10 Brands With Huge Credibility Issues In 2013

21st Century Insurance man21st Century’s parent company, AIG, needs to clean up its tarnished image this year, which will be no small feat.

Photo: 2st Century

It’s no secret that brands like Coca-Cola, Apple, and Google had a great 2012 and are poised for an even greater 2013. Not all companies are held in such high regard going into the new year, though.We talked to CoreBrand, which measures the familiarity and favorability of 1,000 corporate brands across 54 industries in the U.S., to see which companies will have an especially tough year. 

CoreBrand conducts 10,000 phone surveys of business leaders every year, asking them about corporate reputations based on favorability, overall reputation, perception of management, and investment potential. It then assigns them a score out of 100 and combines the scores for measured familiarity and favorability. 

Some companies it flagged for credibility issues, like insurance giant AIG, did not surprise us. But a few other companies hadn’t initially crossed our minds as candidates.

Jim Gregory, founder and CEO of CoreBrand, laid out the 10 brands he and his company see as the ones who will face the most credibility issues in 2013, and the reasons why each of them will have a challenging year. He declined to call them “troubled,” but given the marketing challenges they face, we’re confident that each of them has their fair share of obstacles ahead of them this year.

The companies are ranked according to the BrandPower ranking CoreBrand has calculated for the brands. BrandPower measures size (familiarity) and quality (favorability). Familiarity is a weighted percentage of survey respondents who know more about a brand than just the company’s name. Those familiar with a corporation are then asked about the brand’s favorability dimensions.

General Electric: 69.4

'GE got pounded in the 2009 financial crisis because the company was so heavily invested in its financial arm, GE Capital,' according to CoreBrand. 'Since then it has gone through considerable effort to rebuild its base in industrial manufacturing, such as aircraft engines. Despite still carrying heavy debt loads, the company is making strategic acquisitions.'

GE was featured on our list of the best brands on Instagram. 'GE is a very marketing savvy company,' said Gregory. 'I have no doubt they will try to be as exciting as they possibly can be.' Gregory sees social media as a way for GE to communicate its strategic vision. 'Social media can be as good a form of communication as an ad in the Wall Street Journal.'

Toyota: 65.7

Toyota's numerous recalls in certain years have cast a once-respected company in a bad light.

'Why it has not gotten in front of this problem is inexplicable,' said Gregory. 'It shows real bad management.' It also shows an arrogance the company has about paying the fines imposed on it by the government -- they pay them but don't care, Gregory added.

'Toyota may be projecting continued worldwide sales growth in 2013, but there is no denying the brand is losing its luster,' said CoreBrand.

Best Buy: 48.8

According to Gregory, Best Buy 'must do something to revolutionise their brand and excite their customers.'

The company's stock price is down about 50 per cent from last year, and competition from Samsung and Apple has been tough. Customers have slowly realised that they don't need stores like Best Buy when they can walk into an Apple Store or a cellular retailer to get the same product without going through a middle man. With Circuit City going out of business recently, Gregory said 'Best Buy has seen the writing on the wall.'

It has tried to confront this challenge by creating 'stores-within-the-store,' where companies like Microsoft and Sony can directly interact with customers. Time will tell if this redesign will help Best Buy solidify its place in the market.

BP: 42.5

BP is a prime example of what happens when a brand goes through an extreme image crisis.

The 2010 oil spill significantly tarnished the company's reputation, but not as much as CoreBrand would have expected. 'I don't know if Americans have become more immune to disaster situations or they see BP in a favourable light,' but BP's favorability numbers did not drop as much as Gregory anticipated.

Compared to the perception of other oil companies, BP's reputation is fairly standard, despite the oil spill fiasco. 'The lesson to be learned here is to keep communicating even when you are being criticised for communicating,' said Gregory.

Smith & Wesson: 34

With the ongoing gun control debate fresh on the mind of every American, Smith & Wesson has the opportunity to become a conversation leader in their industry.

'In 2000 the company was the only firearms manufacturer to sign an agreement with the Clinton Administration to certain design safety standards and distribution limitations,' according to CoreBrand.

'Gun advocates and clubs began an immediate boycott that cost the company approximately 40% of its revenue, resulting in the closing of two plants. After the company was sold in 2001, it focused on rebuilding its customer base and its brand with solid marketing and new product introductions,' said Gregory.

