What is reputation? A summary of the best research on corporate reputation
What is reputation? What does it bring our business in terms of sales, financial performance, word-of-mouth?
Reputation can seem a vague concept. Certainly when we talk to C-level, we tend to get the same batch of questions about reputation. A non-exhaustive list would include:
- "What's the impact of reputation on our business?" (or: "What does reputation do for our sales and revenue?")
"What is reputation, anyway? It seems a vague concept."
"Reputation sounds like a nice to have - why should I care about reputation? (What's in it for us?)"
"How can we be sure that communication will improve our reputation?"
"How can we reliably measure the impact of communication efforts?"
In short, there are sometimes doubts that reputation is really a thing.
However, communication scientists have convincingly answered all these questions. So we thought we could help with this 20-minute executive summary about reputation: what its benefits are to business, what it is exactly and how to measure it, and how to use it as a strategic tool.
1. Reputation = money
Let's start with the most pressing questions. Can you prove that a better reputation is good for our business? In a word: yes.
Reputation has an impact on sales:
- Consumers don't always know exactly how good your product or service is. Instead of doing homework, they just rely on your reputation. Consumers can and will rely on (reputation) as the basis for inferences for missing product attributes1
- When your reputation is bad, consumers will think your products are bad: "Negative CSR associations ultimately can have a detrimental effect on overall product evaluations"1
- Customers will buy more easily from firms with a good reputation. A good reputation “enhances sales force effectiveness [and] new product introductions”2
- A solid reputation makes people believe “especially extreme” advertising claims more easily2.
Companies with a better reputation get better payment conditions (longer trade credit) from suppliers
- Their positive reputation allows them "to enforce a longer period of trade credit"3
"Can you prove that a better reputation is good for our business? In a word: yes"
Reputation helps you hire top talent at competitive wages:
- See Glassdoor: Apple is known for paying low wages, expecting long hours and extremely high productivity in return
It should not come as a surprise when reading this to discover that firms with better reputations perform better financially. There is overwhelming academic evidence for this. Seriously, it's not even a discussion anymore.
- “Firms with better corporate reputations are better able to sustain superior financial performance outcomes over time”2