Copyright Economist Newspaper Group, Incorporated Mar 21, 1998A MAN'S hand reaches to turn on a General Electric lightbulb. A voice explains that this man, about to start work, invented the GE jet engine. That engine is flying a technician to an energy plant driven bya GE turbine, one powering a hospital where a little boy now clambers out of a GE medical scanner. Healthy, he skips off to a football game broadcast by satellites made and sent into space by GE. A GE train, carrying the satellites, rushes past a factory fitting a car bumper made from GE plastic The car drives to the home of a child who is opening a GE-made fridge to get her father a juice. Work done, he turns off the light.
General Electric spends 40% of its $toom advertising budget on this kind of corporate advertising. Its "we bring good things to life" campaign has been running for almost 20 years. GE is not the only company more eager to sell itself than its products. Honeywell, another American giant, has borrowed GE'S theme and is about to launch a more modest $4.5m campaign, showing how its mundane range of thermostats and controls "touch" people's lives. In Britain Glaxo Wellcome filled television screens in 1996 with the slogan, "Man has no greater enemy than disease . . . disease has no greater enemy than Glaxo Wellcome Novartis, a Swiss drugs group created from the merger of CibaGeigy and Sandoz, is spending some $1oom to publicise its new name.
What does such advertising hope to achieve, apart from giving the chairman a warm glow? Stephen Greyser, a Harvard Business School professor who has researched corporate advertising, says its target audience is much broader than for normal consumer-goods advertising. It is aimed at three specific constituencies: business customers; opinionformers (investors, politicians, activists, media)who can influence share prices or strategy, and employees.
Companies claim corporate advertising sends important signals to other businesses. One simply says what the company does. Honeywell, for instance, has been advertising to correct the widespread perception that it is a computer company, though it shed that business long ago. Lavish spending on advertising may also signal to potential customers that a company is rich and important.
Robert Worcester, chairman of MORI, a British market-research group, finds that the more a company advertises, the more it is admired. However, in general, business customers are more likely to be wooed by price, product range and personal relationships. Opinion Research Corporation, an American market-research group, recently surveyed over 3,ooo executives worldwide, and found that "knowing a company very well" is the key reason to award new business.
What about opinion-formers? Professor Greyser believes that in large, fragmented markets which may have several stock exchanges, corporate advertising is a good way of reaching everyone who matters at once. Tim Ambler, senior fellow in marketing at London Business School, says that, other things being equal, the share rating of companies that are well known are higher than those that are not. However, most fund managers unsurprisingly insist that corporate advertising makes not a jot of difference to their view of a company.
Michael Price, president of America's Franklin Mutual group, points to Berkshire Hathaway, Warren Buffett's investment group, which does not advertise, as a shining example of wise frugality. More companies, he says, should concentrate on lowering their overheads-including corporate advertising budgets. America's TIAA<REF, the world's largest pension-fund manager is equally sceptical: its investors are already well informed and are guided by financial reality. Dun & Bradstreet says that ads make no difference to credit ratings either. If a company has something to tell investors, those investors want to hear about it cheaply at a roadshow, on the Internet or in an annual report, not extravagantly on television.
But what if a company is unpopular with or misunderstood by opinionformers to an extent that harms its business? Shell was not advertising when it clashed with environmentalists at Greenpeace over its disposal of the Brent Spar oil rig. Steve Cooper of Lowe HowardSpink, an American-owned agency, says that a campaign could have deflected the public-relations disaster that followed. In contrast British Petroleum's warm, caring ads seem to have innoculated it against environmental abuse.
Being a little more famous may also have practical advantages. Monsanto, an American agro-chemicals giant increasingly involved in producing genetically modified foods, is considering a corporate advertising campaign in Europe where public opposition to genetic engineering is fiercest. The logic is that, if consumers know Monsanto's name, they may be more willing to listen to its point of view.
Perhaps the best reason for corporate advertising is to reach employees. It was no accident that Glaxo's campaign was aired shortly after its painful merger with Wellcome in 1995, when the company was much criticised for firing scientists. And, as Andersen Consulting, one of few management consultants to advertise, points out, it can be a good way to attract bright new recruits.
Ultimately, though, the main motive for corporate advertising is usually ego, not reason. Hanson, a former Anglo-American conglomerate, ran a long series of ads on both sides of the Atlantic which described it gloatingly as "a company from over here doing rather well over there". That campaign, obsessively overseen by the charismatic and overbearing Lord Hanson, was tellingly code-named, "Mine's bigger than yours."
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