These Companies Need Rebranding

NEW YORK (TheStreet) - It should go without saying that the better a company engages its brand with consumers, the better the sales will be. Of course, the opposite is also true - companies that have poor brand engagement are likely suffering from sales declines and probably larger strategic and financial issues.

Brand engagement is defined as the degree to which a brand is seen to meet the expectations consumers hold for the 'ideal' company in a particular industry as measured by positive consumer behavior towards the company and brand loyalty.

"A brand can't do well in today's marketplace if it can't engagement consumers, no matter how many ads are run and no matter how much social networking one does," says Robert Passikoff, founder and president of Brand Keys, a New York-based loyalty and emotional engagement research consultant. "Brand engagement correlates very highly with positive consumer behavior, sales and profits."

The 2014 Brand Keys' Customer Loyalty Engagement Index ranks brands according to consumer engagement, with the ideal company scoring 100%. The annual ranking surveys approximately 32,000 consumers, ages 18 to 65, who self-selected categories and brands in which they shop at and participate with. The interviews were conducted via telephone, face-to-face and a small portion online over the month of January.

Top category performers in the index include: Jet Blue (JBLU) for airlines, Dunkin' Donuts for coffee, UPS (UPS) for parcel delivery, Domino's (DPZ) for pizza, Apple (AAPL) for smartphones, L Brand's (LB) Victoria's Secret for apparel and Amazon (AMZN) for online retailers, among others.

"Where engagement is high consumers behave better toward a brand and the brand sees more sales and, along with that, should also see increased share and profits," Passikoff says in a release. "Where engagement is low, the reverse happens. Always."

Brand Keys says that a benchmark for brand success is a score that is higher than 85%. Here are the 10 least engaged brands in descending order:

10. Volkswagen (79%)

Who could forget the old Volkswagen Fahrvergnugen ad?

The German auto maker, is known for its mid-range Jetta, Passat and reinvigorated Beetle as well as its luxury Audi division, among others.

Volkswagen of America, a Virginia-based subsidiary of the parent company, said that February sales fell 13.8% as compared to the year-earlier period to 27,112 delivered last month. Yet the company has been investing in (and promoting) its eco-friendly, clean diesel cars.

Reports have surfaced that Volkswagen is also mulling the production of a mid-size pick-up truck after previously shelving the idea.

9. Coty Cosmetics (71%)

Coty (COTY) is a New York-based manufacturer and distributor of fragrances, cosmetics and skin and body care products. The company went public in May 2013.

Coty sells well-known brands like Calvin Klein, Marc Jacobs, Chloe, Beyonce, Roberto Cavalli, and JLo, Rimmel, Sally Hansen, OPI brands as well as philosophy, among others. Coty sells through supermarkets, independent retailers, chain drug stores and pharmacies, upscale and mid-tier department stores, nail salons, as well as traditional food, drug, and mass retailers.

Coty shareholders are suing the company claiming the company lied about financial results, particularly slowing sales leading up to the IPO, according to Courthouse News Service's Securities Law Review.

Coty's most recent quarterly revenue as reported for the December-ending quarter fell 4% to $1.32 billion.

"U.S. market softness particularly in the mass fragrance and nail categories, and the high level of promotional activity through the holiday season, have impacted our performance in mature markets," CEO Michele Scannavini said of the company's challenging fiscal second quarter. "On a more positive note, our investment in the emerging markets is starting to yield positive results, with solid growth driven by Brazil, Southeast Asia, and South Africa."

According to Cosmeticsdesign.com, the company has been acquiring brands to bolster its market position.

A bright spot in Coty's results was the nail care segment as consumers look to experiment with customization with different lacquers and effects, the article says.

8. Budweiser (regular) (70%)

Everybody loves the Budweiser Clydesdales commercials, including the most recent Super Bowl commercial complete with one really cute puppy and Clydesdale becoming BFFs, so it comes as some surprise that this one made the list.

Yet, when looking out at the beer industry, generic Budweiser and Bud Light have been losing market share to the growing craft beer industry and premium beers.

Perhaps it's why Anheuser-Busch InBev (BUD), the maker of Budweiser and the world's largest brewing company, also owning names like Stella Artois and Corona, decided to acquire the Patchogue, N.Y.-based Blue Point Brewing Co. earlier this year.

Still, don't be fooled. There are plenty of local bars where Budweiser (and I mean Bud full) is preferred to the newer highfalutin craft beers.

7. American Apparel (65%)

Teen retailer American Apparel (APP) is no stranger to racy advertising.

Last week, the Los Angeles-based company made headlines over a controversial advertisement featuring a topless female model with the words "MADE IN BANGLADESH" across her chest as well as details about her background. According to The Daily Beast, the ad was meant to call to light a big issue in the retail industry, the use of sweat shops and poor worker conditions when making the clothes, typically in third-world countries. Last year, Bangladesh garment factories made headlines when the Rana Plaza Building collapsed, killing 1,000 people. American Apparel CEO Dov Charney has spoken out against sweat shops and positioned the retailer as "sweatshop-free," according to The Daily Beast.

