Reputation: a
business critical asset
By Angus
Matthew
In the theories of new economics,
reputation has been called a 'hostage' in the hands of the organized
consumer. It is a vital form of capital, as vital as money is a form
of actual capital.
This article will interest anyone who
is somehow connected with the issue of enhancing or maintaining
corporate reputation. It examines why an enhanced reputation is
necessary within an emerging stakeholder economy, contemporary threats
to reputation and why more than ever an integrated approach is
essential if such perceptual assets are to be protected.
Trust is a vital part of our society
and economy, and although there is a distinction between the
application of trust in our social relations versus that which is
implicit within our economic decision-making, this distinction is
becoming less defined. Deepened brand interactions and rising
expectations of both brands and indeed business as a whole, requires
us to take a closer look at how we manage such intangible, and
business critical, reputation assets.
In economic terms trust, or rather its
absence, is responsible for the huge risk premiums and other
institutional cost burdens such as lawyers and regulators. At the
consumption level it has always been that the brand has embodied the
trusting relationship between expectation and fulfillment, the
pre-requisite for loyalty and subsequent economies of scale in
production. Here the notion of trust revolves around the offer.
In human relations, trust represents
much more than a mutually beneficial offer and until recently this
kind of complex relation had no part to play in the world of the
rational consumer and economic wealth creation. Today we can see new
expressions of value emerging that demand more complex forms of trust
as companies seek to satisfy shifting consumer expectations of wealth
in its fullest sense, where customers invest resources that include
not only finance but time, information, expertise, attention, even
emotion. This has obvious repercussions for a firm's approach to
reputation management, as these markets place the emphasis firmly with
the creation and maintenance of relations between people, rather than
the making of offers and the closing of sales. A more human-centred
approach to wealth creation. When Monsanto faced the pressure groups
over GM foods, it wasn't an ordinary offer based marketing battle
between two producers. It was the public who decided to trust the
motives of the pressure group lobby over and above that of Monsanto,
in what was a decisive competition for 'share of trust'.
This reputation 'imperative' takes on
an even greater importance when we take a look at some of the new
enterprise logic that firms are adopting in the face of what is a
personal productivity revolution for the organised consumer. Forward
thinking brands are looking beyond straightforward 'ingredient' based
standalone products, to a future that has brands as a deep service or
lifestyle, solution based offering, which in the face of limited
consumer time and unlimited consumer choice, provide the maximum
return to consumers for the attention given.
"In today's world, where ideas are
increasingly displacing the physical in the production of economic
value, competition for reputation becomes a significant driving force,
propelling our economy forward. Manufactured goods often can be
evaluated before the completion of a transaction. Service providers,
on the other hand, usually can offer only their reputations."
Alan Greenspan
Brands have begun to emerged that seek
only to aggregate consumer demand, and all its intangible assets, like
attention, information and expertise, and take that to market - a kind
of reverse marketing. These 'consumer agents' clearly operate
intimately within the consumer space and as such represents leap of
faith in the 'trusting' stakes. This clearly requires an absolute bond
of trust on the consumer's behalf as previous forays into this agency
model such as 'independent' financial brokers have floundered and lost
credibility by becoming tainted by the sellers of financial services
and there commission structures. They have little reputation capital
as far as consumers are concerned.
Similarly the emergence of 'passion'
brands with their high share of trust and alignment behind distinct
values, are out flanking traditional brands by overturning them in the
reputation stakes. The Co-op bank with its ethical policy is just such
a brand and effectively acts as a means, or as an agent for
outsourced, ethical decision making. Here the need for 'agency' trust
is perhaps even more manifest as the emotional commitment to this
company is its strength in the market.
We have mentioned how credible pressure
groups can effectively out-manoeuvre commercial brands, as with the
Monsanto issue, but what Tesco did to enhance its reputation as the
'consumers champion' raises the stakes considerably, as companies
ruthlessly compete on the basis of 'share of trust'. A good example is
the situation when Tesco sought to retail Levi jeans at a discounted 'grey'
market rate, much to the annoyance of Levi's who have spent many years
positioning Levi's as a premium brand in the UK. In marketing terms it
was underhand in the extreme but Levi's pricing duality got ruthlessly
exposed (the US the jeans are not premium positioned) and maybe this
was just a reputation disaster waiting to happen with Tesco merely
demonstrating a predatory instinct to raise its reputation. This
represented a high-risk strategy, with national news coverage but it
was one that Tesco was confident of winning. Tesco has and will
continue to launch into new categories such as banking that requires
'trusting' assets in plentiful supply.
