Using Brand Strategy
to Increase Stock Price
Chuck Pettis (Author of TechnoBrands)
Brand-Solutions, Inc.
225 105th Ave. SE
Bellevue, WA 98004
(425) 637-8777
cpettis@brand.com
© 2000 Brand-Solutions, Inc.
To Be Covered
Proven brand strategies for increasing
stock price and profitability
Effective brand strategies for dot-com
companies
What is a Brand?
 A trademark: a brand name
and logo
 A Trustmark
 Most simply, a promise to
the customer
 Perceptual – exists in the
minds & hearts of your
customers, employees,
and suppliers
What is a Brand?
 The proprietary visual,
rational, emotional and
cultural image
surrounding a company,
organization, product,
or person
The Purpose of a Brand
 Assumes a quality product and marketing
 DIFFERENTIATE
 Provides springboard for new products and
acquisitions
 Enduring profitable growth
 Increased perceived value = premium pricing
Soda
 Coca Cola
$2.59
 Safeway Select $1.59
 Price difference $1.00
When You go to a Restaurant….
 Guest:
“Can I have a Coke?
 Server:
“You bet. Is a Safeway
Select OK with you?”
The Purpose of a Brand
Brand Strategy & Stock Price
“The big thing is that brand equity and
the strategies to build it matter. Brand
strategy does influence the financial
performance of any company.”
Robert Jacobson, leading brand researcher &
chairman of University of Washington Marketing
Department

Research shows that improvements in brand strategy
programs produce positive stock market return

See Morgan Stanley reports on www.brand.com
Elements of Brand Strategy
The major elements for measuring and
building brand equity:
 Brand identity: brand name, brand associations,
messages, images, symbolism
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Brand name awareness
Perceived quality
Brand extension potential
Brand loyalty/switching
Proprietary brand assets (trademarks, patents, etc.)
A brand strategy is a plan to measurably
improve each element of brand equity
Customer-Based Brand Identity
& Stock Price
 The entry point for all brand strategy activities
is brand identity development
 You have to know the most compelling
category descriptor, purchase factors/selling
messages, organizational values, etc., and
then link the brand identity to operations
 In 1995, Sun Microsystems was seen as a
manufacturer of technical workstations and
wanted to reposition itself as a maker of
computers and servers for corporations
 Brand-Solutions conducted research to identify
the top purchase factors for business servers,
benchmark Sun’s brand equity, and to select
the best brand name
 In April, 1997, Sun Ultra Enterprise Servers
were introduced using the brand name and
brand identity Brand-Solutions recommended
 After the introduction, all analysts issued “Buy”
recommendations and Morgan Stanley
predicted the stock would climb to $70. In two
weeks, the stock went from $47 to $67.
 Sun’s success in repositioning itself is
confirmed in the headline of an article in the
August 19, 1997, Wall Street Journal: “Sun
Microsystems Goes on a Roll, Astonishing
Many: Computer Maker Reinvents Itself,
Stressing Servers for Big Corporations.”
Packet Engines: Gigabit Performance,
Enterprise Reliability
Alcatel Acquires Packet Engines for $325M
When Do You Sell?
 The King of Gigabit
Ethernet reckons he
missed out on a
$3 billion IPO by selling
Packet Engines too early
 Keep an eye out for Bernard’s newest
company, World Wide Packets!
(www.worldwidepackets.com)
Simon: The Brand
 Simon – The leading developer and manager
of shopping malls in the US.
 1999 – Not known by shopping center
shoppers. No mall management category
existed.
 3/1/99 – Branding campaign begins – “Simon.
Simply the best shopping there is.™”
 Brand strategies are based on a carefullyresearched, shopper-based brand identity.
Simon: The Brand
 1/1/2000 – 53% of shoppers recognize and
understand the Simon Brand.
 Simon “owns” the mall category.
 Annual sales/sq.ft. of $377 vs. industry
average of $340.
 “Simon has been able to use its branding
concept to drive revenues and improve
operating margins.” – Robert L. Levy, Sr.
Real Estate Analyst
Brand Extension & Stock Price
 Brand Extension Examples:
 The Gap
Baby Gap + Gap Maternity + Gap Kids
 Nokia: mobile phones
IP networking
 Purpose of Brand Extensions

