Since 1990, CoreBrand has studied best practices common to companies with good—or improving—corporate reputations. We look
at many factors that play a role in forming company perception, such as size, investment in public and employee relations,
and the ability of the CEO to communicate the firm's vision. But far and away, we found that corporate advertising—defined
as any advertising that carries a corporate name—was the largest driver impacting the perception behind the corporate brand.
Popularity Contest: Plotting familiarity and favorability reveals opportunities for corporate brands
Corporate advertising is also the most measurable form of communications. CoreBrand tracks media spending on corporate advertising
to further understand its effect on corporate reputations. Each year, we use quantitative metrics to survey more than 12,000
business decision makers, who are also active investors, asking them about their familiarity with and favorability toward
different companies. By combining familiarity metrics with measures of favorability, we arrive at the measure of corporations'
brand power. (For the definition of brand power and other terms used in this report, see "Learn the Lingo".)
Spending on corporate advertising can lead to strong familiarity and favorability with key audiences. Bristol-Myers Squibb,
for example, has a history of creating a strong identity through advertising, such as its Spanish-language campaign (inset)
and their latest corporate ad, called "Prevail" (above).
With the knowledge of corporate reputations, we can then study brand equity and the ways in which the corporate brand impacts
the company's financial performance. By using information such as revenue, cash flow, cash-flow growth, earnings, stock-price
momentum, and shares outstanding from Value Line in a statistical model—and taking into account outside influences like general economic conditions—we determined the percentage
of market capitalization that is directly derived from the corporate brand.
There is an established level of familiarity and favorability that is expected based on a company's size, which we determine
by their level of revenue and market capitalization. We use this information when we pour the metrics for brand power, equity,
and investment into a financial-based model to determine the difference between the expected and the actual familiarity and
favorability metrics and how that difference drives changes in stock performance.
Head to Head: Brand Equity Companies that spent $10 million or more on corporate advertising created more valuable brand names.
For the information presented here, we sought to evaluate the impact of communications spending on brand image, and in turn,
the impact of brand image on market capitalization. To do this, we used the quantitative research CoreBrand collected between
2003 and 2006 to study 46 pharmaceutical, healthcare, and diversified-consumer-products companies. Over this time period,
we tracked their corporate brand power and brand equity. Corporate brand investment was tracked using numbers from 2003 to
2005, the most recently available data at the time of the study.