This document discusses the differences between reputation and brand, and how corporate reputation can be impacted during times of crisis. It notes that while a corporation owns its brand, stakeholders own its reputation. It also discusses how technology now allows for more rigorous analysis of social media and other sources to better understand stakeholder perceptions that drive reputation. The document argues that traditional risk management may not fully account for reputation risks, and that trademark lawyers can help by providing reputation intelligence and advising clients to consider stakeholder perceptions.

1. Feature
By Linda Locke
When reputation founders:
protecting corporate reputation
in a volatile environment
While reputation and brand may appear to be experience, such as Apple. It may centre on products (ask Ford) or
synonymous, the nuances have implications for citizenship and social responsibility (check out Whole Foods). For
each of these organisations, the managers devise creative marketing
trademark and IP counsel seeking to protect clients’
communications to express the brand promise to influence the
interests – particularly when reacting to crises and target audience to believe it.
quantifying the impact of competitive incursions Reputation, on the other hand, is what stakeholders think and
on a brand perceive about the organisation. A corporation owns its brand, but
stakeholders own its reputation. A corporation can (and should) seek
to understand the perceptions of its stakeholders and what drives
In January 2012 cruise liner Costa Concordia struck a reef near Isola del those perceptions, and should then use that understanding to shape
Giglio, Tuscany. Today, the enormous ship is marooned off the Tuscan strategy and execution. It may be able to influence perceptions, but
coast and expects to stay there until Spring 2013. Environmentalists it does not own them.
worry about a leak of fuel that cannot be pumped out when the ship is For trademark, service mark and IP law practitioners, the good
finally removed. The elements of this gripping human drama include news is that reputation – and damage to it – is now quantifiable at a
the tragic loss of 32 men, women and children, a captain whose actions granular level.
appear (at a distance) reprehensible and a giant hulk that attracts
cameras like seagulls to detritus – a crisis with potential to evolve. How perceptions are formed
Organisations typically have three channels through which they can
Reputation or brand? influence perceptions:
For trademark and IP law practitioners, reputation and brand may • a stakeholder’s direct experience with the company (eg, dealings
appear to be synonyms. However, the nuances have implications for with employees, direct use of a product and calls to customer
trademark and IP counsel seeking to protect clients’ interests. service agents);
Similarly, reputation and crisis management are linked, in that a • what the company says about itself (eg, annual report, executive
crisis event can quickly undermine even a strong reputation. speeches, advertising, website and public commentary); and
The Costa Concordia incident illustrates the difference, as well as • what others say (eg, media coverage, industry analysts, Twitter,
some truths about crisis management. Two brands were involved – websites, friends, neighbours and family).
the Italian ship and Carnival, the parent company; the crisis was self-
inflicted; the image of the ship is memorable and media-friendly; The importance of each channel varies according to the company
and moral outrage is palpable. and the industry. This framework suggests an important concept
The parent brand suffered a decrease in stock price, while the about reputation – it is about the key business decisions made each
Costa Concordia brand suffered a drop in bookings. The parent brand day, across the organisation. While the right marketing is critical,
managed the crisis from Miami, while the local Italian brand team reputation is not simply about a campaign.
was on site. The strategy was to differentiate the brands. The first two channels are controlled largely by the company and
The reputation of the brands – or the esteem in which they are held include official corporate communications, including the graphic
by stakeholders – continues to be affected every time a dramatic photo treatment of the trademark and service marks, the website and
of the marooned ship appears, reminding the public of the incident. public pronouncements, advertising, public relations and other
Reputation and brand are linked but distinct concepts. A brand is official forms of external messaging.
a company’s promise to its stakeholders. A responsible company The third channel, however, is outside the control of the
zealously protects its brand as a valuable, if intangible, competitive organisation: the opinions of third parties. This channel can include
asset. The brand represents the attributes with which a company reporters whose worked is checked for factual accuracy, industry
wishes to be associated – perhaps luxury and safety in the Costa experts or academics with credentials, self-identified advocates,
Concordia case – and the trademarks, service marks and promotional activists with an agenda and anyone with a phone or a keyboard.
efforts used to express this promise. Client perspective on social media has centred on both fear of
A corporation’s brand promise may revolve around customer uncontrollable commentary and opportunities for marketing.
www.WorldTrademarkReview.com December/January 2013 World Trademark Review 41

2. Feature: When reputation founders: protecting corporate reputation in a volatile environment
Rigorous aggregation and processing of social media commentary The role of trust in business
may provide valuable data for trademark practitioners seeking to At the centre of reputation is the emotional connection that a
understand the impact of actions by competitors on the strength of stakeholder feels with the organisation. Is it trusted and respected?
a brand or a reputation. Or viewed with scepticism and cynicism?