So the reputation stakes have never
been so high. Indeed, the more intimately business seeks to address us
through traditional relationship marketing, or the more powerful
corporations seek to become through globalisation, the greater the
scrutiny and the greater the responsibility. A simple injustice or
misconception can destroy a reputation overnight, or at the very
least, insidiously undermine it. Consequently there is a pressing need
to constantly re-evaluate a firm's activity across its entire
enterprise so that the good achieved in one area does not conflict
with the bad of another and that includes its formal or informal
trading or marketing affiliations, and in fact its entire stakeholder
community. Its corporate identity, marketing communications, its
governance, its social values, its product development, customer
service, its culture, its accumulated knowledge and success, even its
past, all contribute to a firms reputation. The tangible and
intangible, the manageable or unmanageable, a firms reputation today
is the sum of all the perceptions and experiences across all
stakeholders.
Transparency and engagement is key as
the perception of a company can sometimes be misappropriated and take
on a meaning of its own. Business is learning the value of guiding
debate through engagement, as opposed to denying, or worse, remaining
outside it. Today the expression 'a lie can get spread around the
world quicker than the truth can get its shoes on' will resonate with
a great many corporations who have ever had their reputations
questioned. Shell's attempts to scupper the Brent Spa oil platform in
the early nineties was a case in point. The protest movement, as it
turns out, was misinformed and the potential damage of such an act
wildly over estimated. Had Shell engaged with its 'vigilante
consumers', then it could have ensured the accurate reporting and
guided the debate to its benign conclusion.
One of the salient features of recent
times has been the development of technology and its subsequent
invasion of our social spaces. In its haste to profit from the
potential of e-commerce, business failed to appreciate the potential
threats to reputation (and indeed reputation enhancing opportunities)
that the information age heralds. Indeed most pure play e-commerce
businesses failed because they were simply not seen as credible but
this is not my point. Information, that most precious of marketing
resources, is now in the hands of pressure groups, regulators,
campaigners, competitors, and most importantly consumer, and the more
protest driven of these have certainly acquired an authority easily
underestimated. Certain groups or even individuals expert in the
manipulation of information, sentiment and perception have literally
held big corporations to ransom, as Jonah Peretti's recent experience
of Nike's customer service and the 'customisable shoe incident' would
suggest. Every injustice, or more importantly, perceived injustice is
a legitimate target to certain stakeholders, while previous bastions
of professional know how have become public domain, so that we all
have the means to become our own designated experts. Business still
has a very long way to go before it can harness the potential of the
web for reputation management purposes. Open stakeholder engagement is
a big step in the right direction as a means of subverting this
cascade of damaging information or worse propaganda.
Proliferation of choice, another
consequence of a networked economy, has created a prison of consumer
indecision and narrowed the gap between customer satisfaction and out
right brand rejection. Add to this the fact that we have also become
experts at judging any discrepancies between what brands promise and
the experience that the brand delivers and you can understand why
brand managers increasingly shuffle nervously on their feet. The ease
with which a disillusioned consumer can switch brands is apparent,
hence marketing's current obsession with relationships. Indeed, it is
not hard to understand why certain commentators claim that the true
market is none other than the 'community of discourse'. That is to say
that irrespective of your intended brand positioning, it is the
experience that your customers has with your brand, and their
subsequent advocacy, that creates its true identity and ultimately
your reputation.
Reputation and the networked
consumer
The arrival of the information age and
the proliferation of other media has made that other vital marketing
resource, consumer attention, rise appreciably in value. Consumers are
beginning to appreciate that they posses assets other than money,
which are invaluable to business and that the value they represent as
customers stretches way beyond mere financial exchange. As we have
already seen, this is why business has recognised that it is
profitable to aggregate such assets and take them to market. It is
interesting to note how so little marketing is viewed as if it were a
product in itself, competing for dwindling attention and for
'marketing worth buying'. Marketers have not been accustomed to asking
such fundamental questions of their art.
Lastly it is the speed, as well as
extent of connectivity in today's information age which drags
peripheral debates into the mainstream at the speed of thought and
fuels a malaise of protest, such the anti-globalisation movement.
