Guess What? Your Corporate Reputation Does matter

Of all the things that agencies don't want you to know, this is the biggest secret: your corporate reputation often doesn't matter much.

And it's not just agencies: NGOs rely on corporate donations, and the margins that universities make on corporate initiatives would make you pant and drool. Journalists want you to think that reputation matters because it makes you more inclined to treat them with respect and urgency.

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The truth is that none of them can point to much research that shows any link between what people think of a pharma company and how much money it makes. A few corporate reputation programs do work, but most are, at best, a tax write-off. Some crisis management programs pay for themselves but most just produce big binders that people use to decorate their offices.

Insider Insights

How do I know this, and why should you believe me rather than the extraordinarily well-paid people from all those ad and PR agencies? I used to run subsidiaries of several of those companies (Hill & Knowlton and what's now Publicis, for example), and I've consulted for others. Baird's CMC (the group where I'm co-Chairman) has run major market research programs evaluating the reputational impact of various disasters and of corporate social responsibility programs for five of the top ten pharma companies. Of course, I have to be careful telling you exactly what I've found out: clients deserve confidentiality and former employers deserve to have their intellectual property protected, but there are a few major principles that have run through the last 25 years of my professional experience. Here, for instance, is how your stakeholders see you:

Policymakers and those who influence them ("civil society" in the jargon) cannot differentiate well between Big Pharma companies. Ask them who has the best reputation and the answers are unlikely to follow a predictable pattern: in the US, a few more will mention Merck or Johnson & Johnson than others; in Europe, some will mention national champions but even they are unlikely to be able to tell you why they feel the way they do. A tiny number will differentiate on the basis of pricing or corporate decisions, and even those that do are often wrong about which companies they perceive as good or bad.

Health activists are obsessed by intellectual property, patents and tiered pricing. Or they seem to be: we did global research in a red-hot policy area among community opinion leaders. We guaranteed their anonymity and then asked them to talk about the big health policy issues. None spontaneously mentioned anything remotely close to patents or drug pricing. When we prompted, many said that this was a game played by governments, insurers and companies. They, as activists, would play the part expected of them, but they did not take it very seriously. Could any of them pick out companies that were particularly good or bad on these issues? After a lot of prompting, about two in ten could and they usually picked the market leaders. For 99.99 percent of the world, patent pools, voluntary licensing agreements and differential pricing are meaningless.

Consumers do, of course, care about how much they personally pay for medicines, which is why pharma companies are so much more unpopular in the US (where most people pay something) than in, say, the UK (where very few pay anything at all), but consumers in most countries do not think there are expensive companies and good value companies. (If they did, I'm not sure of the impact: an Indian friend was horrified that I was taking an Indian brand of painkiller—he only bought the equivalent, imported European brand that cost 25 times more and must, therefore, be better, he thought.)

Prescribers differentiate on the basis of products or of research that they have been exposed to firsthand. In a few areas, patient support programs and patient compliance programs are starting to build enough corporate reputation to justify some price premium. In no area can you find a significant number of prescribers who refuse to prescribe (or even say they are less likely to prescribe) products from a particular company because of the corporation's behavior. If you were going to see this at all, you would see it in HIV where groups such as the AIDS Healthcare Foundation and ACT-UP have called for boycotts of one product or another. We have looked very hard, but have never found it.

When Bad Things Happen

Problems that are remembered become genericized: it's a horrible word, but the phenomenon is even nastier. Here is a real-life story—the brand involved is dead so it doesn't matter. Almost 20 years ago, a scare started about fragments of glass being found in baby diapers. The brand involved had about a 27 percent share of the UK market—well behind Pampers, with about 50 percent. We told the manufacturers to forget the Tylenol model: instead, get nurses or pediatricians to talk about checking diapers in general, but make company spokespeople inaccessible and never show or mention the brand. When all else failed, present one of the Finnish diaper research scientists who spoke only in polysyllables and did that with an impenetrable accent—be sure to label him as a representative of the parent company not of the brand, we said.