Businesses with good reputations are generally trusted. Trusted
Technology opens doors of insight for IP practitioners organisations attract better business partners and drive premium
The opportunity for trademark law practitioners to understand the pricing. And they are more likely to have the freedom to operate in
perceptions of stakeholders and what drives them and the risks to the way they choose, with fewer regulatory or legislative obstacles.
the strength of the reputation of clients is emerging, thanks to A trusted organisation is more likely to enjoy the benefit of the
technology. Social media represents an opportunity to view, almost doubt in a crisis; stakeholders expect a positive outcome based on
in real time, the perceptions and beliefs of stakeholders and the how they understand the motivations of the organisation and how
drivers of reputation. they expect it to behave.
In the Costa Concordia case, an analysis of the public dialogue – Typically, the C-suite relies on certain internal disciplines to
what was said around the world about the ship, the captain, the crew identify and protect against potential crises, such as enterprise risk
and the parent company – would reveal the likely attitudes of both the management, business continuity and corporate communications.
general public and the stakeholders who are important to the Carnival The dilemma is that while the enterprise risk management and
organisation. More deeply, it would shine a light on specific aspects of business continuity staff may be highly literate in risk analysis, they
the conversation – such as reaction to statements by executive have little experience with or understanding of reputation, and
management compared to those of the captain, and competitors’ rarely have reputation data at hand to guide decisions. The corporate
commentary about the expertise of their own captains and crews. communications team typically has little exposure to tools that
Emerging tools have the sophistication to tag each item, whether quantify reputation and risk at a meaningful level.
in social or traditional media, and apply an algorithm that examines Practitioners should ask clients whether the risk team is literate
volume, emotion and credibility in order to turn words into data. After in reputation and the reputation team is literate in risk. The
processing, the systems perform an in-depth examination of the traditional approach to risk management may not provide
topics and issues associated with the crisis. The most robust of these comprehensive management of the full range of corporate risks. This
systems use theory from social psychology to predict the perceptions gap may provide an opening for IP and trademark counsel to provide
of stakeholders about a company, a brand or even a set of competitors. intelligence and monitoring that alert the organisation to a wider
For the trademark practitioner, such an analysis can reveal the range of risks than are typically used, and to advise appropriate
source of negative reaction and predict the likely reaction. It can action earlier in the process.
unpack the conversations to reveal the most damaging aspects of the Consider these recent examples.
coverage. JPMorgan Chase lost $2 billion in its disastrous hedging strategy,
For the crisis manager, the analysis can inform its response by but a more enduring expense may be the damage to its reputation
identifying the emotions resident in the content so that the client is for outstanding risk management. The bank’s strong financial
responding in appropriate ways to mitigate the effects of the incident. position meant that it was able to absorb the immediate dollar
In a case where the damage is inflicted by a third party, the losses. But the reputation damage resulted in a costly ratings
analysis may provide valuable data points for practitioners tasked downgrade, renewed regulatory scrutiny and the quick evaporation
with identifying potential damage to the brand and ultimately to of $17 billion in market capitalisation. JPMorgan stock recovered
reputation. some ground in the following weeks, but regulatory hearings, a
The ability of the practitioner to notify a client proactively of the criminal inquiry and shareholder lawsuits guaranteed that the
emerging potential for damage to reputation can have a long-term bank’s black eye would not heal any time soon.
positive impact for the client because a positive corporate reputation Bank of America launched – and then ignominiously scrapped – a
yields measurable value. $5 monthly fee for debit card usage following an intense consumer
backlash that featured an avalanche of online protests. If the bank had
Reputation penalty or pay-off? tracked consumer perceptions, it could have predicted the depth of
A company that is highly regarded by its stakeholders is more likely outrage attached to bank fees and thus predicted the failure of the fee.