Exposing corporate duplicity and galvanising global or local protest
around common themes has become our bread and butter. All hail the
'vigilante consumer'. Whether its disgruntled employees with an axe to
grind (www.thevault.com) or for the Naomi Klein inspired 'No Logo'
approach to capitalism (www.adbusters.com), there's something for
everyone. The anti-globalisation movement, despite its current malaise
of ill-defined protest, still represents a threatening tide of
sentiment, lapping around the feet of business. With clarity and
purpose, it could take on a whole different impetus and take scrutiny
of these issues to new heights of public interest.
Putting sunrise technology aside, what
becomes of corporate reputation when framed by the recent events that
have shaken all our beliefs. The geo-political upheaval, the
heightened protest and anxiety, there is a realization that perhaps
the anti-globalisation movement and these other explosive issues are
not entirely unconnected. The world exhibits a fragility all to
apparent, where every cause in business and society seemingly has a
corresponding and increasingly hazardous effect. Anxiety and
insecurity reign supreme. At the moment corporations have to learn
reactively about what they need to do to preserve perceptional assets
in light of these events. Certainly in the UK, where ideology would
appear to be the 'new politics', it is corporations that need to tread
an uncertain path through a maze of emerging issues or concerns. The
fleet of foot certainly have a great deal to gain competitively when
it comes to reputation. An inexorable rise in the expectation that
business should counter these broad concerns and act as positive agent
for social change is apparent and probably just. People now appreciate
that responsibility is a function of both influence and power, both of
which are the foundations of today's global business.
Everyone's affected
As we have briefly discussed, even the
status quo of traditional offer based marketing communications has a
reputation impact and increasingly so. As one writer puts it
"within the next 5 years the point will
be reached where delivering a marketing message will make your company
look arrogant and manipulative. It will look like you are hiding
behind your message, afraid to engage in the real market conversations
with real customers."
Quite. Threats to reputation are
equally, if not more likely, to come from our daily brand experiences
that fail to match expectations, as they are to momentous global
events or social ills. Our need as loyal customers is now to consume,
not as 'units of consumption' or 'consumers' but as humans with real
human needs. The customer expects, and fundamental questions are being
asked of business and the assumptions it has made for so long about
our needs. As I have mentioned, the bottom line (ahem!) is that any
organisation that fails to trade with the consumer along these new
human-centred dimensions fails to attract certain tangible and
intangible resources critical to modern business success, and as the
quote suggests, will lose valuable reputation capital. True loyalty
that is earned through value added and consistent interaction, as
opposed to ephemeral loyalty that is bought through offer based
'bribery' is what's at stake. This is where most loyalty programmes
have floundered; it's about real value not ascribed value.
So any brand capable of building
genuine emotional commitment into its daily operations by addressing
the real needs of the individual person or as we will see, by
developing social capital through alleviation of social ills, posses
has a hugely valuable asset. This enhances reputation assets and a
brand equity that in turn acts as a magnet to attract other essential
business assets such as information, knowledge, talent, custom, raw
materials and of course finance. In essence, the reputation of the
corporate whole becomes integral to attracting future wealth, what
consultant Chris Macrae terms a kind of 'unique organising purpose'
(as opposed to 'unique selling point') that defines all its activities
and relationships. So it's about 'values' as much as 'value'. As an
aside, it is interesting to note that the whole language of marketing
itself is simply a relic of industrial age economics, that treats us
all as such 'units of consumption', operating in the 'marketplace'
that is the final arbiter and clearing house of one dimensional value.
Time for a change in marketing vernacular? To those who know, it is
surely just a question of time.
Clearly a unique organising purpose is
very much about consistent experiences, or the promise of such. I
recently telephoned as a prospective customer, what is now my bank,
and got a telephone operator who simply could not hide his admiration
for the company he worked for. As you would expect from the Co-op
bank, they have had a policy of recruiting elderly people who have
little chance of being re-employed due to their advancing years. The
result: better service and an immediate reaffirmation of the Co-op's
ethical reputation, embedded in to a high value and personable
service. Any 'community' (such as loyal customers) which demonstrates
a strong identity, with discernable values carries with it strong
inclusive desires, which again are also strongly perception altering.