After ten days of recalls, headlines, live TV news reports, threats of lawsuits, a torrent of demands for compensation and endless weeping mothers, it passed (by the way, there probably never was any glass). A few journalists were frustrated by the mumbling Finns and wrote the odd snide piece. A year later, we got a leading polling company to measure who remembered the incident. Unsurprisingly, the parents of toddlers remembered it well but about 80 percent thought it had happened to Pampers.

When I slipped a disc, the orthopedic surgeon behaved the same way: giving me a prescription for naproxen, he warned me that NSAIDs are linked to an increased risk of MIs and strokes and suggested that I take high doses of codeine instead. For once, I nodded politely (and then went off to buy a COX 2 inhibitor—it really is linked to the increased risk but it is far less likely to make you bleed to death from a stomach ulcer than an NSAID—as a gym-going, hill-walking vegan addicted to omeprazole, I thought it was a sound trade-off). Johnson & Johnson were right to react as they did to the product poisoning, but only because Tylenol was the market leader. If you're not, keep your head down and spend money to make sure that you don't have to put it above the parapet.

Public Outcry

Generally speaking, customers only differentiate in a few chronic diseases where they have a particularly close relationship with the pharma company; others never do. In the US in the age of DTC, I have never seen any research to show that consumers can differentiate between big companies even when the consumer has heart disease, osteoporosis or diabetes (of course, there is lots of research that I haven't seen so it may exist although I would be amazed if the beneficiary had not used it in a detail piece by now. There is some ad testing that, I believe, shows that putting any corporate name in a prescription medicine ad reduces audience favorability). Patients who have used a medicine recently linked to serious adverse events know who made it: people who have taken Avandia will know GSK and some of those who took Vioxx will know Merck—especially those who are suing. However, if you survey people with diabetes who have not taken Avandia, I would be amazed if you could find a significant difference in reputation between GSK and, say, Novo Nordisk.

There are exceptions. For example, most influential doctors (those who can influence policy or academic thinking) differentiate between vaccine and pharma companies—even though all the major vaccine producers are owned by major pharmaceutical companies and carry the same brands. They think that vaccine companies are more scientific and more ethical. Or, in another example, companies with a big OTC presence are usually better recognized by consumers and are more trusted, but in qualitative research, this is not a particularly firm or well-grounded belief. There is, though, limited evidence linking these, or any other, exceptions to the bottom line.

A Quiz

Even the worst problems fade from memory rapidly outside the company, but of course, haunt those inside it. Don't believe me? See if you know the answers to this quick test:

1 Which leading biotech company used to be owned by the Vatican and then by a notorious fraudster?

2 Which global company was at the center of a storm five years ago for running a vaccine trial among conscripts to the Nepali Army (they say with informed consent; various NGOs say without)?

3 Two years ago, the AIDS Healthcare Foundation took out a full-page ad calling for a boycott of one high-profile company's HIV products—which company?

4 This year, a major multinational company received a "Shame" Award at the Davos World Economic Forum for having run a clinical trial in transplant patients, some of whom are alleged to have received organs from executed prisoners. Who was the prize winner?

Quiz Answers

If you knew more than one answer, I'm ready to concede that some of these programs might be worth doing. But I will bet for most of you, these stories were forgotten before the newspapers carrying them had even made it to the recycling bin.

1 Serono—now part of Merck Serono. It was owned by the Catholic Church in the 60s and by international fraudster Michel "The Shark" Sindona in the 70s. It went on to become a leader in fertility treatments, among other fields. http://bit.ly/bctaAS

2 GlaxoSmithKline. http://bit.ly/b4xNKx

3 Cipla—The Indian government began an investigation and CIPLA, much to AHF's delight, threatened to sue them thus giving the story global legs.

4 And remember the numerous Economist double-page spreads? Well, just in case you're thinking of footing the bill for an expensive corporate presence campaign from your ad agency. Pfizer was the company who bought them all. Surely you read them?

