Making and unmaking of brands

A brand is meant to differentiate a product from its competition. Hence, companies spend a lot of money branding their products to communicate the quality, design, and/or other features that they feel make their products stand out. Countries have also gotten into the branding game as they try to communicate a preferred image. This can work quite well if they are clear as to what they want the brand to communicate.

Look at all the countries that advertise calling for investments and claiming to be investor-friendly. However, if their actions do not match the promise, it is a lot of money down the drain. On the other hand, it is safer if a country's brand can capture a broad construct, such as the spirit of the people; then it may allow a lot of sub-themes to flourish under it.

India has been heavily promoting the country brand through programmes such as ‘Incredible India.' The immediate benefit, of course, is expected in the area of tourism and one could look at tourist arrivals and judge whether all the promotion has had an effect. But simultaneously, reports about Maoist rebels beheading policemen (even if it is in a remote village) are certainly going to put a damper on the plans of the most intrepid traveller.

A country's brand can emerge without a coordinated effort of its government. Around the time of World War II, Japanese products were regarded as cheap and not reliable. During post-war reconstruction, the companies there worked hard to build their products and slowly the country took on the image of quality and reliability.

These spill-over effects can work in different ways. Thus, when one company gets negative publicity, should its competitors cheer or worry? The answer probably depends on whether you belong to the same country or not.

Prototype theory

The study of these spill-over benefits rests on what is called prototype theory, namely, that people categorise an object based on similarity that then begins to represent a category.

Thus auto, electronics, and other companies and their qualities came to represent Japan. This makes information processing cognitively simple. We develop a mental model and the prototype helps us judge the whole category. Think of politicians and corruption, or bureaucrats and inefficiency; although there are incorruptible politicians and efficient bureaucrats (let me know if you find them!).

In 2009-2010, when Toyota suffered from a series of complaints, extensively covered in the media, about unintended acceleration issues, Consumer Reports , an independent organisation in the US that researches and recommends products, even issued a ‘do not buy' recommendation for some Toyota models.

Subsequent investigations exonerated the company and pointed to driver error as being the cause of the problem in many situations. However, the damage to its brand image was significant and one study estimates the loss at about $5 billion (about Rs 22,500 crore). Ironically, just two years earlier, the company was rated the number one brand for quality, reliability, and so on.

A paper examining this spill-over effect titled ‘What happens to ‘Brand Japan' when Toyota suddenly accelerates?' was presented by Mr Peter Magnusson and his colleagues at the Academy of International Business annual meeting in Nagoya, Japan, that concluded end of June. The paper looked at the effects of the negative publicity on account of recall of cars suffered by Toyota in the US and about which I have written recently in this column.

Based on two consumer surveys, administered in 2008 and 2010, the authors examined longitudinal differences in perceptions. They found a less favourable attitude towards Toyota, Japan's country image and other Japanese high-technology brands. Interestingly, the domestic US auto industry may have benefited from this and saw an improvement in its image.

Of course, the study is a test of difference in perceptions over time and we should not be judging causality from association, so hopefully further studies will try to directly measure such spill-over effects.

At the same conference, I heard the Chairman of Toyota, Mr Fujio Cho, talk about the difference in the approach to human resources between Japanese and US companies. He was being recognised as International Executive of the Year. Neither in the citation recognising him nor in his presentation was any reference made to the recent damage to the company's image.

Whether it was oversight or overconfidence, he certainly missed an opportunity to communicate to over 800 academics from around the world on a crucial issue that has shaken Toyota as an organisation.

Reverse effect

The study referred to deviates from many other studies in the country of origin literature that have looked at the causality in reverse. That is, beliefs about a country lead to related thoughts about the country-of-origin, which in turn accounts for how the brands from that country are evaluated, and thereby translated into purchase intentions. Many of the Japanese products benefited a lot from this too as they came to be accepted based on the country's reputation for good quality.

Extending this discussion from a purely marketing perspective can lead us into areas that can have public policy implications. If a leading company or set of companies falters, should the State step in and try to contain the damage since the spill-over affects other brands and sectors of the economy too? Perhaps that is partly what drove the Indian government to swiftly intervene when the Satyam malfeasance and scandal began to unravel. The possible spill-over effects on a rising and promising IT sector of the country unnerved a lot of people.

In Japan's case, neither Toyota nor the Fukushima nuclear plant problems may cause much of a dent to that country's image. Since the causality can work in both directions, we also have sufficient grounds to argue that companies can or should grab the politicians by the scruff of their neck if they dither on issues such as corruption or terrorism which can have major spill-over effects.

(The author is professor of International Business and Strategic Management at Suffolk University, Boston, US. >blfeedback@thehindu.co.in ).

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