This is branding with a capital B, a belief system that permeates a
whole corporation and is radiated consistently through all touch
points with the consumer. Not a series of meaningless and unworkable
mission statements, but a focus on human-centred values that are
consistently delivered across the entire enterprise and which
re-enforce trust on a daily basis. As we will see there are a number
of ways in which a company can achieve such a state of 'being' but one
of the most currently talked about is the adoption of corporate social
responsibility.
"Genuine" social
responsibility
As we have discussed there is
considerable 're-negotiation' taking place between business and
society and at the level of the brand. The recent vogue for product-centred cause related marketing initiatives is a case in point. While
admirable and undoubtedly mutually beneficial, it is nonetheless
clearly geared around the task of selling more products, and as such
is open to moral questioning as to whether or not it represents true
social responsibility. It does however demonstrate clearly, the
numerous perceptual benefits that social partnerships can bring,
especially when the expression of its social responsibility is
incorporated fundamentally into the core of its business.
Corporate Social Responsibility (CSR)
has suddenly become a bye word for progressive thinking, innovation
and enlightened self-interest. It presents a whole new vehicle through
which business can express its newly found values and
responsibilities. As we have seen, this has the potential for powerful
strategic gains in terms of reputation and in a number of ways other
ways besides.
What CSR is not, and why I have an
objection to this phrase, is that it implies a kind benevolence or
'giving back' to society to offset some kind of corporate guilt. This
may be the situation in some cases, but it misses the point. If
harnessed to its fullest extent it is a vehicle for pro-actively
seeking out means of being a social agent for positive change. Take
Coca-Cola's demonstration of 'compliance-plus' in India when it
volunteered its distribution network to the benefit of many
vaccination programmes. As a consequence Coca-Cola was able to
spread their distribution footprint across India by acting as a force
for good. As creative and as pragmatic a business solution as you'll
see and when communicated effectively, as powerful a communication as
you'll ever see. A statement of intent that is universally appealing,
that transcends through its substance, any degree of fame that an
advertiser has managed to create. A reputation powerhouse that also
creates other tangible dividends, that stretch beyond those of an
intangible nature. Earning a 'licence to operate', employee strategy
tools, and the development of new products and markets to name but a
few.
CSR is however much misunderstood and
constrained by the broadness of its scope. Traditional marketing
services have been slow to react to its opportunities, although there
have been distant murmurings from some of the more enlightened
marketing agencies about creating 'responsible desire'. Naturally
though some of the more enlightened PR firms have recognized it as a
natural extension of their business models and indeed many elements of
CSR have always been the PR sector's stock in trade. A case of the
emperor's new clothes.
CSR is certainly galvanising debate
about the nature and extent of a firm's social responsibilities. This
in turn is forcing executives to better understand how their
reputations are constructed and can be managed. Adopting a 'sense and
respond' approach to stakeholder engagement as opposed to
'decide-announce-defend' mentality has helped to this end. Certain
stakeholders, some who have never had a voice, let alone a dialogue,
are being incorporated into key business decision-making. Whether it's
New Product Design, with its notions of 'extended product
responsibility' or supporting local win-win initiatives to encouraging
employee 'leadership' roles and a contract-plus mentality to working,
the reputation and corporate learning benefits are apparent. Where
would 3M be in the innovation stakes without its emphasis on
responding to, and nurturing employee innovations. That is 3M's
reputation. Whether its consumers, employees, investors, suppliers,
media, pressure groups, government or the local community, the nature
and importance of these relations has shifted on its axis, at a time
when the carefully choreographed need-to-know trickle of corporately
controlled messaging turns into a deluge of potentially damaging,
contradictory, or misinformation.
In case evidence was needed of the
potential costs, never mind the opportunity costs, of failing to
engage with stakeholders, consider the emergence of Napster and other
such potent digital music sharing software. This programme, created by
a fresh-faced 18 year-old college kid and named after a haircut,
effectively threatened the existence of the music industry by
subverting its business model almost overnight. The music industry was
caught cold by the extent of its rapid uptake and responded with
writs. Too late in the day to fight an effective rear guard, it has
yet to counter what is now an impossible fight, as it has spawned a
number of off-shoots and continues to do so. If perhaps the industry
had not been quite so intransigent and monolithic in its ways, it may
have found ways of altering its course or perhaps even harnessing some
of its potential. It has achieved neither. Engaging with this
community of programmers could have led to the development of new
markets; instead it became a very real threat. Traditional market
research is a commitment to targeting, engaging stakeholders is a
commitment to understanding. There are a thousand Napsters waiting to
happen, and it is a fool who denies that there are powerful threats
that lie outside of the corporate radar.
