What Price Reputation?

BusinessWeek has a must-read article detailing the value of brand, and most importantly, how to quantify it:

…CW’s Low and Cohen have spent more than a decade developing ways to measure intangible corporate assets, especially reputation factors, that can affect the bottom line. “There are plenty of data measuring the visibility and credibility of a company,” says Low. “But there have been no data showing how communications adds value to a company.” Says corporate communications professor Paul A. Argenti of Dartmouth’s Tuck School of Business, also a CCW partner: “If we can get this right, we have found the holy grail of communications.”

The method works like this. Cohen first takes data on a company’s daily stock movements for a certain period, say two years. She then collects data on its financial disclosures and economic conditions at both the national and industry level. She runs a statistical model to determine how much of the stock movement is due to financial performance and how much to outside factors such as the economy.

After adjusting for these influences, she loads in less obvious factors. Drawing on reams of data on media coverage, opinion surveys, investor interviews, the company’s public statements, reputation rankings in magazines, and other sources, she runs through several dozen reputation-related issues to see if they move the stock. Do messages about the company’s employee relations, governance, or environmental efforts have impact, for example? If so, how many cents per share can be explained that way?

BusinessWeek