Do Business School Brands Still Matter to Job Recruiters?

A survey published in late 2019 by Bloomberg Businessweek polled MBA recruiters, asking them to score the value of a school’s brand.

The survey asked recruiters which business schools have high brand values that give graduates big advantages in their careers. This survey is interesting for several reasons.

First, the brand results were unexpected. Although Stanford University, Harvard University, and the Wharton School placed in the top three, the rest of the rankings weren’t the standard “M7-Plus” business schools at all.

In the rankings, Georgetown University, INSEAD, and the IMD Business School placed ahead of the University of Chicago, the University of California at Berkeley, Northwestern, Columbia, and Duke.

Second, although the results are useful, something else that’s curious about this survey is that it doesn’t appear to control for response bias. Often, corporations will send business school alumni to recruit candidates at the schools where they received their degrees. Not surprisingly, employers do that because they believe that alumni have first-hand experience with the programs and are best able to evaluate top candidates from their own schools. And to a large extent, they’re correct.

However, for some odd reason, ranking editors at publications—like Businessweek and Forbes—don’t always apply fundamental sample validation and bias reduction techniques that have been taught for decades in the marketing research courses at the business schools they’re evaluating. Ever since I wrote my first article about business school rankings, I’ve wondered about this curious effect.

Poets & Quants editor John Byrne astutely pointed out that, in this case, Businessweek’s editors did not appear to omit survey responses from recruiters who were evaluating the university brands of the very business schools from which they graduated. All the editors do is acknowledge the bias within their sample and cap the percentage of recruiters who are alums at 33 percent. Perhaps that might be a reason why Georgetown ranked above all schools except Stanford, Harvard, and Wharton.

Businessweek’s Missed Opportunity

Third, Businessweek’s survey apparently failed to ask the real question that’s on everybody’s minds: How important are university brands in recruiters’ decisions to hire MBA graduates? This seems like a colossal missed opportunity. After all, what difference does it make how the recruiters rank the business school brands if they don’t weigh them heavily when making hiring decisions?

Candidates who are considering business school need to know how much of a role a university’s brand plays in hiring decisions.

The Plummeting Influence of Brands

Now, here’s something else that’s interesting about this study: Businessweek published this survey at a time when the general influence of brands throughout the global economy is not just declining, but plummeting.

For decades, attempting to increase products’ perceived value, marketers have wrapped offerings in coded psychological attributes and characteristics that have nothing to do with the actual products. For example, they might brand a laundry detergent line as a cultured, sophisticated European choice, pricing it at the high end of the market. Or in the case of peanut butter, the old “choosy mothers choose Jif” campaign. Marketers have been selling products through coded brand building like this for years.

Apple’s Brand Premium

Here’s a more up-to-date example from New York University marketing professor Scott Galloway: Apple wraps their product line in advertising and branding that’s sexy. Displaying an iPhone or an Apple Watch signals that one is a member of the cosmopolitan, creative, and affluent class.

Furthermore, these days Apple’s high-end products command premium prices that have made Apple one of the most profitable companies in history. Galloway emphasizes that Apple products carry the gross margins of Ferraris at the mass-produced, cookie-cutter production volumes of Toyotas.

Consider this: The difference in manufacturing costs between Apple’s top-of-the-line iPhone 11 Pro Max that retails for $1,449, compared to their bottom-of-the-barrel, budget iPhone selling for $449, only amounts to about $50! That’s right, there’s a $1,000 difference in the list prices, but only a $50 difference in Apple’s costs. From a cost accounting standpoint (assuming direct labor and factory overhead in China are constants and looking only at the costs of the direct materials like components and memory), the difference between Apple’s highest- and lowest-priced iPhones is almost negligible.

How Technology Neutralizes Branding’s Influence

So what happens when consumers suddenly become wise to marketing tricks like these through the rapidly growing use of online tools like Google and Amazon for product research?
For example, suppose I use TripAdvisor to uncover a new one-of-a-kind boutique hotel in Anaheim, California. Suppose that hotel displays a 4.9 average review profile and about 50 five-star customer ratings during the past three months, indicating it offers better quality at a lower cost than even the nearby Hiltons.

So why in the world would I rely on Hilton’s brand promise and blindly book the Anaheim Hilton or the nearby Hilton DoubleTree Suites on my next trip to Disneyland? Wouldn’t I be stupid to rely on brand as a deciding factor when I have solid research at my fingertips pointing me towards a superior choice in the marketplace? Of course I would.

Indeed, access to online recommendations is one of the reasons recently cited by Nielsen as to why brand disloyalty is sweeping the globe, with only 8 percent of consumers worldwide remaining loyal to the brands of the products and services they buy.

Advertising as a Tax With Exemptions for the Affluent

Furthermore, these questions presuppose that I’m familiar with Hilton’s brand messages when that might not be the case. A survey conducted for TIME Magazine showed that in some market segments, the proportion of affluent consumers who can identify a “favorite” brand has declined by as much as 45 percent between 2008 and 2015. And it’s not challenging to understand why.

Increasingly, exposure to advertising is becoming a tax paid by the poor and the technologically unsophisticated. A 2016 survey by All Flicks reported that if Netflix started showing advertising, about three-quarters of the firm’s “pay and avoid” subscribers would cancel their subscriptions.

Though not as pronounced, the trends are similar in Internet usage. Data from eConsultancy shows that in 2010 ad blocking worldwide was negligible. Today free software like uBlock Origin blocks advertising so completely that millions now go for weeks at a time without seeing any advertising at all on their desktop computers.

In fact, 2019 data from eMarketer shows that 73 million or almost 30 percent of United States Internet-users block ads, with the proportion even higher in Germany. Increasingly, folks like these who are shielded from advertising can’t recall the promises made by major brands.

Are University Brands Becoming Obsolete?

One might argue that there are big differences between university brands and the brands of detergents, smartphones, and hotels. For one thing, universities build equity into their brands over exceedingly long time intervals. For example, it’s taken more than a century—about 110 years—for Harvard University to build their Harvard Business School MBA brand.

Nevertheless, overwhelming evidence demonstrates that in virtually all other sectors of the economy besides higher education, consumers now weigh brands less and less as factors in their purchase decisions.

One has to wonder if we are rapidly approaching a period in history when recruiters and hiring managers will—similar to conducting product research on Google, Amazon, or TripAdvisor—find alternate ways of evaluating MBA job candidates’ qualities that render reliance on university and business school brands obsolete.