Regular readers of PRWeek's Reputation Monitor may be less than surprised to find – in our round up of the year's best and worst performers – Tesco and Asda as the kings of media image. Indeed, the seemingly invincible supermarkets' respective first and second positions are a mirror of 2004's standings.
But while the song remains the same for these high-street favourites, others have had a much more tumultuous 2005 (see tables). While Sainsbury's rocketed up the table – eighth from bottom last year, sixth from top in 2005 – Morrisons fell spectacularly, dogged by its ill-starred acquisition of Safeway.
Meanwhile, our reputation rundown is given
extra zest this year by added research from Factiva, the Dow Jones and Reuters-owned business news resource. The research equates good reputation with stock market performance and measures the media visibility of CEOs by volume of coverage – or 'share of voice' – and the tone of that coverage.
Manage the good and the bad
'Firms spend a lot of money on "the brand",' says Factiva chief marketing officer Alan Scott. 'But the rules are changing, largely due to the speed of reaction of NGOs and blogs. Research shows there's a performance gain for people who manage reputation well, facing up to issues in the company, good or bad.'
The companies at the top of the Reputation Monitor table appear to understand this. It
is compiled over the year from Thomson Intermedia's National News Index (NNI), which measures media sentiment, excluding stock market reports and passing mentions.
For example, Asda achieved an NNI score of 5,769 – more than twice that of nearest
rival EasyJet, which lies in third. Typical of
its proactive approach to good PR was a pledge in September of £130m of price cuts in the ongoing high-street retail war (its cheapest DVD player was dropped to £19.74).
Asda's initiative to slash the price of petrol was swiftly followed by other supermarkets and put the onus on BP, Shell and Esso to do the same.
Yet 2005 was not plain sailing for the
retailer. Asda's UK PR team also handles comms for owner Wal-Mart, which fell from sixth place to 30th. 'Business performance has fallen short of our standards,' admits Nick Agawal, Asda general manager of
corporate comms. 'But we've invested a lot of time in one-to-one relationships with journalists and pride ourselves on open, honest communications.'
Meanwhile, top dog Tesco has a score
almost a third higher than that even of
Asda. Tesco external comms manager Jonathan Church says: 'We are working hard to tell stakeholders about the benefits that Tesco brings – from jobs and investment in local communities
to healthy living and the latest
Of course, reputation management is easier when business is booming. Tesco's year was characterised by autumn's announcement that its acquisition of 185 development plots gave it control of more than half of the supermarket sites available in the UK, putting it on course to take market share to 45 per cent. At the same time CEO Sir Terry Leahy revealed Tesco was barely a fifth of the way into an aggressive international expansion plan.
Leahy's high profile in the media is important. In Blue Rubicon's recent 'Trust In The City 2004' report, two thirds of institutional investors and fund managers said communication skills were the single highest attribute that CEOs can possess, ahead of even their record and financial awareness.
It is no coincidence Leahy was the second most mentioned CEO in the UK this year, according to Factiva's research (see overleaf). His 750 press mentions between January and
October fell just behind the 803 of BP CEO John Browne, but gave Leahy a 15 per cent 'share of voice' score in the UK media.
Interestingly though, CEO exposure does not guarantee good reputation. Sainsbury's, for example, is sixth in the reputation ranking, but its CEO does not make the Factiva top 20 by share of voice. Nonetheless, the supermarket's spectacular leap up the charts is the reputation fightback of 2005.
Just six months into a three-year recovery plan, this is largely due to staunching the blood which had flowed in the boardroom. One of several media low points in 2004 came after the proposal to offer ousted chairman Sir Peter Davis a £2.4m bonus, in a year that
culminated in a profits warning.
Trading has also been brisk this year. Customer transactions are up and in April
Sainbury's overtook Asda in terms of market share gain for the first time in a decade. By July, quarterly sales were up five per cent, while a report even suggested it could overtake Asda by the end of the year.
Director of comms Pip Wood says: 'Communications has to have some basis in reality. We are a mass-market brand and can't say something to a City audience and expect it not to have an effect on consumers. In October last year we admitted we hadn't given our customers as good a service as we should. Journalists will always make it personal when they can – as with Peter Davis last year. But the brand has got a lot of equity in it.'
Vodafone's PR team is unwilling to comment on the company's drop from third place last year to tenth in 2005. While a top-ten finish is not to be sniffed at, it is a reflection of difficult times for the mobile phone firm. In May it was the UK's biggest reputation climber, rising to fourth position after doubling its full-year dividend and launching a £4bn share buy-back programme. But the warm glow was not to last, and it is just as well for Vodafone that last month's announcement – that increased regulation in core European markets and extra investment in its ailing Japanese division might mean slower sales in 2006 – came too late for inclusion in this year's NNI index. Shares in Vodafone fell ten per cent, shearing almost £10bn off the firm's value.
Trust the banks?
While only one finance company, Nationwide, made the top ten of the NNI table, there are six in the top 20 overall, including Halifax (11th), Prudential (14th) and HSBC (15th). This suggests the financial services
sector has not suffered any great lack of trust from the media.
We will know more later this month when the Financial Services Research Forum (FSRF) pilots its Trust Index, which ranks consumer trust in banks, building societies and so on. It is an independent body that aims to represent stakeholders – including customers – in the sector, but FSRF director Nigel Waite says: 'Reputation is a generalisation I am loath to use. But if you have a reputation, say, for treating customers badly, you won't be trusted.'
At the bottom of the table, meanwhile, the names of Morrisons, MG Rover and Gate Gourmet stand testament to the battering they suffered in the press over the course of 2005 (see Worst Performers chart, p23).
