Family companies can enhance their competitiveness by leveraging their family status to create a brand identity, according to research recently published in the Journal of Small Business Management. If marketed correctly, a family brand appeals to consumers, the investigators reported.
The study—by Justin B. Craig of Bond University in Australia, Clay Dibrell of Oregon State University and Peter S. Davis of the University of North Carolina at Charlotte (Journal of Small Business Management, 46: 351-71, 2008)—found that “promoting family ownership can play a substantive role in establishing a firm’s appeal to customers in a manner that is unique to the family business context,” the researchers wrote. “[O]ne of the advantages of family businesses that we have empirically established in this research is the signal that family ownership communicates to customers about the types of values, beliefs, and norms likely to prevail in family-owned businesses.”
The investigators analyzed survey data from leaders of 218 family businesses with six to 499 employees. The results showed that building “a family-based brand identity” contributes indirectly to a company’s growth and profitability. This effect occurs only if the message has a “customer-centric orientation,” as opposed to a focus on the company’s product attributes, the researchers noted. “[T]he real long-term benefit for the consumer lies not in the specific product or service that the family business produces or sells, but rather, it is in the perception that the family is committed to being customer-centric,” Craig and colleagues wrote. “A challenge for managers seeking to change their firms’ competitive orientation will be to define customers’ expectations about family-brand values and to discover ways to incorporate this in their efforts directed at building better customer relationships.”
The competitive edge might be related to values “implicitly associated with family membership,” such as trust, the authors wrote. “Consequently, when evaluating among alternative providers, functional attributes (e.g., size, market share dominance) may take a back seat to those reputational attributes associated with family-based branding in the purchase decision.”
These findings are particularly relevant for smaller family companies with limited resources. “Lacking the substantive economies of scale and scope available to their larger brethren, small and medium-sized family businesses may be especially inclined to leverage their distinctive family name to create a form of reputational capital or family brand equity that helps enhance performance,” Craig and associates noted.
Consumers’ trust in family-owned brands was also explored in a recent article on Brandchannel.com, an online exchange that focuses on branding. “Customers frequently perceive family-owned brands as emblems of success and prestige,” wrote author Randall Frost, “but this is also because these brands lend themselves to trust. The family name, when used as a brand, serves to reassure the customer.”
Globalization poses challenges for family business owners, who tend to think in national terms, Frost wrote. “Regardless of the economic futures and fates of family brands, the actual families behind the brands are subject to the same triumphs and tragedies in life—just like families everywhere,” he added. “Perhaps that is why consumers—a demographic comprised of parents, children, and cousins—relate to family brands so well.”
Frost’s article is available online at www.brandchannel.com/features_effect.asp?pf_id=438.
Didier is managing director of the private asset management group at Robert W. Baird & Co., headquartered in Milwaukee. Beaulieu is executive director at the Institute for Trend Research in Concord, N.H., and chief economist for Vistage International and TEC. “We find all too often that the business is ignored in wealth management planning, diminishing the benefits of diversification and creating unnecessary risk to the business owner’s wealth preservation strategy,” they wrote.
Some business owners fail to consider their company as an asset because it has not been valued for sale. “To owners, and those who advise them, the portfolio becomes something separate from the business,” Didier and Beaulieu wrote. Also, because business owners are their company’s major decision-makers, they consider the business to be “under control” and don’t believe it necessary to discuss the business with their wealth adviser.
The authors advise business owners to create a business market index that compares their company’s data against industry data and macroeconomic indicators, and then build a correlation matrix that compares the company’s performance against the performance of other financial assets.
“To be fully balanced,” Didier and Beaulieu wrote, “the owner would want to invest more heavily in asset classes with a lower correlation to the business and start avoiding asset classes that are more highly correlated with the business.” They cited as an example an owner of a home-building company who engaged an adviser to design an investment portfolio that would behave differently from his business to protect him from the home-building industry’s ups and downs. The industry has since hit a downturn, but the portfolio is helping to protect his long-term wealth.
Didier and Beaulieu noted that many business owners have invested in assets they are familiar with, such as real estate. “Unfortunately, a large component of most businesses is already significantly invested in real estate,” they pointed out. “So diversifying by adding more of what you are familiar with may not be diversifying at all.”
