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Home > Blogs > Leslie Kossoff > Reception booster: Why you can - and should - put a monetary value on the reputation of your organisation

Reception booster: Why you can - and should - put a monetary value on the reputation of your organisation

Company reputation | Reception booster: Why you can - and should - put a monetary value on the reputation of your organisation Leslie Kossoff

“We want to make all our users happy. If you don’t know that, you don’t know Apple.”
Steve Jobs, Apple Chairman and CEO at the 16 July 2010 press conference responding to the iPhone4 “antennagate” problems.

When the iPhone4 antenna problems were first reported by customers, Apple was taken by surprise. After all, their products are “magical.” Each is better than the last. In design and features, Apple keeps outdoing itself.

Doesn’t it?

In this case the company continued to maintain that it did – first through silence and then through software fixes to show more “realistic” signal bars. They thought that it was working until the moment that the venerable – and independent – Consumer Reports magazine reported that they, too, were experiencing what had come to be called the “death grip” phenomenon.

Their recommendation: Don’t buy the phone.

Practically within moments, the company came out of its silence and Steve Jobs held a press conference. His message was clear: Apple is all about making its users happy. And if that meant that they were going to have to buy bumpers and cases for the already sold iPhones or accept more returns than normal, that was fine. Because they only care about their customers.

The estimated costs to the company for the fix ranges from $75m to $175m – depending on whose account you read. What’s more important, though, is that, during the press conference itself, Apple share price increased 3%.

And that’s why quantifying reputation isn’t an amorphous, undefined measure. Not anymore. Just as there are hard measures for brand equity – which, in part, determine the costs that bigger beasts pay for smaller acquisition targets – there are hard measures and specific means of tracking the monetary value of reputation.

Now, more than ever, when consumers continue to feel the pinch or are simply afraid to spend their hard earned cash, or when companies are doing their best to squeeze the last penny out of their suppliers, reputation is far more than part of a sales and marketing promotion.

Reputation is about life and death. Human and corporate.

The Tylenol Lesson

Probably the best known life-and-corporate reputation-saving crisis comes from Johnson and Johnson.

In 1982, Tylenol bottles in the Chicago area were found tainted with cyanide. Seven people died. As far as anyone knew, the incident was limited to that location only.

Yet, J&J’s CEO James E. Burke made what many analysts considered the company-killing decision to pull Tylenol products off the shelves in all the markets at an estimated cost of $100m.

Because of the scare – and with that decision in play – their market share dropped from 37% to 2%. The talking heads said it would never come back.

It did. By the mid-1980s, the product had regained most of its previous share. Simultaneously, Tylenol re-established itself as the premier brand in its category – and has maintained that status through all the intervening years.

In fact, J&J’s means of addressing the problem makes “taking a Tylenol” as ubiquitous an expression as “taking an aspirin” – with just as trustworthy a reputation.

Differentiating Between Brand and Reputation

The easiest way to differentiate between brand and reputation is that brand is the external image your company has. You pay for that by buying it. You hire firms or use your internal resources to determine what your company’s ‘look’ will be – in everything from its logo to the way its advertisements are presented. It’s your public face.

Reputation, on the other hand, is the internal execution that creates the external image. The real image. Not the one you buy, but the one your customers have of you.

Reputation is all about aligning strategy, operations and execution. It’s making sure that what your CEO says is the company’s promise to its customers is reflected in every interaction and transaction with internal and external customers and suppliers every day. It’s knowing that every decision made works to build the reputation your company wants – externally – by having best of breed systems in place internally.

From global strategy to local supply chain mechanics and front line customer service, reputation will build your brand. Or kill it.

That’s why quantifying your company’s reputation is so important. It’s a cost that can be identified and needs to be managed to ensure the greatest profits and opportunities.

Using Reputation to Build Strategy and Innovation – The Apple Trajectory

Let’s go back to Apple for a moment.

In its early years, Apple was a computer company. It was the little guy. Specialized, higher priced units that did things differently. Graphically. Steve Jobs had a different view of what the user experience could and should be. And, as a result, we were brought new worlds of GUI (Graphic User Interface), WYSIWYG (What You See Is What You Get) and more.

With a share that spent most of its life between 2.5 and 3 percent of the desktop market, Apple was considered an interesting company, but one that only a mother could love. As a result, those who were proponents of the Mac systems (the so-called “MacHeads”) were treated as sad but lovable.

And all the while Apple’s operating systems were being copied to create new products that matched the user experience – or at least as close as Microsoft could come within its Windows structure.

Over time, Apple added more graphics- and audio-oriented capabilities. It became the darling of the media set so that in most all small and large video production houses you would see at least one Mac. If not banks of them.

Which raised a question. Was Apple’s reputation – now for both user experience and graphic/audio capabilities – as a computer company? Or a media company?

In that context, suddenly the iPod makes all the sense in the world. Why wouldn’t a company that is already focused so extensively on the audio and video experience take that knowledge and extend it into a consumer marketplace? They would. At least if they were paying attention to the actual reputation they had built.

Not as a ‘computer company’ but as a media company. All forms of media. Which makes their advent into the smartphone market make sense as well.

This is a strategic progression based on a reputation that they built. Not on their product lines but on the marketplace value and utilization they were creating and seeing. From that point forward, it was just a matter of building on how people already thought of them.

Because if you wanted good – and beautifully designed – technology for anything media oriented, Apple was your answer.

Clearly it worked because Apple’s market capitalization is now greater than Microsoft.

Reputation and the Drucker Question

The management theorist, Peter Drucker, would ask his client companies a core strategy-to-innovation question: What business are you in?

Not what products do you produce or what market you operate in. Not how your services are performed.

What business are you in?

This is not an easy question to answer, mostly because, in the process, executives are so tied into what their company is currently doing that they lose sight of the value their company actually brings. From the customers’ perspectives. All their customers in all the many and varied ways that the company has built a reputation for being the best provider.

But of what?

The Apple example demonstrates how by looking not at what you do but how you’re perceived by customers you can determine what your immediate and long-term steps should be to build the company you want. A company that will successfully catapult itself into new markets and be readily accepted as the preferred provider for whatever it is you have to offer.

And why not? Your reputation is already solid. You’re a trusted provider.

Conversely, by using the same process, you can far more easily, quickly and cheaply identify the disconnects that are keeping your company from getting where it wants to go. Because your reputation in those areas isn’t quite as good.

That being said, because reputation building is an internal process, once you have the information at hand, it becomes easy to address the disconnects and do what needs to be done. Fast. Smart. Cheap.

Successfully.

The Quick Start to Quantifying Reputation

To get the quickest start at quantifying your company’s reputation, look at both Errors of Omission (EO) and Errors of Comission (EC).

Your organization has lost opportunities to grow by not building adequately on its reputation. Those EOs represent lost revenues and future streams.

As well, your organization has committed ECs by not acting on the known disconnects and problems created within that keep your reputation – and opportunities – from growing as they should.

By starting the quantification process using EOs and ECs as guide, you’ll soon be able to give your executive team colleagues exactly the information they need to determine where to target and what the ROI will be.

It’s a big – and easy – win.

This guest blog was first published on The Thinking Executive.

Tags: company reputation , Errors of Comission , Errors of Omission , reputation
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