INTERNATIONAL SCIENTIFIC DAYS 2006 "Competitivness in the EU Challenge for the V4 countries"

Faculty of Economic and Management SAU in Nitra Nitra, May 17-18, 2006

THE ROLE OF MARKETING COMMUNICATION IN DEVELOPING CORPORATE REPUTATION

VLASTELICA Tamara, (SCG) ABSTRACT This paper suggests the appropriate marketing communication strategy for building and maintaining corporate reputation, with special emphasis on the corporate social responsibility. The author will present the model for planning and implementing corporate communication in order to create a favorable environment and earn trust and respect from a stakeholders and public in general, crucial for establishing long-term relationships beneficial to both the business and the society. Organizations have to develop strong corporate identity, which will reflect the corporate values to target audiences and general public. Through the identity, the stakeholders form image of the organization and, through time, corporate reputation is built. Corporate reputation is much more than image. It is public reflection of the historical and accumulated impacts of corporate identity and behavior, in some cases fashioned by near or actual transactional experiences. It takes long time to develop or change reputation, while images may be influenced quite quickly. KEY WORDS marketing communication, corporate identity, image, reputation INTRODUCTION Building and maintaining corporate reputation is the main task of the organizations that today operate in much more unfavorable environment, due to the general decline of trust in institutions. This is specially the case in the countries that are in the process of transition towards the market economy and the European integration. Todays heightened interest in the proper role of business in society has been promoted by increased sensitivity to ethical issues. Issues like environmental damage, improper treatment of workers and faulty production leading to customers inconvenience or danger, are highlighted in the media. Government regulation regarding environmental and social issues has increased. Investors have begun to make investment decisions based on social sustainability as well as pure economics. Consumers have become increasingly sensitive to the social performance of the companies from which they buy their goods and services. This accumulation of industry forces pressure firms to operate in economically, socially and environmentally sustainable way [3]. One of the main tasks for the management is to develop and implement appropriate corporate and marketing communication strategy in order to create a favorable environment and earn trust and respect from a stakeholders and public in general, crucial for establishing long-term relationships beneficial to both the business and the society. MATERIAL AND METHODS The problem of corporate reputation and the role of marketing communication in its development and maintenance are approached from management perspective, based on the theoretical framework given in contemporary international literature concerning this issue. The books, articles and web pages, which have been used as resources, are given in the literature section of this paper. In addition, the methods applied for discussion and conclusion are:

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INTERNATIONAL SCIENTIFIC DAYS 2006 "Competitivness in the EU Challenge for the V4 countries"

Faculty of Economic and Management SAU in Nitra Nitra, May 17-18, 2006

Empirical research The survey conducted by Responsible Business Initiative and

Strategic Media and Marketing Institute in 2005 called Socially Responsible Business in Serbia. The survey investigated attitudes of five target groups: the general public, the business sector, the non-profit sector (NGO), international development partners and state and local administration. The general public survey was conducted by polling, face to face interviews with random representative sample of 2212 respondents. The business sector and NGO sector survey was conducted by means of individual half-structured 78 interviews. The author also analyzed the practice of large domestic and international companies in Serbia, using the method of case studies. Methods of logical explanation (analysis-synthesis, deductive reasoning, generalizationspecialization) and Verification method (practice). 3. RESULTS AND DISCUSSION It is almost impossible to find in the literature unique definition of the corporate reputation, although most of the academics and practitioners agree that corporate reputation is one of the most important factors of business success. This is because corporate reputation is determined by different factors in different countries, influenced by economic, political, social and cultural variables. The common view is that it is extremely important to identify the societys expectations of a good corporate behavior, since these expectations define the specific attributes of corporate reputation [9]. Authors Fombrum C. i Foss C. [10] analyzed the data regarding corporate reputation from different countries and industries. The findings demonstrated that people form their attitudes and feelings about companies on one of the 20 attributes that they grouped into six dimensions: Emotional Appeal (How much the company is liked, admired and respected); Product and Services (Perception of the quality, innovation, value and reliability of the companys products and services); Financial performance (perception of the companys profitability, prospects and risk); Vision and Leadership (how much the company demonstrates a clear vision and strong leadership); Workplace Environment (perception of how well the company is managed, how it is to work for and the quality of its employees); Social Responsibility (perception of the company as a good citizen in its dealings with communities, employees and the environment). However, it is not enough to perform excellence in the areas stated above. Management needs to find a way to communicate companys values and responsibility to all the stakeholders and general public. Beside managing public relations (internal communication, crisis communications, media relations, etc.), very important role in overall business communication of the company have marketing communications. In the case of building corporate reputation, the most important is effective and efficient advertising strategy, generating publicity for the company in mass-media and establishing two-way symmetric communication with target audiences, usually via interactive media. Having in mind the specifics of the transition countries, regarding the political, economical, technological and specially socio-cultural factors, formulation of strategies and tactics for communicating corporate values and social responsibility should include environmental analysis, identifying target audience and researching their profile, defining long-term and short-term goals and objectives, developing strategic and tactical tasks and activities and finally adopting a model for evaluation of the effectiveness and efficiency of the undertaken communication activities.

