Strategic Missteps That Drive Down Shareholder Value

Brand marketing, brand equity and brand prominence drive shareholder value. A company’s business strategy mistakes can make the news and hurt its image in the eyes of shareholders.

The top three reasons for decline in shareholder value are:

      1. Management has lost touch with the marketplace;

      2. Management fails to have a strong business strategy; and/or

      3. Management neglects to leverage brand assets.

Companies sometimes lose sight of the market for their products. If companies are going to rebuild what has been lost, they will need to recognize the relevance of certain basic marketing lessons. These are lessons that form the core of any sound branding strategy.

Branding value begins by:

• Knowing that loyalty is earned;
• Staying in touch with the marketplace, and delivering value to customers;
• Understanding what drives product/brand demand and customer loyalty;
• Acquiring new customers and, even more critical, maintaining relationships with existing customers; and
• Developing and sustaining a strong competitive position that will allow you to compete on differentiation—the things that make you unique—and thus avoid the pitfalls of downward price adjustments and pressure.

The underdog’s inherent advantage….
The media loves an underdog. If David were slinging rocks at Goliath today, be assured that David would get the favorable media coverage. Consider Apple vs. Microsoft. Apple attracts lots of press coverage, helped of course by the introduction of the iMac and iPod. Interestingly, over the years, even before these products were introduced, Steve Jobs consistently jabbed at Bill Gates, making it look like there is real competition for market share between Macs and PCs. The facts, however, tell a different story. Last time I checked, Apple had less than 5% of the market share! In this case, Steve Jobs had the “rocks” to go after the Goliath in his industry, to good effect.

That example is a gentle competition. Charges of abuse, failure to do the right thing, etc. make better stories than your denials—as accurate as these denials may be. Rest assured that if an underdog is taking your company to task for any perceived indiscretion, that underdog, with whom people will identify, is going to be the lucky recipient of more favorable press than you will. Expect the story to see print. And if any retraction is necessary due to a publication’s faulty reporting, don’t expect it to appear on the front page like the story that ran about your supposed transgressions. No, look for it on some other obscure back page.

The solution here is to do everything you can to prevent the story in the first place.

PR can help you become your own “turnaround specialist”
If your company is struggling through a near-death experience, public relations can help. Joann Lubin of the The Wall Street Journal interviewed Robert S. “Steve” Miller Jr., who was the lead negotiator in Chrysler’s loan bailout experience. Miller has subsequently led the turnarounds of several other companies. Miller’s advice, which can be readily adopted to create a successful public relations campaign during a crisis, falls largely into these four areas:

1. Tell the truth. Your personal credibility is key. Good or bad, tell it like it is, and tell anyone with the right to know—including your Board of Directors, stockholders, customers and employees.
2. Act. Do something. Don’t just “study the situation” eternally. The things that need to be done are usually pretty obvious.
3. Listen to your people. Hire good public relations advisors and listen to their suggestions carefully. Give them access to your staff as necessary. Too often, management makes the mistake of becoming insulated, and loses sight of what is really happening.

At The Investor Relations Group, we work in an open, loft-like environment where we can all see each other. Nonetheless, I am still often somewhat surprised by the answers I get from my staff during our one-on-one lunches, when I ask, “How’s it going?” These lunches are extremely helpful in keeping me in touch with important details I need to know. It is vital for leaders to keep on top of every aspect of their company.