Brand names are important to companies no matter their line of business. A well-respected brand name can provoke images of quality, good nature, and reliability. So it's no wonder large corporations regularly spend millions of dollars per year to improve their brand images. A study conducted by CoreBrand and reported on by Yahoo! Finance sheds some light on who has the most, and least, respected brand names.
Business advantages and disadvantages
Some companies have an advantage in brand name simply based on what they do. Hershey (NYSE:HSY) ranks as the third most respected brand name, given a boost by the fact people tend to like chocolate. Other names in the top group have products people generally like using. Examples include Coca-Cola and PepsiCo (soft drinks), Harley-Davidson (motorcycles), and Johnson & Johnson (baby products).
But not every line of business comes with an inherent brand likeness. Few would be shocked to see Philip Morris, a subsidiary of Altria Group (NYSE:MO), as part of the least-respected brand list. But the tobacco company is second to Delta Air Lines (NYSE:DAL) on the list. Because of negative impressions, and the sometimes harsh realities of airlines, large segments of the population generally dislike passenger airlines. Some of the other names making this list aren't too surprising, either: J.C. Penney with its recent retail rebranding problems, H&R Block in tax preparation, and Capital One in financial services and credit cards.
We all know the importance of a good brand image, and it's clear that the major corporations do as well. While watching TV it's fairly common to see some company trying to show off its good side, whether it's Bank of America helping small businesses or BP cleaning its oil off Gulf beaches. But we have to compare all of these companies with their peers, not just other corporations. After all, people aren't going to switch from Delta Air Lines to Hershey's chocolate.
On the respected-brand-image side, Hershey is capitalizing well on the public's love of chocolate. The fact that people don't explicitly dislike Hershey should help in preventing customers from jumping to other brands, but with many other competitors in the field, there are many other chocolate producers to love. Quite likely, many smaller producers also have their own followings, with at least as much brand dedication as people have to Hershey. And if the chocolate-loving tastes of the public are what drove Hershey near the top of the list, it would only make sense that rivals would also have respected brand names. Clearly, the Hershey brand name has value: Millions instantly recognize it. But its high ranking is most likely driven by a general public fondness for chocolate, particularly Hershey's chocolate. However, in a nation of chocoholics, this is still a highly prized position.
Moving to the least respected brand names, it's quite easy to see how Phillip Morris captured its title. Tobacco companies are frequently invoked as pictures of corporate greed, deceptive advertising, and an indifference to human life. But from a purely financial point of view, a public dislike of the Philip Morris brand name is not a major threat to a company that competes with similarly disliked peers. And unlike other companies where customers can easily jump ship, Philip Morris' products are addictive in nature. Customers could choose an alternative tobacco brand, but a general dislike of tobacco companies would limit the consumer's perceived benefits of switching. For this reason, I don't consider Phillip Morris' position among the least-respected brand names to be a threat to its sales.
Delta Air Lines represents an interesting situation, since, while there are are other major carriers Delta competes with, Delta itself was the only one to make the least-respected list. There are multiple interpretations here. One is that Delta is simply the worst major airline overall and that businesspeople (the ones surveyed by CoreBrand) can't stand the carrier -- enough to rank it worse than the tobacco company. Another is that a general disdain for airlines exists and Delta does just enough to push it onto this list. If the former is the case, that's a problem for Delta, sincebusiness people are top customers for airlines, purchasing more expensive seats and extras while traveling on the company dime. But I see the latter as more likely, since all carriers have inspired their fair share of horror stories and customer outrage.
Even if Delta is a universally poor service airline when compared with its rivals, airlines have an advantage many other companies don't: Airlines tightly control slots and routes determining when flights are offered, how many seats are available, and any connections made. They also tend to build dominant presences around certain airports. United Continental has a major Chicago O'Hare presence, American Airlines is strong at Dallas/Fort Worth, and US Airways dominates the Charlotte airport. Delta is no different, with major control in Atlanta, Detroit, and Salt Lake City. In the case of all airlines, customers looking to fly often have limited choices, making them less selective based on the reputation of the airline.
This survey by CoreBrand is just one of many, but it does give us a chance to size up how businesspeople view the brand names of major corporations. While the corporations on these lists aren't necessarily competing with each other, they are competing for consumers' dollars. Brand names are essential, but looking at how they compare in context is also essential. For now, I am holding my shares of Delta, will continue to eat Hershey's chocolate, and have no plans to provide any sales to Philip Morris.
Alexander MacLennan owns shares of Delta Air Lines. He is also long $22, $25, and $30 January 2015 Delta calls, $17 January 2015 US Airways calls, and $50 January 2015 BP calls. The Motley Fool recommends Bank of America, Coca-Cola, Johnson & Johnson, and PepsiCo and owns shares of Bank of America, Johnson & Johnson, and PepsiCo. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.