Valuing the corporate brand in a downturn

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FROM THE VANTAGE point of many chief financial officers today, hard-to-track corporate branding campaigns have become hard to justify. It’s easier to push marketing dollars from headquarters—read, corporate branding programs—to the divisions and their respective product groups—read, promotions and lead generation.

None of this is surprising. While there’s always been a tension between corporate brand and product marketing proponents, an economic downturn tends to push companies toward short-term, tactical choices that maximize revenues. Slashing research and development or business development budgets also belongs in this category. These expenses lose in an equation in which future assets such as “an innovative product” or “a familiar brand” are much more difficult to quantify than current assets like “sales in the pipeline.”

“The real issue in b-to-b is whether to try and build product brands or build more value in corporate brands,” says Don Schultz, professor of integrated marketing communications at the Medill School of Journalism, Northwestern University, and president of the consulting firm Agora Inc.

Schultz contends that many organizations fall into the trap of trying to follow the package goods model developed by Procter & Gamble, Colgate and Unilever. That is, build a lot of product brands and ignore the corporate brand.

While today’s emphasis on short-term returns has given the upper hand to the operating units, Schultz argues that globalization, interconnected markets, affiliations and associations will push the other way in the coming months.

“GE, HP, Cisco, Intel, Microsoft and others have too much equity in their brands to let the operating people run them,” he said, predicting a pendulum swing in the opposite direction “fairly soon.”

Some new research suggests companies aren’t siphoning money from corporate branding. According to a just-released survey from Interbrand Corp., “the majority of participants report that their branding/marketing budgets either have not been affected by the economic slowdown (27%) or in fact have increased (25%) ” and that the “budget allocation for activities such as corporate brand development … has remained largely stable.”

The research firm’s “Marketing State of the Union 2002” report, based on an online survey of 280 marketing managers in the U.S. and abroad, found corporate brand development accounted for 8% of marketing budgets, followed by product brand development at 7%. However, the report does find that these two functions, along with corporate image and brand portfolio structuring, represented 26% of marketing budgets in 2001, significantly down from 37% in 2000.

Al Eidson, president of Eidson & Partners, a Kansas City-based ad agency, which has clients ranging from early-stage software companies to Microsoft, sees two categories of b-to-b marketers. Companies in the first group are consciously using turbulence in the marketplace to build share, and they are doing so through “solid brand-building, investing significantly in print and online,” Eidson says. At the other end of the scale, he sees companies that are striving to “ride this out” by funding promotions and other efforts intended to drive sales.

In fact, the ugly truth is that few companies are explicitly deciding the relative value of their corporate and product branding. Funding choices are being made reactively, without an enterprise-wide game plan. Is your company discussing—right now—how to allocate marketing budgets between corporate branding and product marketing once the economy bounces back?

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