (Porter, 1977) . A strong corporatereputation assumes goods or services of high quality (Carmeli and Tishler,2005) and good relation toward customers. Authors state that good corporatereputations create strategic value for the company (Dierickx and Cool, 1989;Roberts and Dowling, 2002; Dowling, 2004) 6. Wartick (1992) suggests that ifnegative information is already appeared, it is difficult to change theperceptions of stakeholders 11. Trust of external stakeholders helps not onlyto capture greater market share, but also to attract more investments and buildlong-term relationships with investors. Even if your make money, it will beshort-term result that will not last too long.
It the era of digital world itbecomes more important to grow the corporate brand than was ever possiblebefore social media. Without customers’ trust and loyalty, you will losecompetitive advantages at the beginning, lose potential customers and marketshare and lose your business at the end. A critical discussion of strategiesfor building, maintaining and protecting brand image and reputationSeveral experts including LesleyEverett, the author of popular marketing book “Corporate Brand Personality”, lookat brand equity and reputation from public relations perspective 12. Theybelieve that the Internet, forums, blogs and podcasts are effective ways of reachingtheir intended stakeholders and on-line and off-line communications are a meansof building, maintaining or retaining corporate reputation. Other researchersfocus on copyrights, trademarks and patents as legal protection of brandequity. There are numerous of documented ways to protect brand equity but thefocus here will be on brand extension as a way of protection corporatebranding.According to Kotler (1991), there arethree branding strategies which helps to protect brand equity 6.
One strategyinvolves family or umbrella brand names for each product. This strategy hasboth advantages and risks. When the company produce high-quality products orcompany’s brand name is about prestige, new product immediately gains positivebrand associations. For example, many auto companies are successful in theirbrand extensions: Porsche designs Kitchens, Mercedes-Benz creates Apartmentsand Volkswagen produces GTi Watch.
Moreover, most of them use the strength ofthe brand to market their own fashion lines, accessories and perfumes. Thefocus here will be on Bentley Fragrances. Bentley position itself as companyfor which care about customers are the first priority. So, they work with thebest perfumers in the world to provide luxury fragrances that would embodyvalues of excellence, craft and quality of Bentley.
Bentley’s customers appreciategood quality and so expect that in a fragrance. Bentley Fragrances ideally match theBentley Motors values: a mix of rum, musk and patchouli makes the fragrance refined and masculine inspired by the woods andleather synonymous with the handcrafted interior of a Bentley. Bentley Motors marketingspecialists did their job well: understanding the core customers helps them tocreate exclusive perfume in limited collection. Company does not need to sell hundredsof thousands of units to justify the launch.
To sum up, Brand Extensionstrategy to use family name is an excellent way of leveraging the brand’sequity in order to help keep costs low, and to improve the likelihood ofsuccess 6. However, Umbrella brandstrategy of brand extension lead to risks. It is important to consider the impact of anextension on both the parent brand and the child brand 5. In various massmedia including magazines, online newsletters and conferences, Saatchi andSaatchi’s CEO, Kevin Roberts concentrated on the ‘mythology of the brand’. Thebest example is Harley Davidson brand.
Harley Davidson owners really love thebrand. They do not care that motorcycles they ride are not the ultimate interms of technology or oil leakage can happen on the road. The most importantthing is the biker myth – the freedom of the open road and the sound – everybodyloves that rumble. Harley Davidson is a typically masculine brand and itscustomers are extremely loyal: lots of testosterone-charged Harley owners evenmake tattoo the Harley Davidson name and imagery onto different parts of theirbodies. The company tried to use the feelings towards the brand by sellingHarley Davidson cigarette lighters and T-shirts. The company was wrong inthinking that more products means more sales.
It can work, but only in theshort term. Harley Davidson extension to perfumes led to catastrophicconsequences. For bike lovers this an extension was too far. Lots of negativecomments and jokes appeared in blogs: “I want to take Harley Davidson shampoo. Itlooks and smells just like motor oil, but it makes my hair so manageable”. CEOof the Interbrand Group defined Harley Davidson values as strong, masculine andvery rugged values.
“For Harley Davidson to go into a sector that doesn’t liveup to what those values are would be disastrous”. Now company realized itsmistake and avoid producing inappropriate products such as perfumes or kids’clothes. The second strategy implies unique brandnames for different products without association with the core brand. Eachbrand has its own brand identity and develop own brand equity.
Volkswagen Group(which includes Bentley brand as part of brand portfolio) unites twelve brandswith an individual identity and a common goal: mobility. Each brand operates onthe market as independent entity. It is well-known emission scandal that hasdealt a hammer blow not just to Volkswagen’s reputation but potentially to theentire German nation brand. However, enormous scale of scandal reduced brandvalue for 1/3 (from $31 billion to $21 billion) according Brand Finance 13,other eleven brands continue to operate on the auto market with significantlyless losses than Volkswagen brand. On the one hand, this example shows howvital to build and maintain firm’s reputation that can cost millions ofdollars. On the other hand, using different brands for different productsreduces the risks and helps not to drive to the bankruptcy due to one mistake. The third strategy is called asub-brand strategy that combines the first two. It is a combination of family brandname and individual name.
The sub-brand strategy helps to diversify risks andto create specific brand beliefs. Managerial implications and recommendations 1. Reputation management is a strategic process thatdistinguishes the organization against competitors. It is vital for thecorporation to focus not only on public relations but also on alternative waysto protect reputation such as brand extension and umbrella brands.2. The primary object of reputation management is to takeinto account the expectations and needs of various stakeholders.
Researcherscan determine stakeholder preferences and loyalty to support, buy or invest incomparison to competitors.3. Reputation management should spot the company’s brandvalues, and guarantee that these values follow the firms’ behavior to itsemployees and its external stakeholders. If your values are “strong, masculineand rugged”, selling fragrance and baby clothes may be a bad solution. 4. Do not forget about your core consumers. Brandextension into other product categories can be dangerous strategy, lead tobrand dilution concept and even destroy brand.
