No company likes to “leave money on the table.” But that is what pharmaceutical companies are doing with their traditional approach to reputation marketing, branding and communications.

By not forging a differentiating corporate reputation this lost value is a missed opportunity, at best, in straitened times. At worst, it is a value bleed that threatens to intensify as the industry environment and structures shift dramatically in the coming years.

Historically, drug brands’ reputations have reigned overall in pharmaceutical companies. Marketing budgets are geared to individual product brands, whether detailing them to physicians or generating direct-to-consumer (DTC) advertising. Relatively little investment has gone into corporate reputation.

In most reputation surveys of the public, the pharmaceutical industry falls below the average for all industries, and typically ranks low overall. In addition, there is little perceived differentiation among the large pharma companies. It is startling that an industry that has contributed so much value does not enjoy a higher level of reputation. And it is more startling that one hears more rationalization than new solutions to change it.

One could say that the public will never be satisfied because pharmaceutical products cost more than the public is willing or able to understand. Or the industry’s reputation is about the right audience. The focus, many say, is on physicians, who have more positive views.

The industry has done many socially responsible things. But, little reputational consequence has come due to either subtlety or lack of ties to stakeholder needs and interests.

A poor reputation increases the potential for risk that could impact the companies financially, hurt in the recruiting of top talent and lead to increased regulations. The business reality is that building a differentiated corporate reputation in the pharmaceutical industry is more important now than ever before.

Unprecedented changes and challenges on the drug industry show why. There is uncertainty on the future business model; patent expiries; generic competition; regulatory risk and frightful productivity in R&D. Developed markets are shifting with healthcare budget actions and reactions due to ageing societies; the evolution of the US market to different expectations of innovation, value, outcomes and care; and the emerging markets as a growth imperative. Payers are converging, and weight is shifting to cost-benefit.

Pharmaceutical companies have traditionally structured their brand portfolio in a "house of brands" strategy, which is typically found in consumer products companies. Individual products carry the value, with little value contained in the corporate brand.

In contrast to this approach, most industrial or technology companies use an “umbrella” or “branded house” approach in which the perceived value is the product creator. The branded house highlights the company’s innovation, R&D power and the values at the heart of the company that makes the product. For instance, aerospace and defense companies build reputation broadly around the best technology, reliability, and serving the best interest of stakeholders.

The “house of brands” approach has worked in the pharmaceutical industry for years for two reasons: the focus of attention was on companies creating a “blockbuster” drug that would appease Wall Street; products were “detailed” by sales personnel to doctors who were the gatekeepers. But the model is changing and more gatekeepers are emerging.

We believe continuing in the same manner is a mistake in the current environment. We urge a move toward linking the product to the master brand.

First, reputation management should be designed to enhance perceived value vis-à-vis competitors. The company brand should be enhanced as part of the perceived value of the drug for physicians and others. Not bolstering corporate reputation is akin to sitting on capital. Shareholders would not long accept a company that did not deploy capital wisely. We see the same with reputation, which is an asset that can be used to bolster value, but withers when not deployed.

Second, other industries have found that companies with better reputations can better navigate industry pressures. We define reputation as a stakeholder’s expectation of value versus peers and competitors. Reputation is a crucial advantage in emerging markets. Likewise it will play in the evolving US market, from pharmacoeconomics to biosimilars to ongoing regulation. There are crucial reputational elements to them all.

In addition, future trends such as personalized medicine are much more congruent with corporate reputation management than blockbuster product branding. And, “branded generics” trade primarily on reputation.

Third, the public matters. The Internet has given patients incredible access to information. They expect value from the industry. Even beyond “reputation surveys,” everyday conversation with ordinary people reveals that the industry’s value proposition is in open question with nagging complaints on prices and costs. Every US voter is a shareholder of a massive industry customer – US government. Enhanced corporate reputation is a good risk hedge against further erosion of public trust and resulting government incursions with regulation.

We applaud the fact that the industry as a whole has attempted to enhance its reputation. But we believe that reputation is and should be seen as a differentiator of value with significant first-mover advantage.

Therefore, individual companies should be focused on ways to establish their perceived value with their myriad stakeholders (patients, doctors, payers, regulators, pharmacists and more).

A differentiating effort in reputation/perceived value would be led by real, opened and sustained engagement to bring helpful change with stakeholders. This would be collaboration toward new kinds of efforts, historically seen as a bridge too far in the industry. It would build perceived value through actions – not an emotional advertising campaign, nor control of messaging, nor philanthropy.

By building perceived value, a company takes and retains stakeholder share, the equivalent of market share, from others. This enhances its ability to do business and attract and keep talent, boosts its market valuation, lowers its cost of capital, and helps stabilize in crises that are inevitable in the delicate risk-benefit business of pharmaceuticals.

Pharmaceutical companies must break from the pack to shape their corporate reputation, reap value left behind and secure success in a tough world ahead.

Elliot Schreiber is the Executive Director at the Center for Corporate Reputation Management, LeBow College of Business, Drexel University and also has significant experience working with companies including DuPont, Bayer and Nortel.

Christopher Bowe is the US Healthcare Analyst for Informa’s Scrip Intelligence service.