With the digitisation and digitalisation of business and communications, organisational reputation continues to grow in importance. It makes up a large portion of the value that entities provide to their customers, consumers and stakeholders, which was once consumed by tangible assets. Where businesses once determined the availability of products and services for their consumers, consumers themselves now take on this role, armed with a set of expectations that organisations must meet to achieve industry success.
This notion is supported not only by anecdotal evidence of business leaders and teams, but also visualised by the evolution of organisational value over time. In the 1978 Gregory Evaluation, 80 per cent of a company’s value comprised of its tangible assets. Almost 40 years later, the same evaluation found that value had changed entirely, with 20 per cent consisting of fixed assets, and the same amount allocated to the brand, its values and goodwill. Essentially, this change meant that corporate reputation became equally as important as the goods supplied by the company itself.
What is corporate reputation?
Corporate reputation is defined as an aggregate perception from internal and external stakeholders (Walker, 2010). Corporate reputation can mean different things for different divisions and departments in business. For example, while strategists may view corporate reputation as a means for generating competitive advantage, the financial department may consider it a form of goodwill or a mode for generating trust amongst stakeholders. Through the use of specific tools and techniques, and although reputation is an intangible asset, organisations can be assigned a single reputation rating, making it straightforward to benchmark against competitors.
According to RepTrak®, there is a three-step process to calculating reputations. A pulse score determines the emotional bond between organisations and the public based on esteem, admiration, trust and good feeling; seven dimensions: leadership, performance, citizenship, governance, workplace, innovation, and products and services, known to be the pillars of organisations are considered; twenty-three concrete and operational attributes within these dimensions are evaluated.
Why does corporate reputation matter?
The way customers, consumers and stakeholders think and feel about an organisation ultimately determines the actions they take. Whether that’s purchasing and re-purchasing, recommending the organisation to peers, providing positive reviews, instilling a desire to work for the organisation or willingness to invest. Companies who create and maintain a positive reputation are most likely to see their stakeholders take positive actions, which inevitably have a positive impact on the bottom line.
How can organisations leverage reputation for business growth?
Business success is determined by a series of supportive interactions that customers and stakeholders make with organisations, ranging from purchase and recommendation to stories of success in the media. According to Kasper Nielson, executive partner of The Reputation Institute, trust is at the core of every supportive action.
In his 2012 Forbes article, How to leverage reputation as your #1 driver of value, Nielson explains: “Reputation is the emotional connection between people and companies… Companies with strong reputations have this emotional connection and they see increased support from key stakeholders.”
In terms of driving supportive behaviour, Nielson continues to explain that companies with weak reputation see only 16 per cent of consumers willing to purchase its products or services. As reputation grows, so too does the likelihood of purchase. Those companies who exhibit an average reputation can expect 41 per cent of consumers to exhibit willingness to purchase, while those with a strong reputation see this figure grow to 64 per cent.
The primary determinants of purchase can be simplified to two factors: the offering made available by the organisation and the organisation itself. Consumers expect all organisations to offer quality products and services. In most cases, it’s hard to differentiate products between companies, thus a key determinant in decision making lies in the reputation of the organisation itself.
Take, for example, a standard and staple household product: washing up liquid. In Ireland and the UK, it is clear that Proctor and Gamble’s brand, Fairy, dominates the market, despite the availability of supermarket own-brand products, often at cheaper prices. Although marketing and advertising play a large role in the success of the brand, outside these, Fairy has established itself as a brand worth trusting and supporting.
In celebration of Pride and in support of LGBTQ+ families, in 2019 Fairy washing up liquid was re-branded as ‘Fair,’ in support of The Albert Kennedy Trust which serves young and homeless lesbian, gay, bisexual and transgender young people. Alongside raising vital funds, this also saw the brand begin discussions within homes across the UK.
It is ongoing initiatives and activities like these that ensure that businesses remain front of mind, secure supportive behaviours, and ultimately achieve competitive advantage. In a world where market competition has never been so high, consumers are presented with a wide variety of choices. Product differentiation is no longer a means to achieve buy-in. Instead, companies must nurture their reputations to secure support.
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