brand versus reputation: Jeff Bezos, Richard Branson, Josef Ackermann and Pat Russo to the rescue

Do you agree with Jeff Bezos or Richard Branson? Should we care about brands, or should we focus on reputation instead?

Define or else stay confused

Before we can answer the above questions we need to define what these terms mean. First, brand and reputation are two sides of the same coin and closely related. Nevertheless, they are different concepts.

A brand, such as Nespresso, conveys expectations of what the firm will deliver in terms of this particular product. It also conveys the kind of customer experience one can expect from drinking Nespresso instead of another coffee. Simply, brand is what the corporation tells us about itself or the product and what it wants and aspires to be.

Reputation is what people feel about the company. It is the other side of the coin.

More formally, reputation is the collective representation of multiple constituencies’ perception of the corporation’s behavior. Accordingly, reputation is about how efforts regarding brand and what the company has done or delivered are being seen by its various constituencies (e.g., investors, costumers, employees and consumer advocates).

Corporate brand and reputation

Considering the above definition let us consider Jeff Bezos’ quote as mentioned above. It seems what he is talking about is the reputation Amazon has with its investors, suppliers and consumers. For starters, it remains to be seen if the Amazon brand will ever be a bonanza for investors. Let us not forget that the firm managed to spend more than 1 billion to build its brand. Most importantly, after 10 years, investors are still waiting to reap the rewards.

As far as reputation matters, a search on Google will bring up an extensive listing about customer complaints regarding services provided by Amazon. As well, the search brings up issues about the possibility that Amazon may have and continues to take unfair advantage of its market position when dealing with its suppliers.

Hence, while Amazon may be a wonderful brand, what people say about the firm and its services when Jeff Bezos is out of the room is a totally different matter. The story is a bit different with Richard Branson. He has definitely managed to build the Virgin brand around his reputation, thereby moving into different fields of business (e.g., virtual mobile phone network operator). Nevertheless, do investors reap these rewards or is it just Richard Branson laughing all the way to the bank?

How reputation management can help minimize damage to the brand

The recent financial crisis offers numerous examples for how managing one’s reputation carefully can limit the damage to the brand. To illustrate, Josef Ackermann – Deutsche Bank’s chief executive and Chairman of the Board – took up the reins in May 2002 the share price was about €73 and subsequently fell to the low 30s in March of 2003.

During 2007, the share price rose to €120. Unfortunately, it is around €60. Mr Ackermann’s compensation package is estimated to be around €13.98 mio. While this may be great for Mr Ackermann, it is dismal as far as creating shareholder value is concerned. By 2008-08-01, writedowns from Deutsche Bank had climbed to €5bn for this year alone.

The above illustrates that while the brand may have suffered from the financial crisis and mistakes made by management, the compensation package granted to its CEO may not reflect this. Neither may a CEO’s personal reputation have suffered much from such dismal performance as the case of Mr. Ackermann illustrates nicely.

In fact, he went ahead and lectured us on ‘best practices’ recently while focusing on the weaknesses in compensation policies within banks (How the banks can win back confidence’ 2008-07-31 FT). Will he adjust his compensation package accordingly? Unfortunately, customers who listened to Deutsche or UBS’ advice may now be sitting on large losses.

This case shows that either a CEO’s personal reputation may be tarnished from damage to the brand (e.g., Ospel from UBS = fired) or else she could manage to keep things moving along nicely. In turn, keeping the mud and criticism away from one’s personal reputation (e.g., Mr Josef Ackermann) while continuing as CEO. Others, like Pat Russo (Alcatel-Lucent) were fired. Nonetheless, the more than €5 mio severance package MS. Russo got will make living with a tarnished reputation a bit easier.

Bottom Line

Looking at the above examples, we can take two or three insights:

1) brand – corporate brand – reflects what the corporation aspires to be while the me brand reflects what I as an individual aspire to, in turn,

2) reputation – the other side of the coin – is how people feel about the company or the person.

Unfortunately, in practice brand and reputation are rarely if ever treated as separate constructs. This is a dangerous mistake to make.

As well, in the social media space such as social networks (e.g., MySpace) or blogs, how you behave online can affect how others perceive you or your employer. Your reputation may tarnish or enhance your company’s brand.

Yes, a strong brand helps to communicate that a company and its offerings are relevant and uniquely able to meet customer needs. Unfortunately, pouring money into a campaign may not result in a better reputation for your corporation. Social media enables various constituencies to share their opinions about your brand – Co2 footprint, customer service, investor relations. Social media offer consumers and others an easy to use way to share such opinions with thousands of others. This can put your brand in constant peril and makes your firm’s reputation vulnerable to rumours, misinformation and so on.

It is necessary for brands and their owners to monitor social media as well as measure blogs and communities. Hence, may the content be positive, negative or just sarcastic; you better track the sources of such content and gauge the emotion of it to protect your reputation. Accordingly:

3) monitor social media to enhance and protect your reputation

All the executives mentioned above have done whatever they felt was necessary to protect their pesonal reputation as well as the firm’s. Unfortunately, CEOs or entrepreneurs may not have the best interest of investors or customers in mind … c’est la vie.

Whatever you decide to do, make sure you know where you are heading and why this is the right destination. As a strong performer, you need a strong brand and an even better reputation to make the grade.

Afterthought

As far as C-suite compensation packages are concerned, there is no such thing as a free lunch – the credit crisis is as much a crisis of values and ethics as of economics – and no, managing one’s reputation at all costs may not justify the means…

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Tagged as: define brand, define reputation, Jeff Bezos, Josef Ackermann, reputation vs. brand, Richard Branson, social media