When Fortune Brands launched an advertising blitz announcing its name change from American Brands in June 1997, the company eschewed focus groups, audience surveys and other traditional gauges. Instead, James Gregory at Corporate Branding Partnership, which acted as Fortune Brands’ agency, simply kept his eye on the stock ticker. And over the next several weeks, much of it spent in a quiet period before earnings results, the stock rose 26 percent compared to 6 percent for the company’s peer group. ‘That’s not all from the ad campaign,’ Gregory admits, ‘but you can bet that some of it is.’
The impact of advertising, even product advertising, has always been slippery to grasp. When it comes to corporate advertising – promoting a brand, not a product – and especially corporate advertising to the financial community, making the connection between spending and results is even tougher. There is supporting evidence out there, however. In this magazine’s 1998 US Investor Relations Survey, more than one out of four investment professionals report that corporate advertising in financial publications has led them to further investigate an investment prospect. And the impact is more marked among portfolio managers than analysts, with 40 percent following up compared to 24 percent for sell-side analysts. All in all, some 31 percent of portfolio managers indicate they bought stock after their interest was piqued by an ad.
At the world nexus of financial advertising, Dow Jones & Co, ‘Gregory’ is beginning to be uttered with the same hushed tones of respect as English departments offer to Shakespeare, for few others have ventured to connect ads to stock price. Indeed, Gregory is on a crusade. ‘Quantifying the effect of advertising is the search for the holy grail,’ he remarks.
While Gregory’s roots are in advertising, he has since moved on to consulting for other ad agencies. In research for the Association of National Advertisers and the AAAA (American Association of Advertising Agencies), and in his 1997 book Leveraging the Corporate Brand, Gregory sifts through data on some 760 companies to reach this conclusion: in the matrix of factors that influence stock price, corporate brand image accounts for 5 percent. ‘That’s a small slice of the pie, but it’s hugely impactful. The interesting thing is that this is growing – every year we see it go up.’ The impact also varies according to sector. Among high-tech companies, brand image has a 10 percent impact on stock price, while for utilities it’s just four percent.
In his latest ANA study, Gregory found corporate advertising budgets were up 18 percent in 1997 over 1996, with some 67 percent of all companies using corporate advertising. And last fall he unveiled data which suggest that all the spending paid off. During the October 1997 market turmoil, the stocks of the 20 US companies with the strongest brand power actually gained – losing $94.1 bn in market cap but regaining $101.2 bn – while the 20 weakest lost a combined $19.8 bn in market value. ‘A powerful corporate brand can translate into better stock performance,’ he pronounces.
Moving the needle
Of course even the faithful are obliged to offer up a word of caution. ‘There are just so many variables,’ says Robert Paradise, publisher of Barron’s. ‘It’s easier to move the needle on a smaller, less known company than it is for a company like IBM. A major corporation can’t expect to spend a small amount on advertising and raise stock price 10 percent. You can get results. Are they always measurable? Only if the objectives are very measurable. Still, it’s a little ludicrous to always challenge corporate advertising when advertising itself has proved its capability.’
No intestinal fortitude
Paradise says that trying to measure results is actually the most common mistake at companies initiating a corporate ad campaign, and he discourages them from undertaking before-and-after studies. The results, he says, are ‘too happenstance’. And trying to get a wary chief executive officer to return to the advertising arena after a disheartening benchmarking study is next to impossible. ‘Sometimes a company runs one ad, doesn’t get results, and gives up. That company doesn’t have enough intestinal fortitude. Continuity is very important, and corporate advertising is a long-term commitment.’
‘It’s very difficult to measure results, and very expensive to get legitimate, accurate reads,’ agrees Katherine Kissam, executive assistant to the CEO and leader of the advertising effort at Monsanto. Still, before advertising to establish a new identity for itself and spin-off Solutia, Monsanto did formal testing to understand awareness of the company. It also pre-tested its campaign in focus groups and one-on-one testing. It used quantitative data to select different newspapers and markets (New York’s Erdos and Morgan produces the bible of readership surveys), then used word-of-mouth feedback to determine effectiveness. ‘But we didn’t go out and formally measure whether or not the campaign worked because, frankly, the cost didn’t justify it.’
As for Fortune Brands, an Old Greenwich, Connecticut company whose brands include Master locks, Titleist, FootJoy, Jim Beam and Knob Creek Bourbon, management considered setting up a formal process to measure the effectiveness of its advertising campaign. ‘But we felt the money would be better spent extending the breadth of the campaign,’ says Robert Rukeyser, senior vice president of corporate affairs (brother of Wall Street Week’s Louis Rukeyser).