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INTERNATIONAL SCIENTIFIC DAYS 2006 "Competitivness in the EU Challenge for the V4 countries"

Faculty of Economic and Management SAU in Nitra Nitra, May 17-18, 2006

Environmental analysis and target audience profiling should include the research of their knowledge and opinion of what makes a good corporate reputation. Very indicative are results of the study conducted in Serbia Understanding of and Attitudes towards Responsible Business [3]. This research has shown that the trust of the citizens of Serbia that any institution (either Government institutions, or NGOs) or company, works in the best interest of the society (either general society wise, or local community wise) is extremely low. The least trusted are large international companies, with only 11% of the respondents stating that they do have trust and 61% that they do not have trust in them. Further more, the results of the study have shown that citizens awareness of the importance of the responsible attitudes of companies towards the society is quite low, unlike the situation in developed countries. Most of the citizens think that Government institutions should be the most responsible for the general welfare of the citizens, while the large international companies and NGO sector should be the least responsible. These results are not a surprise since until the end of the 1990s almost all the companies were owned by the state. Obviously, the public is not aware who and in what way can and should be responsible for the benefit of society. Also, the study shows that most of the citizens are forming their image of companies and making a choice between the products, based on the most direct benefit for them. When it comes to the ranking the importance of different factors that determine their opinion about some company, the situation is as following: quality of product and services at fair prices (60%), protection of health and safety of workers (48%), law-abiding business(34%), fair attitudes toward employees (28%), protection of environment (23%), providing safe jobs (20%), certainty that children work is not used (15%), helping development of local community (11%), contribution to national economy (11%), general business ethics (5%), philanthropic activities (3%), clear communication of all risks related to products (3%). In respect to this, the objectives for communication program that refers to corporate values and CSR in transition countries could be the following: 1. To increase the level of knowledge of general public about corporate social responsibility - What is CSR? Who is in charge for practicing CSR? How to integrate CSR in business strategy and activities? 2. To increase the awareness of employees and the general public of the importance of the responsible attitude and influence of companies to the society and environment. 3. To establish and introduce corporate values and social responsibility and to communicate them to the management and the employees, in the way that will ensure their acceptance and practicing in everyday work. 4. To build the good corporate citizen image and reputation of the company that embraces, nurture and spread social and environmental responsibility.(Thus, the first two objectives refer only to the companies operating in the countries in transition.) As a theoretical framework for building corporate reputation by communicating corporate values and social responsibility, the author of this paper suggests the strategy of multiphase integration of corporate values into corporate culture, identity, image and reputation, as shown in Picture 1. Every phase has a specific target audience, communication tools to be used and objectives to fulfill. BUILDING CORPORATE CULTURE Target audience: Management and employees. Communication tactics and tools: direct communication, meetings, manuals that describe corporate values within the vision, mission and everyday business activities of the company and of the each employee, educational seminars, companys newsletter, briefings with instructions for behavior, clear statement of how the acceptance and practicing of the proclaimed corporate values will be included in the process of evaluation of their work performance (financial benefits, promoting, special awards such as employee of the month,

