Paul Simons: are top managers and the City finally waking up to the reality of ‘brand damage?’

Is ‘Brand Damage’ a consideration for the City?

A financial journalist in the business press last weekend referred to ‘brand damage’ in a piece about M&S (which reported its annual profits today). It is the first time I’ve read this phrase, in particular from someone commenting on business performance.

In the seminal book Positioning: The Battle for Your Mind, the authors Ries and Trout eloquently and persuasively make the case for the financial impact of a brand’s ‘positioning’ in the minds of the public. Their argument is based on a truth stating that none of us are capable of storing all of the information around us so our brains summarise, edit, condense, compartmentalise what we can manage. In tech terms our mental bandwidth and storage are both limited.

m&sDespite the herculean efforts of M&S in recent times the news remains downbeat with their clothing business declining. Our journalist expressed the view that a recovery is challenging and will take time because the word on the street is negative. M&S are losing customers to competitors such as Next and Primark, both posting good to excellent numbers. These two rivals are ‘re-positioning’ M&S, it is less about what M&S are doing wrong but more about what others are doing better.

Also there was more news today about our favourite airline – Ryanair. Annual profits down for the first time since 2009 with, in consequence, big increases in marketing spend and widespread improvements to customer service. Ryanair is the victim of ‘repositioning’ by easyJet under Caroline McCall’s leadership following progressive and intelligent product improvements.

Ryanair has the same issue of ‘brand damage’ as M&S, for different reasons, following Michael O’Leary’s years of arrogance towards his paying customers. The question is how long will it take to repair this damage?

Another big brand leading with the chin is Morrison’s who have posters all over the UK saying ‘welcome to the new cheaper Morrison’s’. I felt ‘be careful what you wish for’ because this propaganda will stick; back to my bandwidth point. My reaction was not what they intended. I realise they are trying to say they sell goods at lower prices but to me it screams cheap.

Aldi and Lidl own the value end of the grocery market, Waitrose at the top end, with Tesco, Asda and Sainsbury in the middle ground. At a single stroke Morrison’s have positioned their brand in a different place, one that is based on a different business model.
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I found the comment on brand damage a fresh observation because all of us working in the wider marketing and advertising worlds fully get the impact of brand’s reputation on financial return. However this experience and knowledge is rarely invited to the top table of large organisations.

My working life is effectively that of a ghost writer for senior management who don’t have the time or space to dig deep on brand reputation issues. None of the clients I have worked with over several years has a robust understanding of how their business is positioned by the wider public. They tend to be surrounded by middle management, terrified about losing their jobs, who are, therefore, very compliant and also 100 per cent focused on their world.

I often do basic surveys to assess the general, top line perceptions of the market and often the results range from surprising to shocking for top management.

If the City does begin to factor in ‘brand damage’ to their assessments of companies we might just see the ‘sell’ and ‘buy’ advice about their shares alter significantly.

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About Paul Simons

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Paul joined Cadbury-Schweppes in brand management and then moved to United Biscuits. He switched to advertising in his late 20s, at Cogent Elliott and then Gold Greenlees Trott. He founded Simons Palmer Denton Clemmow & Johnson in the late 80s, one of the leading creative agencies of the 90s. Simons Palmer then merged with TBWA to create a top ten agency. Paul then joined O&M as chairman & CEO of the UK group. After three years he left to create a new AIM-quoted advertising group Cagney Plc. He is now a consultant to a number of client companies. Paul also shares his thoughts on his blog. Visit Paul Simons Blog.