to enjoy strong brand loyalty and long-term high-value customers. It Penn State’s child sexual abuse scandal stunned students,
may see lower employee turnover and easier recruitment of high- parents and supporters of the university and its football programme,
calibre employees. Such a company may benefit from higher and horrified social media users across the United States. The
investor confidence, a more positive regulatory environment and university’s fumbled response was magnified by the 24-hour news
even lower costs of capital, as its reputation paves the way for greater cycle. Months after the story broke, the scandal’s details continue to
trust from financial partners. batter the university’s reputation as ongoing legal proceedings make
But a weak or negative reputation exacts a measurable cost – a harrowing headlines.
reputation penalty – as a company viewed with distrust and outrage In each case, the organisations were unprepared for the
by its stakeholders is more likely to suffer increased customer churn controversies and the maelstrom of criticism that they suffered.
and elevated customer acquisition costs. It will face higher employee With the exception of Jamie Dimon at JPMorgan Chase, who swiftly
training costs and related service inefficiencies. Such a company will apologised, their flummoxed leaders exacerbated the damage to
pay the price of regulatory constraints, increased cost of capital, lower their organisations’ reputations by issuing ill-advised and tone-deaf
investor confidence and an increased vulnerability to competitors. responses.
For example, major financial institutions that suffer a credit
downgrade due to reputational damage may have to post millions or Rational and logical drivers of reputation
even billions of dollars in additional collateral and face higher To build trust in a risk-filled environment, clients should closely
borrowing costs. examine their decisions and behaviour from the point of view of
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3. stakeholders. Typically, companies that are trusted are outward shadow over a summer paradise, or perceptions of greed, hubris,
facing, seeking to understand what their stakeholders think and feel, indifference or abuse of power. An enraged stakeholder can make it
their values and what they expect. difficult for a client to grow a business.
An essential starting point in understanding reputation is to
identify the drivers of perceptions for each group of stakeholders, Mind the gap
and how each driver connects to trust. Typical drivers of reputation Best practices suggest the regular analysis of stakeholder perceptions
might include: to determine the drivers of reputation and how they are changing,
• the quality of its products and services; and then a gap analysis among the groups.
• governance and ethics; A gap analysis between stakeholders can be revealing. For
• how its business intersects with societal interests; example, if employees perceive that their employer performs
• its workplace; strongly on, say, innovation, while external stakeholders judge the
• innovation; company to perform poorly, the company has a communications
• its financial performance; and problem to solve. It needs to get the message out about its strength.
• its vision and leadership. If, however, the external world perceives a company to perform
highly on a primary driver of reputation, such as ethics, while
The importance of these drivers can shift. Before the recession, internal stakeholders rate it weakly, it is a risk waiting to blow up.
vision and leadership drove reputation for many major financial Why? Because employees know the company best; they understand
services companies. Since it began, governance and ethics have risen how it actually makes decisions.
to the top. Stakeholders may include employees, customers, regulators, non-
In a recent analysis of the reputation of a manufacturer, legal governmental organisations, activists, legislators, the investment
issues tied to the bribery of government officials overshadowed the community and local residents. One approach is a periodic survey.
good works and increased employment provided by the company in Another approach is 24/7 monitoring, particularly in volatile industries.
local communities, even though members of the general public The best approaches to measuring the drivers of reputation cover
would never have the chance to purchase an item from the company. logical and emotional aspects of perception. Boardrooms are ruled by
Mistrust can quickly turn to outrage if certain conditions are fact and logic, but in the living rooms of the world, intuition and
present, such as the image of the rusting hulk of a ship casting a emotion rule. This becomes particularly relevant in situations of
www.WorldTrademarkReview.com December/January 2013 World Trademark Review 43

4. Feature: When reputation founders: protecting corporate reputation in a volatile environment
The traditional approach to
Recently, the Intangible Asset Finance Society reported a sharp
spike in the number of S&P500 Index companies disclosing that
risk management may not
reputation risk is material in their annual reports, growing from 40
in 2009 to 283 in 2011.
provide comprehensive
Corporate leadership has an obligation to protect both revenue and
reputation. When either fails, the entire organisation can be at risk.