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INTERNATIONAL SCIENTIFIC DAYS 2006 "Competitivness in the EU Challenge for the V4 countries"

Faculty of Economic and Management SAU in Nitra Nitra, May 17-18, 2006

greater participation in decision making process, etc). One of the most effective ways of communicating corporate values to the management and employees turn out to be storytelling. Storytelling is a powerful communication tool that advertising and PR professionals use very skillfully to promote their companies products or services. However, the stories can be equally effective in internal communication. To understand and appreciate what their organization stands for, workers need to hear about its people, its values and its history [9]. The task of the management at this point is also to choose or invent new ways of practicing social and environmental responsibility through concrete actions and socially useful projects that will address the issues that are of the greatest importance for the internal and external companys stakeholders for a given country or region. These actions will be the topic of marketing communication strategy in the next phases.

CORPORATE VALUES AND SOCIAL RESPONSIBILITY

CORPORATE CULTURE

CORPORATE IDENTITY

CORPORATE IMAGE

CORPORATE REPUTATION

Picture 1. Development of corporate culture, identity, image and reputation with respect to the corporate values and social responsibility CREATION OF CORPORATE IDENTITY Target audience: Employees, management, suppliers, other business partners, customers, government, local authorities, NGOs, media, investors, shareholders, local community and general public. Communication tactics and tools: Integrating corporate values into the communicational aspects of elements of the visual identity (logo, color, business cards, companys premises, employees uniforms, packaging of the product, vehicles, flags, slogans, Internet presentation, etc.). The special emphasize should be put on the importance of a slogan and Internet presentation. Slogan, in this case, is not a short-term headline for advertising purposes, but kind of a temporary companys statement such as Connecting people (NOKIA), Joy of life (Coca Cola), Touching lives. Improving life. (P&G), "We try harder." (AVIS), etc. Considering the growth of cyber population (the percentage of population whose primary

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TARGET AUDIENCES

INTERNATIONAL SCIENTIFIC DAYS 2006 "Competitivness in the EU Challenge for the V4 countries"

Faculty of Economic and Management SAU in Nitra Nitra, May 17-18, 2006

source of information and entertainment is Internet) it is evident that statement on corporate values and social responsibility should be presented via this channel of communication. CREATION OF CORPORATE IMAGE Target audience: Employees, management, suppliers, other business partners, customers, government, local authorities, NGOs, media, investors, shareholders, local community and general public. Communication tactics: One possible tactic for building corporate image, that is especially appropriate for countries in transition, is taking advantage of the fact that there is no a long tradition in communicating corporate values and social responsibility to the public, and therefore every effort in this field might be awarded by the positive feedback and trust of the general public. There is also a possibility to manifest a social responsibility by informing and educating public about the importance of this aspect of corporate businesses. This education may include the information about what citizens can expect of corporations or in some cases when the responsible behavior lacks, what they can demand from corporation in order to protect the social interest of the local community. Communication tools: Advertising (Cause Related Marketing techniques), generating publicity for the actions that company is taking in the field of humanitarian work, philanthropic activities, fight for the human rights and similar initiatives, brochures, press releases, press conferences, event management, etc. One of the marketing communications strategies for building corporate image may be so called Cause Related Marketing. It is defined as a process of formulation and utilization of marketing activities characterized by non-profit contribution, which, in turn, causes customers to engage in the revenue-providing exchange. Todays market is characterized by a large number of products of similar quality, price and purpose. Out of a growing need to differentiate themselves and their products, many companies have started to use cause related marketing as a way of communication within their marketing, packaging, promotion and finally, corporate social responsibility [7]. Cause related marketing usually refers to commercial activity in which companies and non-profit organizations form alliances to market an image, product or service for mutual benefit. Companies intention is to attract consumers wishing to make a difference in a society with their shopping, because increasing number of consumers find those companies that care about social issues more appealing. Such sophisticated clients and consumers, who think about the companies behavior regarding environmental or social issues, are on the rise. Obviously, Cause related marketing positively differentiates the company from its competitors, but also ensures other advantages including boost in sales, attracting and retaining consumers, greater loyalty of the consumers, greater visibility, improvement of the companys image, positive media coverage, etc. DEVELOPMENT OF CORPORATE REPUTATION Target audience: Employees, management, suppliers, other business partners, customers, government, local authorities, NGOs, media, investors, shareholders, local community and general public. Dowling defines corporate reputation as the attributed values evoked from the persons corporate image. As such, a good corporate reputation is the final proof that the values and responsibility that has been communicated within the previous phases, is really practiced in the business strategy of the company and everyday activities of its representatives (management and employees). According to Fill C. [2] corporate reputation presents a deeper set of images, an individuals reflection of the historical and accumulated impacts of previous identity cues, fashioned in some cases by near or actual transactional experience.