Product development with an emphasis of
social inclusion is a far sighted policy, as it not only engenders a
deeper commitment from its lower income users but it also paves the
way for lower income groups to become future higher income groups
loyal to your brand. The Halifax bank recently found to its detriment
that practising a kind of customer apartheid and trying to shed
unprofitable customers, was not good for its reputation. The Sun
newspaper exposed this practice, which is actually a rather common
ploy amongst marketers and is an excellent example of where divisional
priorities conflict within a business. Marketing's gain is the firm's
reputation loss.
Again marketing's obsession with
product-focused communications, has left its legacy in the deprivation
of the internal corporate working environment, resulting in at best a
functional, if not feckless or despondent, workforce. Employees
represent possibly one of the most crucial stakeholder relations and
the introduction of new motivation and leadership styles is just one
example of how businesses have set about leveraging those crucial
intangibles of brand, knowledge and culture for reputation gain. In
real terms it is clear that customer satisfaction is intimately
entwined with the motivations or otherwise of the employees as the man
from the Co-op so ably demonstrated. Brands are constructed from the
inside and so bosses have to stop 'managing' and start leading,
inspiring etc and connect the goals of the corporation with those of
the individual employee. In respect of attracting crucial assets there
is also evidence to suggest that distinct values and a high reputation
are vital in attracting the most skilled employees. McKinsey's report
on the 'War for Talent' interviewed CEOs and questioned whether they
felt that they had the necessary skill base to achieve their long-term
objectives. Only 3% replied in the positive.
Reputations, like more traditional
assets, are bankable too. In times of hardship or crisis, firms with a
good reputation can fallback on its 'bank of goodwill'. Perhaps one
day we will see intimate associations between businesses and good
causes, to the extent that corporates take ownership of certain social
issues and commit to its eradication, reporting authoritatively on its
success or otherwise, just as mortgage lenders regularly issue
economic forecasts to the mass media.
Worth remembering too that reputation
as conveyed by word of mouth is far more effective than telling people
of your ethical credentials, which means marketing services will have
to re-think some of the ways that they have traditionally sought to
influence the perception of a firm. Enlightened and enriching aspects
of business (such as community involvement) tend have a life all of
their own. By engaging with stakeholders and letting the message of
your good work spread organically, you are embracing the most
effective means of promoting your stance with the least cost. The Body
Shop message is a case in point with its policy of non-advertising. If
your do market your ethical credentials, it's also worth considering
that each stakeholder has its own particular information needs and
habits.
Earning your reputation
As someone with a good understanding of
sustainable development but now working in the marketing services
sector, it has been interesting to see how quickly this social
responsibility 'enlightenment' has come to fruition and how companies
have grappled with this issue. It has been even more intriguing to
hear the 'micro' debates that range in the various business areas,
whether its customer service, marketing, public affairs, distribution,
product development, corporate governance, ethics etc, all of which
have at their core the need to re-enforce and draw from their
companies reputation. It is perhaps not surprising that due the sheer
scale of the 'macro' debate, little in the way of consensus has
materialised. This will undoubtedly become a business critical issue
in time. Critically for marketing services, communications are now in
the position of providing real and unprecedented solutions to real
business problems by clever application of intangible assets.
Corporate brands and indeed
corporations themselves, need to move from the mindset of a rented
reputation and a declared brand image, to a reputation that is earned
and a brand image which is deduced through experience, either directly
or indirectly. Today consumers require clear and substantial value
offerings more than ever. It would appear that it is far more astute
to take a position rather than create one, as today's reputations
really are the source of future wealth creation in its widest sense.
The brands of tomorrow will increasingly serve as the window to the
soul of the corporation, and not act to just mask its inadequacies. It
is my belief that most corporations do not even have an understanding
of what elements comprise their reputation, let alone how to manage
the potential conflict between these elements.
As Michael Willmott of The Future
Foundation so accurately pointed out 'corporate citizenship is part of
the service you offer your customer'. Managers of reputation beware.