management of the full range Planned resilience trumps uninformed reaction in crises
of corporate risks. This gap
The relevant concept relating to risk for client organisations is
business resilience. Resilient organisations have the ability to
may provide an opening for IP
manage risks and adapt to disruption. They are aware of the
conditions of risk and their consequences, and seek to mitigate both.
and trademark counsel
Reputation resilience stems from the ability to listen to
stakeholders, understand their perceptions and maintain an
openness to input. Organisations are judged on the perspicacity of
their response in a crisis. Counsellors who advise organisations to be
aware of shifts in stakeholder perceptions based on business
decisions are guiding the organisation towards greater resilience.
crisis and risk. If stakeholders – people – have serious concerns about Consider the following business outcomes.
their personal risk, messaging anchored in and limited to fact and Product managers will better understand risks to and
logic may have the opposite effect of that intended. opportunities presented by reputation building, as well as their
When people feel a conflict with their personal values, they ask competitive positioning.
themselves whether they want to tolerate the stance of the client. Strategists will understand the drivers of corporate reputation
The company may look tone deaf and uncaring, especially if human and incorporate them into planning to bring greater alignment
life is involved, as in the Costa Concordia event. inside the enterprise and reduce the chance of unintended risk.
If the answer is no, they will not tolerate the position, the result is Communicators will measure the impact of their response to a
a decline in trust in the organisation and its management. This crisis and improve the next time.
dissatisfaction may turn into resentment, and finally outrage. If Trademark and IP practitioners will quantify the impact of
outrage is harnessed and amplified through social media, it can competitive incursions on a brand, and be able to identify potential
present significant obstacles to the organisation. risks before they have an impact.
Outrage results when a critical mass of people feel that their With intelligence in hand, the view of risk can be expanded to
values are violated. For example, if a company appears to put profits include non-market, non-operational issues, and to address broader
ahead of the safety of employees or customers, direct stakeholder issues that are of concern to boards. A strong reputation intelligence
anger can spread through networks rapidly and that company can process should include the following capabilities to fit into the
find itself on the receiving end of the wrath of millions of people. corporate playbook:
A proactive approach led by trademark and service mark • risk assessment;
practitioners may help the company to see the trajectory of risk and • impact analysis;
intervene before an incident becomes a crisis, or before long-term • risk heat map;
damage is done to both brand and reputation. • dynamic monitoring; and
• risk scenario/event planning.
What’s missing? Reputation intelligence
Why do such serious, damaging risks regularly take organisations by The value generated by these process improvements will extend
surprise? The traditional corporate risk mindset focuses on revenue by throughout the client company. The client will anticipate and prevent
examining financial, regulatory and operational elements of risk. But risks to its reputation through proactive monitoring. It will strengthen
when an organisation filters priorities based primarily on protecting the company’s customer and employee loyalty and increase investor
revenue, it may miss the impact of business decisions on the confidence when it responds swiftly and thoughtfully to reputation
perceptions of stakeholders, which are the central focus of reputation. crises. Finally, it will create a regulatory environment in which it meets
Today’s environment – featuring the immediate, constant and customers’ needs with the flexibility and freedom it desires.
global reach of social media and other communications channels – Reputation has long been considered a ‘soft’ topic. Trademark,
presents an entirely new category of impact and analysis that is often service mark and IP counsel should be aware that data analytics are
outside the traditional risk and trademark counsel framework, but now available to quantify the impact of events, decisions and even
which may also help the organisation to understand risk in new ways. comments on the reputation of companies.
Consider JPMorgan Chase’s multibillion-dollar trading debacle. Practitioners who understand the theory and application of
Some of the bank’s own risk managers warned that the risky trades analytics on behalf of their clients will elevate their own value and
could result in huge dollar losses. But in fact, the bank’s actual losses visibility as they counsel their clients towards reputation and brand
were dwarfed by the total cost of risk, including the reputation resiliency. WTR
penalty: plummeting market capitalisation, higher borrowing costs
and regulatory scrutiny.
Indeed, the immediate losses were not the greatest concern of
the ratings services that downgraded JPMorgan’s outlook and credit
rating; rather, Fitch and Standard & Poor’s (S&P) cited “reputational Linda Locke is principal at Reputare Consulting
damage” as their first concern. linda.locke@reputareconsulting.com
44 World Trademark Review December/January 2013 www.WorldTrademarkReview.com