Head of the Class
Posted by Tom Gable
The Reputation Institute just released its annual Reputation Pulse, which measures the corporate reputations of the largest U.S. companies based on consumers’ trust, esteem, admiration, and good feeling about a company while also gauging perceptions across seven rational dimensions of reputation.
The survey named Johnson & Johnson as the most reputable U.S. company first for the second consecutive year, followed by Kraft Foods, Kellogg, The Walt Disney Company, PepsiCo, Sara Lee, Google, Microsoft, UPS and Dean Foods. AIG finished 150th out of the 150 companies included in the survey.
I’ve blogged and written regularly about the importance of investing in image as a part of corporate and organizational strategy. Beyond just making a list, companies enjoy significant benefits from having a positive reputation, according to the Reputation Institute; a company’s reputation score has a positive and direct link to consumer attitudes and behaviors. It reported that having a strong reputation in 2010 yields “more recommendation, more benefit of the doubt and more purchase behavior than ever before.”
In comparing the Top 10 to the Bottom 10 measured companies, the institute noted that the general public is:
300% more likely to verbally support or give the benefit of the doubt;
200% more likely to consider products; and
350% more likely to purchase products of highly regarded companies.
“In today’s tough economic climate, corporate reputation is critical to sustaining and growing business,” said Anthony Johndrow, Partner & Managing Director, Reputation Institute North America. “This year’s results illustrate a direct correlation between how well a company manages its reputation and how likely consumers are to recommend or reject the company. A good reputation is not just a nice-to-have; it’s a bottom-line business imperative.”
It Pays to Communicate
Respondents who indicate they have bought a company’s products or utilized a customer support service tend to rate those companies higher, indicating that direct experience has the greatest impact on corporate reputation. Third party messages, from the media, online or other people, tend to have a negative effect. Reputation Institute’s findings show that respondents who were reached by companies’ corporate actions and/or communications initiatives scored them 3 points above the U.S. mean.
In fact, a consumer who has encountered a company’s marketing, branding, public relations or social responsibility efforts on average rates the company higher regardless of their reputation ranking—even companies with weak reputations can gain from telling their side of the story.
Johndrow sums up the key insight from this reputation driver analysis: “We all know that people care and talk more than ever about the companies behind the products and services they use and they are talking about them. Join this conversation and tell your corporate story to create the support needed in tough times. Corporations can create deeper connections than products can alone, essentially deploying who they are as a company to drive business results.”
The Importance of Reputation and Authentic PR
The survey and news release make good points. But the concept of putting value on a reputation requires more historical perspective. The Reputation Institute was founded by Charles Fombrun, Ph.D., who serves as its chairman. He was one of the first to measure the impact of reputation on company fortunes. He published the results in 1996 in his classic book, Reputation – Realizing Value from the Corporate Image. He followed later with Fame and Fortune. Excerpts from his first book are worth noting because the findings hold true some 15 years later. Here are a few highlights:
A reputation develops from a company’s uniqueness and from identity-shaping practices – maintained over time – that lead constituents to perceive the company as credible, reliable, trustworthy, and responsible. In turn, a company’s established reputation helps to protect it from rivals trying hard to imitate its practices. Reputation builds strategic value for a company by granting it a competitive advantage that rivals have trouble overcoming. To achieve that advantage, however, a company must develop appropriate practices, or character traits, as it were, that rivals find difficult to imitate.
What Capitalizing on Reputation Gets the Firm
If being perceived by constituents as credible, reliable, trustworthy, and responsible is the hallmark of good reputation, it pays off because well-regarded companies generally:
- Command premium prices for their products
- Pay lower prices for purchases
- Entice top recruits to apply for positions
- Experience greater loyalty from consumers and employees
- Have more stable revenues
- Face fewer risks of crisis
- Are given greater latitude to act by their constituents
Corporate reputations are perceptions held by people inside and outside a company. To acquire a reputation that is positive, enduring, and resilient requires managers to invest heavily in building and maintaining good relationships with their company’s constituents. It calls for practices that measure and monitor how the company is doing with its four top constituencies: employees, investors, customers and communities. Doing so pays off in the long run because favorable reputations produce tangible benefits: premium prices for products, lower costs of capital and labor, improved loyalty from employees, greater latitude in decision making, and a cushion of goodwill when crises hit. (57)
A good reputation generates consistent, shared, and favorable impressions among observers about what a company is, what a company does, what a company stands for. In this way, a company’s reputation is itself identity defining. It helps us assess our understanding of the companies with which we do business.
Marketers, advertisers and public relations specialists help to create attractive images of a company. Indeed, many companies rely quite heavily on PR professionals to shape the perceptions of those looking in from the outside – principally the customers. But unless those images are anchored in core characteristics of the company and its products or services, they will decay. In general, what companies want and need are reputations that are both enduring and resilient: able to withstand scandal and attack, to overcome crisis and assault.
Can your organization invest in reputation as part of long-term strategy? What does it stand for? Then, can it commit to providing ongoing proof of principle and walk the talk over time? That’s the essence of authentic, fact-based PR.
Tags: branding, creative, investor relations, isses management, marketing, planning, positioning, PR, reputation, ROI, value
