A view from Helen Edwards

M&S CEO's pay package shows confidence in the brand

How strong is the M&S brand? Just look at its new CEO's salary.

Poor Steve Rowe was only six weeks into his £810,000 job as Marks & Spencer’s new chief executive when he sparked derision with his vow to cherish "Mrs M&S". 

Journalists to the right, analysts to the left and, horror, Mumsnet with his head in its sights: this wasn’t the smoothest of debut strategy briefings. His day ended with "stomach-churning" as one of the kinder rebukes and the share price 9% down.

But let’s cut the guy a little slack. While his all-too-catchy fusion of brand and customer may have been simplistic, it reflects an accurate grasp of symbolic consumption theory – the central tenet of which is that people use brands to reinforce personal identity.

Project of self

Clothing is where it happens to be most obvious – exemplified by the way people hold up a perfectly nice garment to the mirror, shake their head and sigh "It’s just not me"; something that clearly is happening too often at M&S.

"It isn’t just consumers who are prepared to make personal financial sacrifice to be associated with a distinctive brand, but employees too"

But it’s not just about what people wear, or even what they display. In quieter sectors, too, the theory dictates that people like to buy what "feels me". 

No, they don’t become "Ms Kenco", "Mr Gillette" or "Dr Pirelli", because people don’t exist in only the coffee, shaving or automotive dimensions. But in category after category, they welcome certain brands inside their "project of self" – to use the academic phrase – and are willing to pay for the privilege.  

That’s why symbolic consumption theory matters: a strong appeal to personal identity, especially if combined with high salience, is a massive contribution to brand equity, which in turn is the force that earns a brand a premium above the generic product or less attractive branded competitors.

So much is commonly understood, including, it would seem, by Rowe himself. Firmer prices, higher sales, or both, he might have said, can only be achieved by increasing our appeal to our core customer’s sense of self. 

The price of pride

A much more surprising twist to the personal identity theme was revealed last year by one of our leading marketing academics, Professor Nader Tavassoli of London Business School (see panel).

"Executives were willing to accept an average of about $90,000 less per year to work for a strong brand"

His research team showed that it isn’t just consumers who are prepared to make personal financial sacrifice to be associated with a distinctive brand, but employees too.

The team traced the annual remuneration of 2,717 US senior executives and mapped that against the strength of the brands of the companies they worked for, using ten years of data in each case. 

It found that executives were willing to accept an average of about $90,000 less per year to work for a strong brand. 

At chief executive level, that sacrifice scaled up considerably to an average of $1.3m less per year. Tavassoli’s interpretation is that brand strength is a badge that can be most proudly worn by the chief executive and that, while people buy many brands, they work for, or run, just one. 

So, at this level, the fusion is justified: CEOs really do take on the guise of "Ms IBM" or "Mr Nike". That feels better than being "Ms or Mr Dullsville-Backward Inc", and that’s a social privilege worth "paying" for. 

For marketers, the findings are significant as they give them another front on which to press for resources. Not only does strong brand equity help the bottom line by keeping prices buoyant, it does its bit at the other end too, curbing the excesses of C-suite rewards. 

Meanwhile, what are we to make of the package paid to Mr Rowe, which is £165,000 less than that earned by his predecessor and some £3.8m less than the CEO mean for a FTSE 100 company?

Well, one interpretation is that he is relatively inexperienced at this level, and the pay reflects that. Another is that the business urgently needs to slash costs. Or we could draw the logical conclusion from the Tavassoli research: the decision of the board to offer less and the willingness of Rowe to accept it reflect the deep confidence of both in the appeal of the M&S brand.

In which case, ignore the chatter of the journalists and pay no heed to the analysts: the new Mr M&S had already put his money where his mouth was, six weeks before he stood up to open it. The clothes might not be for me, but I’m taking a shine to those shares.

Brands and pay

In 2015, a team led by Professor Nader Tavassoli of London Business School published a study entitled "Employee-based brand equity: why firms with strong brands pay their executives less".

Using US executive pay figures from Standard & Poor’s Compustat ExecuComp database, and brand strength measures from BAV Consulting’s BrandAsset Valuator, the team made more than 10,000 remuneration-brand observations.

It found that non-CEO executives accepted 2% less on average (about $90,000) for every standard-deviation increase above the mean for brand strength. CEOs were prepared to take 12% less – about $1.3m.

Tavassoli said: "A well-regarded brand can do more than just helping to recruit the best leadership talent – it can also benefit the bottom line by lowering payroll. HR teams should therefore leverage brand equity as much as they would more traditional benefits."