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Rolling on the rails of branding

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Union Pacific Corp.’s ongoing "Building America" campaign, with its striking images of locomotives and railcars rolling through uniquely American landscapes, is a standout in the eyes of many. The TV spots are memorable for the folksy voiceovers by actor Sam Elliott, and the print ads have garnered numerous awards, including four national Addys from the American Advertising Federation.

But the campaign, which debuted in April 2002, also stands out in the current b-to-b marketing environment for another reason: In this era obsessed with marketing return on investment, Union Pacific is running a campaign unabashedly focused on branding.

Why? The answer is complex. It involves several factors—the company’s difficult merger with Southern Pacific and other railroads in the 1990s, a supportive board of directors, a desire to unite the company’s employees and, perhaps most important, an imperative to impress Wall Street.

Oddly, the campaign doesn’t aim at the most obvious target. As Kathryn Blackwell, Union Pacific’s general director-corporate communications, explained: "We are not targeting customers directly with any part of this ad campaign."

Rich heritage

Union Pacific was founded when President Abraham Lincoln signed the 1862 Pacific Railroad Act. Meeting the Central Pacific Railroad at Promontory Point, Utah, in 1869, the Union Pacific helped created the first transcontinental railroad.

In the mid-1990s, however, Union Pacific nearly squandered its legacy after a series of acquisitions, including purchases of Southern Pacific and the Chicago and North Western Railway. "We doubled the size of our company in roughly a 12-month period," said Dick Davidson, chairman-president-CEO of Omaha, Neb.-based Union Pacific.

Integrating the acquired companies proved difficult, and Union Pacific suffered a damaging collapse in service quality, including delays, lost cars and accidents. "We came very close to shutting down commercially the western half of the United States, because the system was so backlogged," Blackwell said. "It was like trying to untangle a bowl of spaghetti."

A transportation broker, who spoke on condition of anonymity, said, "No one knew what was going on, not a soul." After relying primarily on trucking for his business during that period, this broker is only now considering using rail again.

Union Pacific overcame its integration problems by 1999, Davidson said, but "we didn’t seem to be getting any recognition for it."

Studies by CoreBrand L.L.C., a branding consultancy used by Union Pacific, showed the railroad’s "brand power"—a propriety rating based on a company’s familiarity and favorability among top executives—had declined 25% between 1996 and 2000.

Union Pacific’s board of directors wanted the company to get credit for the improvements in service, and Davidson hired Bob Turner as senior VP-corporate relations to explore marketing possibilities.

Turner had advertising agency Bailey Lauerman, with offices in Lincoln and Omaha, survey various Union Pacific constituencies, including customers, employees and investors. Using input from the survey, the agency prepared a positioning statement for Union Pacific. "Without articulating it in this manner, they expressed [the beliefs] that Union Pacific was very vital to the country’s financial success and the continuing success of the United States," said Jim Lauerman, president of the agency.

Turner contemplated searching for a Madison Avenue firm to create advertising based on this positioning, but Lauerman convinced him to give his agency a shot. Bailey Lauerman created the "Building America" campaign that depended on breathtaking photography and cinematography of trains traveling through singular American landscapes such as those near Moab, Utah, and Mt. Shasta, Calif.

Target audiences

Union Pacific said its "Building America" campaign is aimed first at employees. In the wake of its mergers, Union Pacific has had several rounds of job cuts totaling more than 5,000 positions. Despite the cuts, Union Pacific has reasonably good relations with its employees, according to Jim Corridore, transportation analyst at Standard & Poor’s, who said, "No company with a large union has amazing employee relations, but they do a decent job."

The campaign is designed less to mollify employees than to bring them together, the company said. The railroad currently has about 47,000 employees (not including about 14,000 employees of its Overnite Trucking unit, which the railroad plans to spin off later this year).

Prior to the ad campaign, Union Pacific’s employees did not seem to be fully in sync with the company’s history and core message. "We were one company but not necessarily one culture," Blackwell said.

The ads are part of an effort to create a single culture. Union Pacific runs the TV spots on broadcast channels in key local markets and on cable networks such as ESPN. In the fall, the company will conduct comprehensive research on employee response to the campaign. The anecdotal response has been almost uniformly positive, Blackwell said. In response to employee requests, the company lists the air times of commercials in local markets on its Web site.

Another critical audience is Wall Street. To reach this target, Union Pacific aired spots on cable outlets such as CNBC. Print ads have appeared in The Wall Street Journal, BusinessWeek and Fortune.

Analyst Corridore said the investment community is essentially the only audience for a campaign of this kind. "It’s my assessment that the entire brand campaign was designed to raise the stock price," he said. "That’s the be-all and end-all."

Union Pacific did believe its brand campaign could boost its stock price. And the company wanted to build its brand in comparison to other railroads and sought to match the branding might wielded by the likes of Microsoft Corp., Intel Corp. and General Electric Co.

Corridore said that, so far, Union Pacific is falling short of its aspirations. "Since the beginning of the year, the stock is up only 2%, significantly less than [gains by] the Standard & Poor’s 500," he said. The railroad’s stock was trading at around $60 a share last week.

But figures compiled by CoreBrand tell a brighter story. CoreBrand’s data show that Union Pacific improved its brand power by 10% between 2000 and the second quarter of this year. Also, CoreBrand conducted an analysis of Union Pacific’s stock price to determine how much of the company’s market capitalization is due to its brand equity. Between 2000 and the first quarter of this year, the company’s brand equity jumped from 8.1% of its market capitalization to 8.9%, according to CoreBrand.

While Union Pacific’s campaign focuses on employees and investors, the railroad is still communicating with the backbone of its business: customers. "We do have a very large sales network," Davidson said. "Are our customers seeing these ads? No doubt about it. But sales is how we’re reaching out to customers."

Advertising, he said, will never be a central component in Union Pacific’s efforts to reach customers. "We’re a heavy industrial company," Davidson said. "We are not a P&G or a Colgate-Palmolive or an Anheuser-Busch, [companies] that spend 30% of their revenue on advertising."

But that doesn’t mean that a smokestack marketer such as Union Pacific can’t use branding to reach its business goals. "This is to restore our image as a marquee company in the United States," Davidson said.

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