They also advise business owners to be mindful of liquidity risk. “Be sure you have ample liquidity in your investment portfolio so that you can meet any unanticipated cash needs,” Didier and Beaulieu wrote. “This is particularly a concern on the downside of the business cycle when credit conditions tighten and liquidity is at a premium.”
Thank you for promoting longstanding family enterprises! (See “America’s Oldest Family Businesses,” FB Summer 2008; “The World’s Oldest Family Companies, FB Autumn 2008.) A good family business friend of ours is featured in your magazine and suggested that we should be too.
My brother Evan and I are the ninth generation of our family timberland management and lumber manufacturing enterprise that began in 1741 in North Amherst, Mass., and is headquartered today on the same site in a 1768 farmhouse.
What started in 1741 as a small enterprise today features:
• a sawmill that can produce 3 million board feet a year of timbers and lumber
• a planing mill to surface lumber and timbers
• a building supply store
• thousands of acres of Tree Farm certified sustainable timberland.
Thanks again for all you’re doing to improve the viability of longtime family businesses. We appreciate it.
The Cowls Companies
North Amherst, Mass.
To the Editor:
I am producing a photo documentary project portraying the dreams, stories and future prospects of families running businesses over multiple generations. The project features a cross section of enterprises.
In the course of my research, I discovered Great Brook Farm in Walpole, N.H. The dairy farm, established in 1761 by John and Lydia Graves, has been an ongoing commercial concern ever since. The farm, now in its tenth generation, is run by Peter Graves, the ninth-generation farm manager. Peter and Brenda Graves’ son Sam, of the tenth generation, is learning farming. His older cousin Andy, son of Peter’s sister Cindy and her husband, Dave Westover, works full-time on the farm and also represents the tenth generation. Eighth-generation members George and Bob Graves are also still active.
The documentary I am creating includes the Graves family. As senior producer and photographer, I will take the lead in making public presentations to honor and support -multigenerational family businesses.
Senior Producer and Photographer
LEGACY-Generations of Family Business
To the Editor:
I am the eighth generation in my family to live and work on our farm in Grosse Ile, Mich. On July 6, 1776, William and Alexander Macomb purchased the island of Grosse Ile from the Pottawatomie Indians. Over the generations we have shrunk to 27 acres now in the middle of a bedroom community.
My great-grandfather changed the hay farm into a nursery farm specializing in azaleas and rhododendrons, which we continue to do today.
I am hoping that Westcroft Gardens would meet the criteria to be included on your list.
Erica L. Mesedahl
Grosse Ile, Mich.
To the Editor:
I’m proud to work for The Pastene Companies, located in Canton, Mass., and Ville D’Anjou, Quebec, Canada. I think we qualify to be listed.
Pastene is North America’s oldest importer of premium Italian packaged goods. It began as a pushcart operation in Boston’s North End in 1848. To date, Pastene has been owned and operated by descendants of Luigi and Pietro Pastene. Chris and Mark Tosi, sons of Jerome Tosi (cousin of Charles Pastene), continue to rum the firm.
We’re best known for our Kitchen Ready Tomatoes, San Marzano Italian Tomatoes and Italian Peppers.
The Pastene Companies Ltd.
To the Editor:
The Hager Companies should have been included on your list of America’s oldest family businesses. In 1849, a German immigrant named Charles Hager took a job as a forger at a blacksmith shop in St. Louis. Over time, C. Hager & Sons Hinge Manufacturing Company evolved into a more diverse company, known as Hager Companies.
Fifth- and sixth-generation Hager descendants still own and operate the business. High regard for the company’s history has maintained the company’s headquarters in the same St. Louis location where the business started—in a building designated as one of the region’s historic landmarks by the Missouri Historical Society.
Hager Companies employs approximately 500 people in the U.S. and has developed key strategic partnerships with international suppliers. Hager Companies operates manufacturing plants and distribution centers in Montgomery and Oxford, Ala., distribution centers in California and Dubai, and a joint manufacturing venture in China. It is expanding its international sales and continues to focus more efforts worldwide.
Editor’s response: Our lists of the oldest and largest family companies are based on the best information available to us. Readers are encouraged to send us information on companies we may have overlooked.