Words to the Wise Can Boost Share Price

WASHINGTON Fostering the perception that a company is innovative can boost that firm’s stock price, says public relations firm Waggener Edstrom.

If clients understand the key words being communicated about their brand in the press, they can develop a plan to better control their brand messages in a complicated media environment and improve their bottom line.

Waggener president Corey duBrowa summed up the challenge of managing a brand’s message at a Sept. 26 presentation in Washington, D.C. Each day, there are 1.3 million blog postings, 320,000 new MySpace user profiles and 65,000 YouTube uploads, he said. The number of media outlets is growing at a rate of 7 percent each year, which is faster than the U.S. economy. And since Americans, who spend 9.5 hours a day consuming media, more than the 7.5 hours spent sleeping, say they are overwhelmed by the amount of choices, trying to control messages has become a Herculean task.

The field of public relations also has its own image problems when it comes to measuring the effectiveness of its industry. Counting mentions of a company in traditional media and then assigning an equivalent value (as if those impressions were actually paid advertisements) no longer impresses clients. And hiring interns to monitor blogs is hardly practical when the number of bloggers worldwide is expected to peak at 100 million this year, according to Gartner Research.

Brand monitoring solutions help track diverse and influential voices across such a wide spectrum—and can cost an average of $80,000, says Forrester Research. “Fragmenting media and changing consumer behavior have crippled traditional monitoring methods,” according to a Sept. 2006 Forrester report on brand monitoring. “Large enterprises need comprehensive coverage that requires advanced technology delivered by specialized vendors.”

Waggener has developed its own brand monitoring technique called the “Narrative Network,” which works a bit like a search engine highlighting words—though it also analyzes the relationships between words. The method is based on research the company released in March and has since put into practice. It now has some results of actual case studies to share.

The research showed a connection between media stories depicting a company as innovative and an increased stock price.

The pilot study examined the media coverage of 20 publicly traded companies—including Apple, Dell, Google and IBM—and analyzed the coverage of those companies in 15 business publications including The Wall Street Journal, Business Week, Forbes and The Economist over an 18-month period. Waggener then compared the key words used to describe the companies in the media with fluctuations in share prices during the same period.

When terms Waggener describes as “emotional-innovation key words” such as “pioneering,” “breakthrough,” “creative” or “cutting edge” were applied to companies like Apple and Google, there was a correlation with an increase in stock price. When the media used more rational, fact-based language like “research and development,” “engineering,” “patents” or “labs” for companies like Dell and IBM, the share-price correlation was not sustained.

“What does all this mean for PR?” asks Waggener svp Daniel Gallagher. “The people connection is really, really big, and if you look at the companies described as innovative and cutting edge—like Apple and Google—those are ‘people places.’ There is a lot of storytelling around Steve Jobs and the really good storytelling occurs when you talk about people. There is a sense of mystery about these companies, and people are being described as innovative. The people are the key elements in the story telling.”

DuBrowa puts it this way: “It is clear how journalists are pressed for time and resources. There are fewer writers and when the ad spend goes down, there are fewer pages to work with. Innovation helps us have a differentiating story to tell and it gives the company a unique selling proposition to cut through the clutter. Innovation is meaningful, especially when it is connected to a business driver. Journalists like to write that kind of story.”

It’s more than having a client throw around some buzzwords. The company has to be fully positioned as breakthrough and innovative. That means repeating the innovation message in every communication with the public, from corporate speeches made by CEOs to the story pitches and press releases sent to journalists. “We are weaving this into the strategy from the very beginning,” duBrowa says, asking clients, “‘How does your innovation relate to the culture of the company, the long-term ambitions, and what do you think is the differentiating aspect vis-a-vis your competition?'”

When Gallagher—who spent 20 years in advertising at shops such as Saatchi & Saatchi, JWT and Ogilvy & Mather—arrived at Waggener in 2004, he started looking for market research firms specializing in PR. He found none. “Everybody in advertising talks about how important the brand is because the brand is the story,” Gallagher says. “Where are the quantitative foundations for storytelling in PR? That idea is what started us on this project. Most advertising looks at how it’s received in people’s heads. We took it from the media perspective.”

By using the Narrative Network, the Truckload Carriers Association, a nonprofit trade group, learned that it had an image problem. The TCA had been doing market research, but, “we didn’t think we were getting the whole story,” says Debbie Sparks, the group’s vp of development.

The TCA had asked its Virginia-based ad agency SmithGifford, which also handles Roy Rogers and the Virginia Lottery, to create an image campaign. SmithGifford needed to know what the current image was, so it encouraged the group to have Waggener conduct a Narrative Network analysis of how trucking is perceived.

The results, which the group received last month, were jarring. Key words like “crash,” “death,” “police” and “kill” were the top indicators that came up in the media analysis. The group quickly realized its industry had a reputation for being unsafe because big trucks appear menacing to smaller vehicles on the road. “All of our hearts just stopped,” Sparks says. “Waggener said they had never seen a more negative image. This really showed us that we don’t have ownership of our brand.”

Sparks said the TCA also learned other important lessons. For the past 30 years, the industry has typically recruited new drivers by putting signs on trucks saying how many cents per mile drivers are paid. “There may be a secondary message being sent to the public that we are encouraging drivers to drive fast,” Sparks says. “The safety problem could be magnified by these posters.”

Then there is the question of how the group describes itself. “There is not one name we call ourselves,” Sparks says. “We use trucking, tractor-trailer, motor-carrier, heavy-hauler, big rig—and it is very difficult to build a brand identity when there are so many different words identifying your industry. Waggener said, ‘You need to come up with one word that describes you and stick with it.'”

Waggener also said the group had not been publicly discussing some of the positive programs it has in place to improve truck emissions to help counter the negative stories about accidents. The group will meet Oct. 20-23 at its national conference in Orlando, Fla., to determine how to fix the image problems.

For Bruce Gifford, a creative director and partner at SmithGifford, the Narrative Network analysis helped identify the target audience for the image campaign. “In this case, it’s a mind-set,” Gifford says. “And that can be shared by different people with different ages and lifestyles. So I need to speak to people who feel this way.”

Gifford believes the Waggener tool is a significant advance that goes beyond just PR, advertising and marketing. He calls it a communications tool. “Up to now, figuring out what people thought about an issue was like figuring out what was going on in a dark room,” he says. “We could hear some of the sounds in there. We could stick our hand in and feel parts of it. We could extract bits and examine them under a microscope. But the Narrative Network lets us see the entire room all at once.”

Peter Kim, a senior analyst at Forrester, considers brand-monitoring tools like the Narrative Network to be on the cutting edge of market research. “You are tapping into conversations and can aggregate insights that are unprompted and unbiased,” he says. “This is different from focus groups, which can be biased. “You are able to monitor the conversation and see how ideas flow and what magnitude they reach. This is what can give companies an early warning if something is an issue or not.”