Over at Institutional Investor, companies get the magazine’s help in measuring the effectiveness of their advertising campaigns. Twice a year Institutional Investor goes to its audience of buy-side and sell-side readers and quizzes them on how they view advertisers, with 20-70 percent of those surveyed turning out to be shareholders in those companies. ‘Successful companies use this over the years as a benchmark to track how perception is changing,’ says Lisa Helme O’Farrell, industry director, corporate advertising.
But the simple question has to be put: why should a company do corporate advertising? ‘It’s extraordinary how much non-industry experts don’t know about your company,’ O’Farrell answers. ‘The first time they see these surveys, companies usually find their worst fears confirmed: the financial community is not familiar with products or management strategy, and it’s vague about market position and leadership. After four years they start to see the perception changing.’
Management structure
The right management structure can certainly do wonders in getting an advertising campaign off the ground. It worked for Lucent Technologies, which figures in the annals of corporate advertising as one of the all-time blockbusters. Upon spinning off from AT&T in 1996, Lucent spent a reported $62 mn establishing itself as a new brand, with external communications – public relations, investor relations and advertising – all reporting to a senior VP of public relations and investor relations, Kathy Fitzgerald. ‘We’re very much linked together,’ says Mary Ann Niebojeski, VP of investor relations. ‘That really helps a lot in making sure we’re all connected and pushing on one set of messages.’
‘How you align it internally is very important,’ concurs Monsanto’s Kissam. ‘You can’t just speak in terms of aspirations, saying what you want to be when you grow up. It’s very important to have people from all across the organization – financial relations, all the different businesses, public affairs, government affairs, and the chief executive officer – so that when launching a campaign you’re being congruent with who you really are.’
According to Fortune Brands’ Rukeyser, ‘Most important was that we had a chairman, Tom Hays, who understood the value of this kind of advertising and was very committed to it.’ The company’s management structure was also integral, with IR chief Anthony Diaz actually running the campaign. ‘We definitely had the view of IR incorporating the ads,’ says Diaz.
This year Rukeyser et al are focusing more on promoting the company’s various individual brands than its new stock symbol. Around 80 percent of the 1998 budget is devoted to co-branded ads, helping drive up EPS in the first half by 14 percent. ‘Certainly the advertising has been very constructive,’ notes Rukeyser. ‘But at the end of the day our investors are most interested in how the company is doing.’
Snappy & catchy
The scope of investor relations and advertising stretches further than high profile corporate image ads. For Lucent’s IPO launched to some 3 mn AT&T shareholders, the campaign went beyond splashy Wall Street Journal ads to television, periodicals and three direct mailings to shareholders. ‘We wanted to make sure they knew what they were getting,’ Niebojeski says, adding that these days Lucent would rather be written about in the Wall Street Journal than advertise in it. ‘To me that’s another form of advertising, and something I’m always looking for from an investor relations perspective.’ Lucent also does sponsored articles in magazines aimed at the individual investors, such as Better Investing, then distributes reprints.
For veteran investor relations officers, the ads that sometimes provide the best war stories are proxy fight ads. Who can forget RJR Nabisco’s battle with Bennett LeBow – LeBow… LeBogus, LeBankrupt? ‘Fight ads are becoming better graphically, and they’re becoming better written,’ says Stan Kay of MacKenzie Partners, who was RJR Nabisco’s proxy solicitor during the 1996 fight. ‘Some ads are still just 82 point type screaming their message, but they’re getting more sophisticated and advertising-oriented rather than just pounding the message out. Like what we did with LeBow, it should be snappy and catchy to draw you in.’
‘We have tried to pioneer a fight ad aesthetic – something with a little bit of style,’ says Michael Claes of Burson-Marsteller. ‘It doesn’t take any more time, but it takes more effort.’ His fight ad campaigns for Norfolk Southern against CSX and for Starwood against Hilton, for example, were each coherent and identifiable in terms of style. The latter battle ended up as perhaps the largest fight ad brouhaha of all time, with Starwood, Hilton and ITT all peppering the Wall Street Journal and the New York Times with full-page ads and even double page spreads. (The Times has lately been pushing hard to score more corporate ads and especially deal-oriented tombstone ads, drastically undercutting the Journal – $20,000 for a half-page tender offer ad compared to around $71,000 – while noting that 85 percent of Journal readers do not read the Times).
Because the Starwood fight involved a large proportion of arbitrageurs, who were concerned with hour-to-hour changes in the stock price, Claes says there was a rationale for using CNBC and CNNfn to supplement the print advertising on the trading floor. Aside from fight ads, he is surprised at how few companies go to the likes of CNN or the broadcast networks as part of their corporate advertising campaigns, with a few stand-outs like Norfolk Southern or the Southern Company. ‘There is still a bias against them. You can look at a print ad, hold it up, and put it on your wall. With a TV ad, once it’s gone, you’ve forgotten about it.’
Perhaps the next frontier in corporate advertising, then, is the tube: and camera-shy investor relation officers should be brushing up their on-camera presence to become talking heads of the future.