5 Reasons To Invest in Looking Good

Not all reputation management programs are a waste of time, energy and resources. Here are a few valid reasons for investing in boosting a pharma company's reputation

1 The most important reason to get people to think well about your employers is above the pay grade of humble marketers: investors need to believe that the company is dynamic, thrusting and whatever else Fabulous Fab and his friends value in a stock these days. I have kept a Financial Times article from a decade ago listing the 16 products from a favored company's pipeline that would "guarantee a growing revenue flow". Only one was ever launched and it is likely to be withdrawn. As you may have guessed from the well-known behavioral patterns of the financial sector, the FT has never done this review itself.

2 At the 100,000-foot level, pharma needs what Jean-Pierre Garnier calls "permission to operate": in modern societies, industries need some level of societal acceptance if they are to be viable over the long term. One of my colleagues at Baird's CMC, Simon Bryceson, calls the loss of this legitimacy, "The Tobacco Road." Fast food and soft drinks manufacturers worry that they are some way down this road; Simon thinks that pharma may be so far down it that it cannot turn back. He says that when he presents to the main boards of Big Pharma companies about it (as he has often), there is a lot of nodding. It requires PhRMA to find some new breakthrough strategy, or it requires an individual company to break out: could, for example, a pharma company create a competitive advantage by becoming a socially-more-accepted medicines company? I have never found a client brave enough to try, and I have to say that I have never been able to show the more courageous ones a precedent suggesting that it might be worth risking a career on—especially when that career is likely to be finished by the time the end of The Tobacco Road is in sight. I encourage my Braveheart readers to get in touch on Linked In and we'll pursue the idea.

3 At a 1,000-foot level, many companies depend on a close working relationship with governments and the public sector. They need government research funds to develop a new vaccine or they want to license the discoveries made in a government or university laboratory or they need a change in legislation to protect a patent. Officials and lawmakers get nervous if these necessary arrangements are likely to face particular press or civil society criticism. In this age of Twitter campaigns and sarcastic You Tube videos, the average politician makes the average duck-billed platypus seem a reckless risk-taker, so it is important to avoid corporate reputation damage in areas where you are likely to need public partnerships. This, though, usually involves substantive concessions—a subsidized access program, for example—rather than burnishing the corporate image or running ads in 9-point type in The Economist (one more question for the Quiz: who used to run those incredibly expensive double pagers, week in and week out?). I understand corporate campaign contributions also sometimes help to soothe frayed nerves.

4 In a survey that one of my pharma clients did, over 60 percent of employees said that they had lied at least once about where they worked because they felt ashamed of it or because they felt pressure to do so. You do not need to be signed up for the full touchy-feely HR credo to believe that this is bad for business. We have studied the internal impact of corporate social responsibility programs and of a good reputation, and they do affect employees' likelihood of staying with the company and their willingness to act as ambassadors for it. If you suggest this as a reason for spending your marketing budget, you are unlikely to have many future opportunities to act as an ambassador for anything except, maybe, the joys of a sparkling WC. As a reason for a joint investment by public affairs, marketing and HR, it is underused.

5 CEOs, chairmen and board members suffer from a related syndrome but they can't lie about where they work, so they spend instead on "good deeds." In Europe, they might even get a title out of it or a handsome sash to wear at formal dinners or an award from some minor member of a Royal Family. These corporate social responsibility programs are what the corporate yacht was in an earlier age: the chance to build contacts and to get into elevated social circles. I'm sure that you couldn't show that the yacht directly helped make deals or build profits and you certainly cannot show that these programs do. My limited diplomatic abilities constrain me, but others make a lot of money out of producing the glossy card brochures, the coffee table books and the corporate ads with generic pictures of African villagers bought from Internet photo agencies.

Mark Chataway is co-chairman of Baird's Communications Management Consultants. He can be reached at mark.chataway@bairdscmc.com