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Launching new brands is expensive
Good trademarks may be hard to find
Strong competition for distribution
Gain quick acceptance of new products
 Danger: If you introduce a defective product or
a product that is too far afield from the product
category, you can risk failure
Brand Extension & Stock Price
 (High Brand Awareness + Positive Brand
Attitude) + Brand Extension = 2% to 9% Stock
Price Increase
 Consumers value new products with well-established
brand names because they quickly convey the
brand’s attributes and reinforce a sense of trust.
Brand extensions save the company marketing costs
and generate higher revenues more quickly than new
brands.
 Extensions of brand with very low brand awareness
and esteem also provide a positive return because
they have high upside potential and little downside
risk.
Vicki Lan and Robert Jacobson, “Stock Market Reactions to Brand
Extension Announcements: The Effects of Brand Attitude and Familiarity,”
Journal of Marketing, January, 1995.
Announcements of Advertising
Slogans & Ad Changes and Stock Price
 On average, 1% increase in market cap after
announcement
 Resulted in an expected increase in firm’s
annual profit of $6-8 million
 Conclusion: Publicize ad changes carefully
and appropriately
Lynette Knowles Mathur and Ike Mathur, Journal
of Advertising Research, Jan/Feb 1995
Increased Perceived
Quality & Stock Price

Quality is a function of trust and customer
satisfaction with the brand

Increased perceived quality = increase in
stock return

“Quality” brand building for 34 major US
corporations did pay off where it really counts –
for the shareholder
David A. Aaker and Robert Jacobson, “The Financial Information
Content of Perceived Quality,” Journal of Marketing Research, May
1994.
The First Intel Inside Ad
New Company Brand Name
& Stock Price
 In most cases, name changes signal improved profit
performance and increase stock price (+.44%).
 A change in company brand name says to the market,
“We have changed our company (i.e., brand strategy,
management, organization, product offerings) and those
changes are for the better.”
 Both cosmetic name changes (e.g., Paine Webber to
Paine Webber Group) and radical name changes (e.g.,
Consolidated Foods to Sara Lee) signal a change in the
firm’s activities.
Dan Horsky and Patrick Swyngedouw, “Does it Pay to Change Your
Company’s Name? A Stock Market Perspective,” Marketing Science,
Fall, 1987.
Name Change:
InfoSpace.com to InfoSpace
InfoSpace Stock Price
300
290
280
261.1
270
260
250
240
230
220
210
225.3
259.8
259.5
253.5
238
218.1
217
200
2/25 2/26 2/27 2/28 2/29 3/1
3/2
3/3
March 1 Press Release
3/4
3/5
3/6
3/7
Brand Attitude, ROE
& Stock Price
 Brand attitude = % positive company opinion
minus % negative opinion
 In high-tech markets, change in brand
attitude helps predict future business
performance and leads accounting ROE,
by 1-2 quarters
 ROE, in turn, influences stock return/price
David A. Aaker and Robert Jacobson, “The Value Relevance of Brand
Attitude in High-Technology Markets,” April 2000 article to appear in
future issue of The Journal of Marketing Research.
Brand Attitude, ROE
& Stock Price
 Drivers of Brand Attitude
 Visible, dramatic new products increase brand
attitude
 Product problems decrease brand attitude
 Competitor actions: e.g., aggressive comparison
advertising
 Highly visible changes in top management (CEO)
 Legal actions & lawsuits
Note: Major advertising initiatives are not linked to
substantial movement in brand attitude.
David A. Aaker and Robert Jacobson, “The Value Relevance of Brand
Attitude in High-Technology Markets,” April 2000 article to appear in
future issue of The Journal of Marketing Research.
Sears Builds Brand Equity from the Inside-Out
Employee satisfaction and attitudes about their job and the company
predict
Employee behavior in front of customer
predicts
Likelihood of customer satisfaction, retention and recommendation
predicts
Superior financial performance and revenue growth
“Bringing Sears Into The New World,” Fortune Magazine, October 13. 1997.
Lessons in Dot-com Brand Building
 How Amazon.com built a corporate reputation
and a strong on-line presence on the Internet…
(And why barnesandnoble.com and CDNow
did not)
Violina R. Rindova and Suvesh Kotha, “Building Reputation on the Internet:
Lessons from Amazon.com and its Competitors,” revised September 1999.
Brand Equity & Reputation
 Brand Equity
 The added value provided to a product or company
by its brand identity
 The set of associations and behaviors that increase
or decrease the value of the brand compared to its
asset value alone
 Reputation
 The general estimation in which a person is held by
the public
 The state or situation of being held in high esteem
How Amazon.com Built a Corporate Reputation
and a Strong On-line Presence on the Internet…
 Corporate reputation or “brand equity” is one of the few
resources that provides a firm with sustainable
competitive advantage.
 Reputation is an asset to be created, nurtured and
exploited.
 Reputation building – a flow of orchestrated strategic
actions and signals interpretable in the market place
 Reputational stock = (media visibility + positive media
mentions)
 On the Internet, reputation:
 Is of greater importance in purchasing decisions than direct
comparisons of competitive products
 Is a mechanism for generating sales
 Amazon did many more strategic actions and more
actions earlier than bn.com and CDNow
Violina R. Rindova and Suvesh Kotha, “Building Reputation on the Internet:
Lessons from Amazon.com and its Competitors,” University of Washington
Business School, Revised September 1999.
Internet Reputation &
Brand-Equity-Building Strategies
1. Create balanced symbolic communications –
diverse, yet consistent. Balance novelty and
familiarity.
 Amazon.com – a metaphorical link to Earth’s largest
river
 Dot-com name = Internet-based
 A compelling story – not limited to one product
category
 “Store” symbolism – e.g., shopping cart
 Ads use physical symbols to represent the huge size
of product selection
Violina R. Rindova and Suvesh Kotha, “Building Reputation on the Internet:
Lessons from Amazon.com and its Competitors,” University of Washington
Business School, Revised September 1999.
Internet Reputation &
Brand-Equity-Building Strategies
2. Take Competitive Actions
 Use symbolic counter-moves and signals to
competitive actions (e.g., match Barnes & Noble
price cuts) by attacking, defending and
disseminating knowledge
 Redefine the industry paradigm: Barnes & Noble’s
motto of “The world’s biggest bookstore” vs.
Amazon.com positioning itself as “The Earth’s
largest bookstore.”
Violina R. Rindova and Suvesh Kotha, “Building Reputation on the Internet:
Lessons from Amazon.com and its Competitors,” University of Washington
Business School, Revised September 1999.
Internet Reputation &
Brand-Equity-Building Strategies
3. Build close and communal relationships and
participate in networks that increase reach and
leverage reputation
 Many personalized, one-on-one messages and services –
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automated, free-of-charge
Grassroots associates program
Proactive Investor Relations communications
Borrow reputation from VC firm – Kleiner, Perkins,
Caufield & Byers
Invite customers to talk with one another
Know customer preferences
Provide many opportunities for interaction, conversation
and sociability
Violina R. Rindova and Suvesh Kotha, “Building Reputation on the Internet:
Lessons from Amazon.com and its Competitors,” University of Washington
Business School, Revised September 1999.
An Inductive Model Of Reputation Building
On The Internet Through Strategic Actions
naming
diversity and consistency of symbols
story
retail facade
symbolic actions
balance of novelty and familiarity
advertising
lawsuits
price cutting
competitive actions
close relationships
personalization
participation in networks
reputational stock
redefining industry paradigm
capacity expansion
community
positioning
relational actions
aggregation of traffic and information
reputation borrowing and lending
Violina R. Rindova and Suvesh Kotha, “Building Reputation on the Internet:
Lessons from Amazon.com and its Competitors,” University of Washington
Business School, Revised September 1999.
Reputation & Internet Success
 Reputation/Brand Equity building activities
are one of the key determinants of
competitive success for Internet firms
“Reputation Building and Firm Performance: An Empirical Analysis of the
Top-50 Pure Internet Firms,” Suresh Kotha, Shivaram Rajgopal and Violina
Rindova, University of Washington Business School, November 1999.
Reputation & Internet Success
1. Marketing Investments in Reputation
 Create brand awareness & signal your true
character as a quality producer

