Capricious brands
By Pete Pokkinen
It is raining on the station platform. In the autumn weather it is nice to be waiting for a train until the announcement comes.
“Attention passengers. The Pendolino train will leave half an hour late.”
And once again people at the station and in their offices grumble about how trains of the Finnish railway company VR are late, rain or shine.
VR trains also run on time - fairly often in fact. Of the company’s long-distance trains, 89.4 per cent ran on schedule last year.
However, facts do not weigh much when a company’s brand has suffered dents. Not even the stone statues in front of Helsinki’s Central Railway Station can protect it.
It can be very costly for a company if its brand suffers. For instance, VR passengers might switch to driving, where it is easier to set schedules.
The monetary value of a brand is rarely considered. Does a brand and reputation have an economic significance?
Lisa Sounio, an expert in branding, thinks that they do. She gives one example.
“Let’s consider two brands of vodka, Finlandia and Absolut. Both brands have been sold. Absolut Vodka was sold for six billion euros, while Finlandia was sold for a few hundred million. Nevertheless, the bottles still have more or less the same stuff in them, so brands do sell”, Sounio explains.
Finland’s economic engine, the mobile phone manufacturer Nokia, is valued at about 15 billion US dollars, according to research company Millward Brown.
In a single year, 58 per cent of the value of the brand, or about 20 billion dollars, has disappeared.
A major reason for this is that Nokia has been placed at a disadvantage in the competition for attractive smartphones. During the spring, the company has twice reduced its estimate for profitability, and its share price has plummeted by 25 per cent in a year.
Therefore, the brand and economic success go hand in hand.
“A brand helps a company produce a good result constantly. It therefore increases sales. For that reason, a brand needs to be managed in a systematic manner”, notes brand researcher Kirsti Lindberg-Repo of the Hanken School of Economics
A brand is interesting in that it can be broken in many different ways.
Jaakko Aspara, Professor of Marketing at the Aalto Univeristy, describes two ways: either through erosion over time, or through being damaged in a crisis.
“Brands that deteriorate over time are extremely problematic, because then the problems are usually in the products represented by the brand, or in the style down the line. It could be difficult to change directions”, Aspara says.
Lindberg-Repo notes that it is sometimes hard to turn a large ship around.
“Finns have been in the habit of pushing a brand through to a consumer as if it were an icebreaker. Nokia will certainly come forward powerfully with new products”, she says.
How can a brand be fixed?
It is easier to repair individual dents, even though it often costs vast amounts of money. For instance, the car manufacturer Toyota has had to recall millions of cars for repairs for technical defects. It will cost billions.
However, a brand can also make it through problems.
“Damage to an image can certainly be great, but it is best to speak honestly about the problems. It is easier to get through a negative situation if the problem, and the ways to deal with it, are pointed out”, Professor Aspara observes.
In a problem situation corporate leaders need to come forward briskly and clearly.
“It is important to communicate with the customer. One cannot simply send out news releases from an ivory tower. The brand needs to be brought out in a positive light.”
“For instance, in the BP oil disaster in the Gulf of Mexico, the company’s Chairman of the Board [Carl-Henric] Svanberg did not immediately come out in public, and negative news reporting increased constantly”, Lisa Sounio says.
Although brand deterioration can be costly for a company, fixing it can be even more expensive.
“The crumbling of a brand does not necessarily take money out of a company’s cash box, but the losses are mainly reflected in lost sales, and in any case, fixing a brand costs vast amounts of money, in order to turn the situation around”, Aspara notes.
However, the professor points out that simply doubling the marketing budget is not enough.
“Millions or billions can be lost by a large company as if the money went into a black hole if the activities are not planned properly. For instance, product improvement and advertising campaigns have to be targeted and timed correctly.”
So what should a company do in a difficult situation?
WSOY Publishers raised a stir when the company sacked its best-selling author Sofi Oksanen and later, after co-determination talks, terminated 29 other employees.
Lisa Sounio feels that controversy only boosts the book business.
“The media and the public love controversy, so book sales will probably just grow. Brands are no longer a one-off matter anyway. Damage spreads fast, but on the other hand, the se things are forgotten more quickly.”
Lindberg-Repo compares a broken brand with a cracked egg.
“If the shell of an egg breaks, it can be patched, but if you wait too long, the egg starts to rot.”
For instance, the defence concern Patria suffered damage when the company was accused of paying bribes in connection with weapons sales.
The legal process has dragged on, which means that the egg is in danger of going bad. The damage can be reflected in the loss of orders worth hundreds of millions of euros.
A brand spurs sales but mental images cannot save everything. A brand only works if it is in line with what the company does.
“A broken eggshell can be patched, but an egg that rots from the inside cannot be saved”, Lindberg-Repo ponders.
In fixing a brand, speed and response are the best ways forward.
Sounio says that customers do not wait for companies to give answers. Instead, they ponder train delays among themselves.
“A company needs to be able to participate in this discussion and to respond to a customer’s point of view.”
She feels that VR reacted far too late to the situation in the winter. “The snow had taken passengers by surprise many times”, she says.
VR’s advertising slogan Yhteisellä matkalla translates as “Travelling together”. However, the real brand is formed in the minds of the customers.
Last winter VR got a new slogan from its passengers:
VR - if you walked you would be there already*.
Helsingin Sanomat / First published in print 29.8.2010
*Translator’s Note: the “slogan” alludes to a slogan promoted by the airline Finnair, which translates as “If you flew, you would be there already”.
PETE POKKINEN / Helsingin Sanomat
pete.pokkinen@hs.fi
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| 31.8.2010 - THIS WEEK |
 Capricious brands |
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