At home though, like other retailers geared towards teen consumers, the chain is struggling. Last week the company said February comparable sales fell 5% compared to a year ago. Year-to-date through February, comparable sales were also down 5%.

A report by The Wall Street Journal said that the company hired lawyers at Skadden, Arps, Slate, Meagher & Flom to work on restructuring options as it struggles with weak sales and heavy debt.

A separate report by Bloomberg last month suggested the company's bondholders are seeking a restructuring as the company hits a cash crunch. While Charney declined to comment on whether bondholders had hired advisers, he denied the WSJ report saying it is a "mischaracterization that they have been engaged as a restructuring firm" to Bloomberg.

6. Sears (64%)

Iconic retailer, Sears Holdings (SHLD), once a bellwether retailer symbolic with the American middle class has taken a turn for the worse in recent times. The company has been looking to shed assets as it figures out how to survive in the new digital age of retail.

Last month, Sears reported a fourth-quarter net loss attributable to shareholders of $358 million, or $3.37 a share.

The company said that domestic comparable store sales slumped 4.6% in the quarter, consisting of 5.1% decline at its subsidiary, Kmart, and a 7.8% decline at Sears Domestic stores.

Sears, under the direction of hedge fund manager Eddie Lampert, has been trying to excite customers by promoting its Shop Your Way member-centric platform as well as focusing on online sales, but unlike J.C. Penney (JCP), where a real turnaround might be in the cards, the Sears re-invigoration has fallen short.

Sears announced plans to spin off its Lands' End division in December. The company acquired the casual fashion retailer known for its mail order and later online catalog in 2002 for $1.9 billion.

5. WoW Search Engine (60%)

No need to worry about this search engine stealing Google's (GOOG) thunder. Who's actually heard of it?

WoW Directory does it exist, and claims it is the "world's largest local and regional website directory, founded in 2003 and has been built primarily from quality freely reviewed submissions."

WoW's search function relies on Web site submissions, which is then cross referenced to the state, city and region the site's designate as their location.

"We feature a very comprehensive topic structure so our users and site submitters are assured of finding the topic specific to their needs. We do not use volunteer editors; your site will be reviewed by an experienced professional editorial team," the site says on its contact page.

4. Sony e-readers (60%)

Sony's (SNE) e-readers have fallen victim to Amazon (AMZN). While Sony was first to launch its e-reader back in 2006, the company has been forced to give up market share to Amazon, with its Kindle product line.

In September, Sony confirmed to The eBook Reader.com that it would not be selling its latest e-reader version, the Sony PRS-T3 ebook reader, in the U.S, looking instead to focus on mobile and tablet devices as well as gaming.

Last month, Sony Electronics announced organizational restructuring, including 1,000 employee staff reductions, one-third of the division's workforce, and the closure of 20 U.S. Sony stores. It will still have 11 stores open in the U.S. The move is part of a wider corporate restructuring by the parent company.

Sony Electronics is also closing its Reader Store on March 20 and transferring U.S. and Canadian users to Toronto-based eReader company, Kobo.

The free Kobo App for Android will be pre-loaded on select Sony Xperia smartphones and tablets. Sony's Wi-Fi Reader will also tap into content available via the Kobo eBookstore, it said.

3. Kmart (59%)

With Sears as its parent company, Kmart too has suffered declining sales and frankly, poor store management as the landscape for big box retailers deteriorates given mounting competition from online retailers, namely Amazon.

In a video for TheStreet, contributor Brian Sozzi attests that the company has been quietly accelerating store closures at both Sears and Kmart since the holiday season.

Doing a simple Google News search for Kmart brings up that sad reality. The search returns local news articles about stores - some of which have been in business for decades - that are closing.

2. Quiznos (57%)

Quiznos, once a fan favorite with its toasted sandwich creations, fell victim to Subway's domination as well as up and coming sub franchises.

At its peak, the Denver-based chain had 5,000 stores. It has already restructured once, after suffering declining sales, store closings, upset franchisees and accumulating debt. Last month, Quiznos was said to be near bankruptcy. The company on Feb. 28 was given one week to reach an agreement on its debt.

Today the company has less than 2,000 stores.

1. Blackberry (52%)

With all that is going on at BlackBerry (BBRY), it's no wonder the company earned this year's top spot for poor customer engagement.

BlackBerry is in the midst of what investors are hoping is a turnaround, following a miserable year it continued to lose market share to Apple's (AAPL) iPhones and Google (GOOG) Android devices.

The story gets worse for BlackBerry. Reports surfaced last week that T-Mobile (TMUS) was offering a deal to encourage BlackBerry users to trade in their devices and switch to an iPhone 5s. Customers apparently responded in droves to the offer.

According to research firm IDC, BlackBerry owned just 0.6% of the worldwide smartphone market in the fourth quarter.

Last year the company tried to sell itself and failed. Turnaround specialist John Chen took over as BlackBerry's CEO in November 2013. Chen has been focused on severing its losing handset division to "concentrate the company's efforts on its strengths, namely secure enterprise software and solutions," TheStreet contributor Robert Weinstein recently said.

--Written by Laurie Kulikowski in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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