Like brand equity, corporate reputation is an intangible asset that has some very tangible ramifications. It has the power to affect every aspect of the business, including enhancing or destroying shareholder value. But when it comes to tracking and measuring the value of investments we make in enhancing reputation, it seems surveys of investor and analyst attitudes are all that makes it onto our marketing dashboard (since many have found that promising their CEO that stock prices will rise in response to a proposed investment in corporate reputation to be a career-limiting move).
So how do you measure the payback on the next investment you might make in seeking to enhance that reputation? Start by developing clear ideas of who you’re trying to influence and what you’re specifically trying to accomplish before you begin.
Here’s an example…
Retail investments giant Company A invests $2 million in a public relations campaign in a mid-sized market centered around a donation to revitalize youth sports facilities, receiving in return naming rights on a prominent Little League complex. Its rationale for making this gesture is to enhance the image of the company as a community minded, local organization, and to associate its brand with the youth and vitality of sports.
Company A measures the effectiveness of its investment in terms of the change in attitudes among local customer, prospect, employee, agent, legislator, and vendor constituent groups. It develops elaborate surveys and measures the pre-post differential in the affected market versus nearby control markets where there are no such sponsorships. It also measures the number and nature of media “hits” received in the local press and calculates the value of that exposure if it were paid at rate card for each media.
So when all these indicators respond positively, Company A tells the CEO that “The campaign was a huge success! The attitudinal shifts are through the roof. And we generated over $2.5 million in free media exposure, giving us an ROI of 25% on the media value alone!”
Competitor Company B makes a similar investment in a different market, but does so against the stated goals of
1. The firm increased the number of Power Agents to 57, which has a forecasted net present value of $1.4 million;
2. Employee retention fell slightly short of the 85% goal at 82%, but the expected savings in recruiting and re-training are still worth $1.8 million NPV based on employee tenure and productivity; and
3. The ballot initiative is in the right committee of the state assembly and a straw poll of legislators suggests a 65% likelihood of passage within the next six months, which would translate into a probability adjusted $4.2 million in incremental net profits from new-product sales.
Bottom line: the managers in Company B can report to shareholders that not only have they improved the attitudes among key audiences, but the investment they made in enhancing the company’s reputation has achieved short-term payback of $3.2 million, for an ROI of 60%, plus the prospect of a longer-term payback of an additional $4.2 million. And that’s before the value of any incremental media exposure is taken into account – which the sophisticated investors know is not really worth the rate-card value of the exposure, unless the company had intentionally planned to forego other advertising or communications expenses in achieving it.
So what did Company B do differently than Company A? It set expectations for the investment it was making in more financial, tangible terms, and then developed the framework for measurement in terms of the expected economic behaviors it intended to create. Sure, it included the attitudinal shift surveys to diagnose the effectiveness and consistency of its message. It just didn’t stop there.
The lessons: push past attitudes to measure the real value of corporate reputation in terms that CEOs can understand.
SOURCE MediaPost/Pat LaPointe