8/8/2019 Article - Negative Brand Equity

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mark marketingweek.c

NEGATIVE BRAND EQUITY'S A DEATH SENTEN

Buy shares in BP. That wa s the bizarre advicefrom Royal Bank of Scotland analysts last weekafter those bright sparks worked out that eventhe worst possible costs of the DeepwaterHorizon will total less than the actual drop in BP's

market value.RBS has , of course, got it wrong again. Long

after the costs have been paid and the oilcleaned up, BP will continue to live in infamy asone of the world's most shamed brands. Theofficial terminology for this kind of perilous stateis negative brand equity. And it spells disasterand probable death for the company that wasonce known for being "Beyond Petroleum".

Negative brand equity occurs when a company'sbrand actually has a negative impact on itsbusiness - meaning that the company would bebette r off with no na me a t all. It happe ned in theSeventies when Tesco's brand was so poorlyperceived that Imperial Tobacco decided not toacquire the retailer for fear of being associatedwith such a tarnished and unpopular organisation.I t happened again in the Ninet ies when Skodadiscovered to its horror that it could not get Britishconsum ers to buy its cars despi te spendingmillions on advertising. Consumer research laterconfirmed that two-thirds of its target marketwould literally not consider anything at any pricethat carr ied the Skoda badge.

And now we have BP. Like every case ofnegative brand equity before it, the peculiaritiesof the situation mean that all the traditionaladvan tages of branding are now inverted. BPwould be better off whitewashing its forecourtsand removing all evidence of its Helios brandidentity. That said, the actual impact of the

Deepwater disaster on BP's petrol pump sales islikely to be localised and temporary. W e knowfrom past history that petrol consumers are afickle bu nch. W hen the Exxon Valdez oil tankerspilled its load into Prince William Sound in 1989the enduring impact on Exxon's gas sales, evenin the stat e of Alaska, w as virtually zero.

Unfortunately for BP, the more seriousimplications of negative bran d equity transcen dconsumer sentiment. BP is discovering thatnegative brand equity can also have a detrimentalimpact on its relationships w ith supp liers. Earlierthis month, for example, the company returned toits banke rs to seek additional finances to helpfund the clean-up operation in the Gulf. While BPdid apparently raise money, the funds were only

obtained after it agreed to pay significantlygreater margins and fees. BP needs to get used tothis - it will become standard business practice

To put it inlayman's terms,BP is wo rth moredead than alive

See Maik Ritsonappear at The Annual,Marketing Week's ne wconierence on 29September 2010www. theannuaico. uk

from now on as suppliers that once pridedthemselves on dealing with BP regard sucinteractions as a reputational an d financialEven Lord Coe, the head of the 2012 LondoOlympics, recently had to defend BP's

sponso rship of the G ames in light of theDee pwater aifair. The tarnished oil giant ceven give money away without a fight.

Even more pernicious da mag e is beingBP at the employee level. Internal memoshave recently advised staff not to wear thcompany logo and to take caution in revewho they work for in public settings. Gooadvice, but also a measure of the kind of that negat ive brand equity has on humanresources strategies. One of the bigges t dbehind the rebranding of BP in 2000 as "BPetroleum" was to avoid losing talent to positioned, more ethical brands. BP now the prospect of navigat ing the century ahwith a damaged brand and an increasing

second- ra te management t eam.

And finally there are the financialimplications. A well run global brand likeGoogle t rade s at a ma ssive premium fromassets because i t also owns a brand namhas widespread aw areness and pos i t iveassociat ions. Mil lward Brown va lues Goobrand equity at $114bn (£75bn), or roughthree-quarters ofthe company's total valucontrast, BP's current market capitalisatiless than its book value. If you broke up sold off all its oil wells, offices and otheryou would recoup a sum bigg er than BP currently worth. To put it in layman's teris worth more dead than al ive.

And death is exactly what will eventuabefall BP. It will probably be gobbled up bcompetitor keen to get its hands on BP's for less tha n th ey are actually w orth. E veavoids that fate, its brand is so tarnished will eventually have to break itself up andrebrand the various offshoots with newidentities untainted by any association wcurrent corporate identity.

How ever it eventually occurs, the de athis an entirely appropriate fate for a brandclaimed it was green (and wasn't) and a cwho se core competence w as pum ping oi lto land {and couldn't). Good riddance. •

Mark Ritson is an associate professor ofmarketing, an award-w inning columnist

a consultant to some oí the world's bigbrands

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