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INTERNATIONAL SCIENTIFIC DAYS 2006 "Competitivness in the EU Challenge for the V4 countries"

Faculty of Economic and Management SAU in Nitra Nitra, May 17-18, 2006

A strong corporate reputation is strategically important for three main reasons: as a primary means of differentiation when there is a little difference at product level, as protection if company encounters environmental turbulence or crisis, and finally, corporate reputation became a part of the brand and corporate value. It is obvious that one company cannot establish direct contact with all the representatives of its target groups and therefore marketing communication via mass-media is of extreme importance for building corporate reputation. There are few good examples of how marketing communication could be used for corporate reputation development, not only for the promotion of products and services that one company offers. First, large domestic company Serbian Oil Industry (Naftna industrija Srbije NIS) last year started with its advertising campaign called Responsible.... TV commercials and street billboards were sending the following messages: Responsible to the nature, Responsible to our employees, Responsible to the state, Responsible to the future, Responsible to you, etc. In this form of corporate advertising they did not promote any of their products or services. Second example of advertising with clear goal for developing and improving corporate reputation is US Steel Serbia. In September 2003, U. S. Steel purchased Serbian steelmaker Sartid a.d., an integrated steel producer with facilities in Serbia. During that period this company encountered hostile internal and external environment, strikes and serious crisis. Before that, US Steel had never organized advertising campaign, since they were not producing consumer products. In 2005 they launched intensive marketing communication campaign with slogan For better life in Serbia and We work for them followed with pictures of employees and their children. Clearly, this was a corporate image and reputation building campaign. In this paper the author tried to answer the question how and what to communicate to the public in order to create good corporate reputation, a favorable environment and earn trust and respect from a stakeholders and public in general. LITERATURE 1. Pickton D., Broderick A., Integrated Marketing Communications, Prentice Hall, Harlow, 2001, ISBN 0 273-62513-6 2. Fill C., Marketing Communications engagements, strategies and practise, 4th edition, Prentice Hall, Harlow, 2005, ISBN 0 273 68772 7 3. RBI newsletters, no. 1-4, 2005, monthly issue by Smart Kolektiv (www.smartkolektiv.org; 2006-01-20) 4. Wilcox D. L., Ault P.H., Agee W.K., Public Relations Strategies and Tactics, 4th edition, Harper Collins College Publishers, 1995, ISBN 5. Vlastelica T. Kosti M. Baki I.: Communicating Corporate Values and Social Responsibility in Countries in Transition Challenges For International Companies, Paper presented at Annual Congress 2005 of the European Public Relations & Research Association (EUPRERA), Lisbon. 6. Kraus M.: Earn a return on your reputation, Article in CEO magazine, 2004. (Source: www.reputationinstitute.com) 7. www.selfgrowth.com 8. www.csreurope.org (2005-09-06) 9. www.marketingprof.com(2005-12-21) 10. www.reputationinstitute.com (2005-10-15)

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INTERNATIONAL SCIENTIFIC DAYS 2006 "Competitivness in the EU Challenge for the V4 countries"

Faculty of Economic and Management SAU in Nitra Nitra, May 17-18, 2006

CONTACT ADDRESS Tamara Vlastelica, B.Sc. Teaching assistant at the Faculty of Organizational Sciences University of Belgrade. Address: Jove Ilica Street, Number 145, 11000 Belgrade, Serbia and Montenegro. E-mail: tamarav@fon.bg.ac.yu

Recenzent: doc. Ing. Iveta Ubreiov, CSc.

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