The Financial Impact of a Strong Brand Reputation
According to Communications Consulting Worldwide (CCW), if Wal-Mart were to have the brand reputation of Target, then its stock price would increase 4.9% and its market capitalization would increase by $9.7 billion. CCW also estimates that if drugstore chain CVS had the reputation of its chief rival, Walgreens, then CVS’s stock would increase by 6.9% and would add $3.9 billion to its market cap.
It’s no secret that a strong brand reputation has a halo effect within the consumer marketplace and financial marketplace. What’s new is the ability to more precisely measure a brand’s reputation in order to predict how changes in brand’s reputation will impact the company’s stock price.
In this MUST-READ BusinessWeek article, we learn that CCW has constructed a model which is able to link the positive/negative attributes of a brand’s reputation to the rise/fall of its stock price.
Southwest Airlines is a client of CCW and the brand reputation of Southwest is very strong. However, CCW estimates Southwest could improve its stock price 3.5% resulting in increasing its financial market value by $300 million by tweaking its consumer messaging. To accomplish this, Southwest would need to downplay its low fares messaging and instead, highlight its far-reaching routes and frequent schedules. Southwest has followed CCW’s direction and although airline stocks have fallen 15%+ in 2007, Southwest’s stock is only down 5.0%.
Having a predictive model to determine the stock price impact of marketing messages can only help marketers at Fortune 1000 companies to better design and better sell-in their programs.
If you are interested in learning more about how brand management is reputation management, read THE 18 IMMUTABLE LAWS OF CORPORATE MANAGEMENT by Ronald Alsop. It’s a worthy read from way back. You can also read this excellent summary of Alsop’s book.
To further entice you to read the Business Week article, take a look at this graphic. It is sure to intrigue the marketer in you.