Advertising

Customer service

Affiliate programs
 The more an Internet firm invests in reputation by
committing resources to marketing and advertising,
the higher will be its market value
 The impact lasts for two – three quarters.
Therefore, continuity is important.
“Reputation Building and Firm Performance: An Empirical Analysis of the
Top-50 Pure Internet Firms,” Suresh Kotha, Shivaram Rajgopal and Violina
Rindova, University of Washington Business School, November 1999.
Reputation & Internet Success
2. Borrow reputation from VC firm reputation to
increase market value & sales growth
3. Media Exposure/“Buzz”
 Major newspaper/magazine press releases
articles
higher market value & sales growth
 Impacts last for one quarter and are more short-lived
than marketing investments
“Reputation Building and Firm Performance: An Empirical Analysis of the
Top-50 Pure Internet Firms,” Suresh Kotha, Shivaram Rajgopal and Violina
Rindova, University of Washington Business School, November 1999.
InfoSpace – Master of “Buzz”
Brand Strategy Secrets for
Increasing Stock Price
1. Carefully research, define & execute on your
company & product brand identities.
2. Know the top-ranked reasons buyers
purchase your brand. Internal opinions
usually don’t match what customers actually
want.
3. Link the brand to operations.
4. Track the level of brand awareness &
positive/negative esteem to predict future
business performance.
Brand Strategy Secrets for
Increasing Stock Price
5. Track employee and customer satisfaction to
produce superior financial performance.
6. Avoid “brand-name-itus.” Centrally manage
new brand name and brand extension
decisions.
7. Develop & execute on-going programs for
raising perceived quality to earn the
associated increase in stock return.
8. Publicize brand strategy news within the
investment community.
Thank You!
 Good luck with your brand strategy programs!
 If you would like help developing a brand
identity and brand strategies for your
company, contact Chuck Pettis at BrandSolutions, Inc. at cpettis@brand.com
or (425) 455-8601.