On 8 April, MG Rover collapsed into administration with the loss of 6,000 jobs at its Longbridge plant in the West Midlands and up to 30,000 jobs at its supplier base. MG Rover no longer exists as a corporate entity following the Nanjing Automobile Corporation's purchase of its assets from administrator PricewaterhouseCoopers. The new owner has since shown little interest in proactive
media relations for the brand, and it shows.
Yet even MG Rover was outdone by bottom-ranked Morrisons. In May it dropped to the bottom of our Reputation Monitor after its fourth profit warning since acquiring Safeway in 2004 (Safeway is fourth from bottom overall). The call by Pensions Investment Research Consultants for investors to demand Sir Ken Morrison's resignation did not help. And neither did operational problems, such as September's news of a three-day strike by distribution workers. The company's PR team decline to comment.
British Airways languished at the foot of the NNI table for much of August and September, yet has made it to respectable obscurity overall (78th, up from 258th in 2004). Not so its caterer, Gate Gourmet. A company unlikely to have been on many people's lists of newsmakers at the start of 2005, it sprang from nowhere to take the wholly uncoveted third from bottom slot overall (see above).
Gate Gourmet will know only too well that a bad name can be hard to shift. Enron, which filed for bankruptcy four years ago, continues to be used in the media as shorthand for corporate sharp practice, and remains fifth from bottom in 2005's table. Yet the rewards are there for PROs. If Factiva's one per cent per month figure is correct, there is a large cash incentive – rather than just a warm, fuzzy feeling – for companies that take charge of their reputation. L
CEO's share of voice: It's not how much you say, it's how you say it
BP CEO John Browne may have the most press mentions, but it has not been good enough to propel the company into PRWeek/Thomson Intermedia's top 20 table – it sits at 24th. However, Browne's dominance this year is arguably responsible for an improvement in BP's reputation – in 2004 the oil firm was ranked 41st.
A far more potent indication of how well a CEO affects a company's reputation could come from further analysis which breaks press coverage down in terms of tone, under headings such as 'trust', 'leadership' and 'visionary' (see above right). If the CEO's name and company appeared within 60 words of one of these headings, one count was made. As the pie charts show, Tesco CEO Terry Leahy, compared with Browne, has a much higher number of mentions around the issue of 'turnaround' and a far lower number of 'bullish' mentions. These charts are in line with the popular view that Leahy is known for his frankness and respect.
Share Price Case study: Sainsbury's
Is the effect of press coverage on share price measureable ? Academics have been grappling with this for years. However, research by MBA graduate students at the London Business School, Investor Dynamics and Factiva does seem to demonstrate that companies that sustain a good corporate reputation can a substantive effect on stock price.
This year's reputation hero, Sainsbury's, appears to corroborate this view, with its share price and press coverage lines showing remarkable symmetry (below). 'Investors do implicitly or explicitly value and react to corporate citizenship from news about companies,' says Investor Dynamics managing director Philip Lambert.
Heathrow: Another summer of turmoil
August's wildcat strike by workers at Gate Gourmet, the main caterer for British Airways, quickly attracted media opprobrium, leaving it third from bottom of 2005's Reputation Monitor. Gate Gourmet's messy dispute over restructuring plans saw nearly 700 workers apparently sacked, 70,000 airline passengers prevented from travelling after BA staff took unofficial action in support, and the TGWU involved in negotiations to reinstate all the striking workers, rather than simply those Gate Gourmet did not regard as 'troublemakers'. TV images of crowds of workers seemingly being dismissed by megaphone were unfortunate for the company.
Day-to-day PR continues to be handled by Gavin Anderson, but in September Gate Gourmet brought in APCO to offer strategic comms advice ahead of the TGWU's conference. APCO's focus has been on positioning the company as a good employer while emphasising the need for work practice modernisation.
Agency director Darren Murphy says: 'It's difficult because the story has been set in people's minds. Even now in media coverage we see inaccuracy. The only way to shift perceptions [as a company] is by your behaviour and getting messages about your behaviour out there. The situation provided an easy story of industrial relations: "US business in conflict with low-paid Asian women". The story writes itself, the fact that it's not true is beside the point – it allows you to come to a conclusion very quickly. That's not deliberate media distortion but the media using shorthand. We will make the case for change and modernisation in the industry and for Gate Gourmet's record as an employer. It's a slow task, a tough slog to turn that reputation round.'
Although Gate Gourmet has fared worse, the effect the dispute has had on the British Airways brand is still being calculated. British Airways' own financial figures show the direct financial cost has been £35m – the price of its fleet being grounded for two days. The figure was announced at the end of September, when BA revealed a fall in pre-tax profits of 18 per cent to £241m. Although it said this was not directly attributable to Gate Gourmet (it argued that the fall looked large because a year earlier, profits were buoyed by the sale of shares in Qantas), the City made its own assessment. On the same day as its Q3 figures were announced, BA's shares fell nearly 2.5 per cent to 306p.
The newspapers were not kind. The Independent's Michael Harrison described the dispute as a cost-cutting exercise that was coming back to bite BA (it outsourced its meals in 1997), adding that it all added up to a 'planeload of bad publicity'. The Guardian described it as 'a dispute at a prawn risotto factory which will delay 300,000 passengers and humiliate BA'. Worse still, journalists have spotted a trend – this was the third summer in a row in which BA suffered a crisis. In 2004 it was the cancellation of flights in the summer rush, in 2003 it was the 'swipe-card strike' and its botched attempts to introduce clocking-on arrangements for groundstaff.
The indication is that BA is coping. The week after its results were published, former Aer Lingus boss Willie Walsh joined as CEO and embarked on a whirlwind media tour. It seems to have done the trick. Back in The Indy, he was quoted as saying 'I'm not Rod' [Eddington, his predecessor] and promised no more industrial action.