Love 'em loathe 'em

Business may love them but Australian consumers have got the hump with many of the BRW Most Respected Companies. Admire two big financial services companies, two airlines and both halves of Australia's supermarket duopoly? Pur-lease.

There is not just a gap but a chasm between many of the companies business admires, and those loved by consumers. Take one example: Qantas (seventh on the list). Its long-cherished reputation as one of the world's safest airlines has been beset in recent years by tales of strife (outsourcing maintenance overseas) and snafus (most dramatically, an exploding oxygen tank that forced an emergency landing).

It is often subject to criticism for poor customer service, and its BRW award comes only weeks after winning a "shonky award" - a dubious accolade from consumer organisation Choice for hefty credit card surcharges on tickets.

How can a single company be so revered by business yet so reviled by consumers? Analysts say the disparity shines a light on the fundamentally different way business values what it does and consumers do. One branding expert argues the consumer benchmark of brands is a more reliable indicator of real power in the market.

For eight of the companies in the top 10, the business name and consumer brand are identical (Woolworths, Westpac Banking Corporation, Google, Virgin Blue, Qantas, Toyota, GE and Origin Energy). Wesfarmers is not a consumer brand, but it is the parent company of two retail icons - Coles and Bunnings. BHP Billiton is the only other company in the top 10 that is not directly exposed to consumers.

While business admires these brands for their management, finances and records of handling risk and adversity and so on, consumers have a different emphasis. Their direct or indirect experience of buying and using a product - and how well it delivers on the marketing promises - determines how they value brands.

"Brands are basically ideas and emotions," the national research director of advertising agency George Patterson Y&R's brand consulting division, David Evans, says. "As an abstract idea, a brand doesn't sit in the asset register of a company. It sits in the mind of a consumer - and that's where you should be evaluating it."

Evans is talking up George Patterson Y&R's 2009 Brand Asset Valuator study, based on surveys of 4000 Australian consumers and their rating of 1200 brands in 139 categories.

The study gives fascinating overlaps and disparities between business and consumer perceptions. Google and Bunnings (a subsidiary of Wesfarmers) make the top 10 for both BRW and George Patterson Y&R. Google is placed fifth for business and first for consumers, a finding that is consistent across genders, states and every age and income bracket, Evans says. "It's easy to understand why: it delivers on its promise to any consumer, anywhere, and is always generating new information and help."

Wesfarmers ranks third for business, while its subsidiary Bunnings comes in ninth for consumers. Ongoing improvement of the customer experience explains its popularity, Evans says. "It used to be just hardware retailing. Now they sell you tools, and help you use them and even design your project." As a result, the brand can be compared with sexy, high-tech interactive ones - and even outperforms them. "Bunnings [ranks] better than wii."

It's not roses but raspberries from consumers for banks and financial services brands (with the rare exception of ING). Worst of all is global conglomerate GE, whose most high-profile business in Australia is consumer finance. It's ranked ninth on the BRW list and a shameful 1015 on the brand values list.

Selling high-cost credit products to consumers is profitable, but does not earn much in the endearment stakes. "GE has a very poor reputation with the consumer in terms of service and brand reputation," Evans says.

It is a similar story at consumer organisation Choice. Boasting 200,000 members, Choice has been a critic of many of the companies on the list. Spokesman Christopher Zinn says: "GE might have some fantastic runs on the board in terms of global strategy ... but my immediate focus [is] on some of their credit products, both in terms of the lending practices and rates they have charged of late."

Zinn is not surprised that the same companies reviled by consumers are feted by their peers. It's part of his organisation's role to uphold exacting standards and focus on areas where companies let consumers down - but this is not to say they don't offer excellent products and services in other ways. "There's an inevitable disconnect because we look at different things," he says.

Another analyst thinks the disparity between business and consumers is because one looks back, the other forward. Baldeep Gill is the communications director of consultancy Brandaide, which helps companies collect and analyse consumer feedback and runs consumer complaints website nootgoodenough.org.

Gill says that when it comes to thinking about brands they admire, businesses look at past achievements, while consumers look ahead and make predictions about likely buying decisions.

This difference accounts for the lag that can occur when a business cuts costs. Gill points to the hospitality industry during the global financial crisis. "A lot of hotels cut back on little extras - the fruit bowl at the front counter, the chocolates on the pillow," he says. The bottom line improves in the short term, and the business community cheers - but the consumer impact isn't felt for some time and may be severe.

"Business looks at the performance of its peers, sees who hit the market that everyone else missed," Gill says "Consumers, on the other hand, are making a current decision about what they will do in the future."

On the money

Being respected is an honour, but does this sort of recognition also make a company a great investment?

Not according to the share price performance of the BRW Most Respected Companies when measured against local stockmarket indices.

A portfolio of the seven Australian shares in the top 10 companies, equally weighted, would have delivered an investor a 27 per cent increase in value in 2009, well above the 22 per cent increase of the S&P/ASX 200 over the same period.

Individual results were mixed. Three companies - Virgin Blue, Wesfarmers and Westpac - outperformed the relevant local index and seven underperformed, as the table shows.

Studies overseas have shown little correlation between business esteem and investment performance.

In 2002, two academics from the University of Wisconsin analysed the share price performance of Fortune magazine's list of Most Admired Companies (conducted by HayGroup, the same firm that undertook BRW's research).

Professors Greg Filbeck and Thomas Krueger found that while these favoured companies outperformed the S&P 500 over most time periods, this advantage disappeared when weighted against peers in terms of industry segment and market capitalisation.

Arbitrageurs will also be disappointed by this: the authors found little evidence of a market reaction to the results of the survey.

In short, good companies don't always make good investments - because out-of-favour and undervalued companies will often perform better than the favoured few.

It is not only how well or badly a company is managed that determines its stockmarket returns; it is also how well or badly it is managed relative to expectations.

BRW