Related Terms: Brand Equity
"Corporate image" was once advertising jargon but is today a common phrase referring to a company's reputation. The "image" is what the public is supposed to see when the corporation is mentioned. The ordinary man and woman on the street usually have a wry view of public relations, advertising, hype, hoopla, and therefore also of corporate image—and this often for good reasons. But a good corporate image is a genuine asset; it translates into dollars at the counter and higher stock valuation.
The concept is usually associated with large corporations, but small businesses also have a corporate image even if neither their owners nor customers think of it that way. In the absence of active efforts, corporate image "simply happens": it is how a company is perceived. Management, however, may actively attempt to shape the image by communications, brand selection and promotion, use of symbols, and by publicizing its actions. Corporations trying to shape their image are analogous to individuals who will dress appropriately, cultivate courteous manners, and choose their words carefully in order to come across competent, likeable, and reliable. In the personal as in the corporate case, the image should match reality. When it does not, the consequence will be the opposite of the one intended.
A corporate image is, of course, the sum total of impressions left on the company's many publics. In many instances a brief, casual act by an employee can either lift or damage the corporate image in the eyes of a single customer or caller on the phone. But the overall image is a composite of many thousands of impressions and facts. The major elements are 1) the core business and financial performance of the company, 2) the reputation and performance of its brands ("brand equity"), 3) its reputation for innovation or technological prowess, usually based on concrete events, 4) its policies toward its salaried employees and workers, 5) its external relations with customers, stockholders, and the community, and 6) the perceived trends in the markets in which it operates as seen by the public. Sometimes a charismatic leader becomes so widely known that he or she adds a personal luster to the company.
Only in the best of cases does a corporation enjoy a single reputation. Different publics may have different views of the corporation depending on their different interests. A company's brand image may be very good but its reputation among suppliers poor—because it bargains very hard, pays late, and shows no loyalty to vendors. A company may be highly regarded on Wall Street but may be disliked on the Main Street of cities where it has closed plants. A company may be valued for providing very low prices yet disliked for its employment practices or indifferent environmental performance. It is much more likely that a small business will have an all-around reputation for excellence than that a very large conglomerate will merit all-around praise. Smallness has its advantages.
The single most important factor in the corporate image is a company's core business performance; performance, by definition, includes financial results. A growing, profitable corporation with a steady earnings history will, for these reasons alone, please its customers, investors, and the community in which it operates. A profitable company that, nevertheless, exhibits huge gyrations in earnings will fare worse: its earnings and dividends will be unpredictable; it will have layoffs; its stock will fluctuate; its vendors will be more uneasy; its employees nervous. When a business fails in its core function, its reputation heads straight south. Enron Corp., an energy trader, had a stellar reputation as the 7th largest corporation measured in revenues. It fell into bankruptcy almost abruptly on December 2, 2001; the Justice Department began to investigate it for fraud. Suddenly every aspect of the company that had been admired and lauded—its audacity, energy, profitability, innovativeness, entrepreneurial spirit, and so on—took on opposite and negative connotations. The core business had failed; Enron's reputation imploded. No amount of corporate image polishing could have saved Enron's reputation after that.
Corporations evaluate their image, much as politicians do, by survey. They employ the methodology of marketing surveys used both in polling and in support of advertising. The investigators select appropriate samples of the public and interview them; telephone surveys are the most common. They use statistical methods of extrapolation to project from the sample what the public as a whole (or selected publics) think. Corporations, of course, also rely on the much "harder" measures such as sales and stock performance. Surveys of the corporate image are sometimes motivated by sagging sales and a miserable press.
The theory of the corporate image holds that, all things equal, a well-informed public will help a company achieve higher sales and profits, whereas a forgetful or poorly informed public may come to hold negative impressions about the company and may ultimately shift more of its patronage toward competitors.
A recent campaign launched by Toyota Motor North America Inc. illustrates measurement and a response to it. As reported by Jamie LaReau in Automotive News, "Toyota periodically surveys U.S. consumers' perceptions of the automaker. The surveys suggested [that] Americans' awareness of Toyota's U.S. presence had declined since 2000 '¦ even as the company was building and expanding plants." The company launched a print and TV program to highlight the company's contributions to the U.S. economy.
The example of Toyota is a case in which Toyota felt the need to communicate ("words") something about its investments ("action") in the United States. Ideally words and actions are always closely linked in building or repairing the corporate image. Ideally, also, the two will correspond. To achieve a close alignment of words and deeds is often difficult in practice. Who has not observed with a knowing eye the difference between the cheerful, helpful clerks in the TV ads of a company and the surly indifference of that same company's actual clerks? Expert advisors to the corporate world, such as Roger Hayward writing in Accountancy Ageemphasize the need for consistent follow-through—so that employees become "a vast army of goodwill ambassadors."
Whether the objective is to make the most of a good thing or to turn around an adverse situation, good management practice will ensure that action is accomplished before the words are spoken. A case of that sort is presented by the Rite Aid chain store. The company went through a financial scandal in the late 1990s; its former chief executive and others were convicted and jailed. A new management team first turned the chain around before, as reported in Chain Drug Review, it launched a campaign to tell the world that "the turnaround is complete and we are a stable, healthy company focusing on growth," as Chain Drug Review quotes Karen Rugen, Rite Aid's senior vice president of communications and public affairs, a newcomer to the company.
The management of the corporate image also involves management of the more mundane side of image, the corporation's logo, its brand images, the look and feel of its retail outlets, its offices, signage, even its stationery and the look of its calling cards. Good management implies ensuring that all spokespersons for the company say the same thing in the same way for a consistent message. Furthermore, in pays attention to consistent self-presentation in the look of its facilities.
Every small business will have the equivalent of a corporate image because it will have a reputation among its employees, customers, vendors, neighbors, and the government agencies with which it deals. The first action of the owner, in choosing the name of enterprise, is an exercise in building a corporate image. The process continues in many ways: in the choice of brand names to be used, the location of leased space, office decorations and/or store equipment selected, the company's Web site design if the business has an Internet presence, its sales literature, and so on. As the business begins to operate, it will build its visibility in its market by outward symbols; the quality of its products or services; the knowledge, skill, and friendliness of its employees; its promptness in paying bills; its effectiveness in mounting promotions; and the list goes on.
By their very nature, small businesses tend to be closer to all of their constituencies. As a consequence, the business will enjoy rapid feedback from the public when it begins to make mistakes or has some bad luck. If that should happen, the small business, like the major corporation, will engage in the actions—followed by words—which will be necessary to recover losses or make the most of unusual success.
"Analysis: Corporate Case Study—Schering-Plough Looks to Remedy An Ailing Image." PR Week. 12 December 2005.
Brady, Diane, Michael Arndt and Amy Barrett. "When Your Name is Mud, Advertise; Companies in Crisis Used to Lie Low. The New Response to Bad Press is Positive Spin." Business Week. 4 July 2005.
"Explaining the Enron bankruptcy." CNN.com/U.S. Available from http://archives.cnn.com/2002/US/01/12/enron.qanda.focus/. 13 January 2002.
Hayward, Roger. "Insight: Corporate Reputation" Accountancy Age. 30 June 2005.
LaReau, Jamie. "Toyota Polishes Corporate Image in TV Campaign." Automotive News. 28 February 2005.
"Maintaining Corporate Image." Automotive Industries. May 2005.
"Retailer Burnishes Its Image as 'Stable, Healthy Company'." Chain Drug Review. 20 December 2004.
"What's in a Name?" Industry Week. September 2005.