Today, the industry is under pressure again, and despite significant gains in the stock price, which is up 83% from over a year ago, there remains a concern about the long-term outlook for companies like S&W.'

Gregory says the manufacturer has learned its lesson about cooperating with gun control measures, but it needs to get over its anguish to 'develop a long term strategy instead of being politicized out of existence.'

AIG: 13.3

'AIG was in the crosshairs of the financial meltdown of 2008,' said Gregory . 'The insurance company received $182 billion in the largest company bailouts by the US Treasury. The company has subsequently been selling off assets to pay down the loans received.'

'The Securities and Exchange Commission and the U.S. Justice Department entangled the company in several fraud investigations resulting in a $1.6 billion fine and criminal charges filed against some executives.'

'When the parent company failed in 2008, AIG rebranded its insurance unit to 21st Century Insurance. Now that the company has repaid the U.S. government loans, they have launched a 'Thank You America' advertising campaign, which boasts that AIG not only repaid the loans, but America also made a profit of $22 billion in interest.'

Gregory said AIG is a very marketing savvy, brand conscious organisation. He thinks it would have been smart for AIG to launch the whole brand under a new name, instead of just its insurance segment. It looks like AIG's current strategy is to take their tainted brand 'and put a fresh coat of paint on it.'

Lennar: 2.1

'Lennar is a major homebuilder that had a huge turnaround in 2012 after being pounded over the last five years along with the rest of the housing industry,' said CoreBrand.

'In December, Lennar announced a $1.7 billion loan agreement with China Development Bank for two large San Francisco housing developments.'

'The catch is that Lennar must use a Chinese contractor for some aspects of the project, which have yet to be defined. One Chinese company under consideration is China Railway Construction Corporation, which has evolved from its beginning as the Railways Corps of the People's Liberation Army (not a comforting association for most Americans).'

'In addition, the Chinese drywall crisis in the U.S. is still a bitter memory of the housing industry and homeowners. How Lennar handles this arrangement with the Chinese bank and construction firm will define their brand in the coming years.'

Gregory said 'this is a calculated risk to get ahead of their competitors. If it works, it'll pay off big, if not, they'll be carrying this around for a long time.'

Cummins Inc: 1.6

'Cummins designs and manufactures engines and electrical power generation systems on a global basis. The highly cyclical nature of the business has created some headwinds for its corporate brand, especially during economic downturns,' according to CoreBrand.

'The stock has more than doubled since 2008, outperforming the Dow Jones Industrial Averages by a wide margin. In 2009, Cummins saw its major competitor, Caterpillar (CAT), exit the on-highway engine market.'

Gregory says Cummins' recent international focus, which brings in 59 per cent of its total revenue, has caused it to lose its audience in the U.S. 'It should at least be maintaining the U.S. audience. The problem isn't with the business itself, but in how they communicate,' said Gregory.

PPL Corporation:1.1

'PPL Corporation is an electric utility holding company, generating, transmitting, and distributing electricity to wholesale and retail customers in the U.S. and the United Kingdom,' according to CoreBrand.

'The company has made two major acquisitions recently, making PPL one of the largest investor-owned utilities in the U.S. These acquisitions also switched them from an unregulated dominant company back to a 70% regulated utility company at a time when regulatory demands and increased capital spending requirements will increase the likelihood of increased debt, placing continuing downward pressure on the brand.'

Out of the 1,000 companies that CoreBrand follows, PPL had the largest loss of favorability in recent years.

'PPL can turn around by telling their story -- here's who we are, here's the companies in our portfolio, here's our future plans,' said Gregory.

Unum: 0.8

CoreBrand says 'Unum is one of the oldest and largest disability insurance firms worldwide.'

'Unum and Provident Insurance merged in 1998, which created UnumProvident Corporation. The company launched a new corporate identity in 2007 with a shortened name -- Unum.'

'The company was the target of significant negative press in 2002 when CBS's '60 Minutes' aired a segment about the company having quotas and offering employees incentives for closing claims. The company has made significant efforts to reform its practices and become a model for other insurers.'

Despite these efforts, Gregory says the company has 'focused so much on changing business processes, but didn't communicate it. It's hard to pick up momentum with no communication.'

You've seen which brands will have a challenging 2013 ...

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