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Business Strategy Best Practice

Measuring Brand Reputation

by Andrew Tucker

This Chapter Covers

  • What brand reputation is.

  • How value is achieved through brand reputation.

  • Why existing approaches to brand reputation miss the target.

  • Measuring brand reputation.

  • Brand reputation in the UK energy sector.

  • Brand reputation of Toyota.

Introduction: What Is Brand Reputation?

Brand, reputation, and strategy are like a three-legged stool—remove one leg and the stool topples. Whole disciplines have grown up around each leg of the stool, but companies only achieve sustained commercial success when all three are well manufactured, balance each other, and can take the weight of expectations. Of course, building sustained commercial success is more complicated than building stools! Amid the mountains of academic research and practitioner advice on strategic brand and reputation management, there is a gap in how brand and reputation can be manufactured to balance each other and take the weight of expectations. First, let us clarify the core concepts that are in play. Brand is the expectation of what a product or service delivers. Simply put, brand is what a company says about itself. Reputation is the collective perception of a company’s stakeholders, based on whether the brand matches the company’s performance and behaviors. In other words, reputation is what others think about your company. Brand reputation, then, is the management of the dynamic interaction between brand and reputation; it is how you evaluate whether what you say about yourself and what others think about you are sufficiently aligned to achieve sustained commercial success.

There is a straightforward business case for building and maintaining a strong brand reputation. 91% of customers choose to buy products or services from a reputable company, but 77% of customers would actively boycott the products or services of a disreputable company.1 For listed companies with well-known brands, a 5% change in reputation corresponds to a 3% change in market value.2 Of course, many leading companies already proactively manage their corporate reputations to realize bottom-line results. For example, Shell invested US$6 million in gaining community consent in the two years prior to its 1998 Malampaya deepwater gas-to-power project in the Philippines. Going beyond the local environmental impact assessment laws, Shell engaged with the communities to be impacted by the US$4.5 billion project through a series of community outreach meetings, information dissemination, participatory workshops, and dialogs with regulators. As a result, the company estimates it saved up to US$72 million in completing construction ahead of schedule, avoiding contractual penalties, and being able to lay pipelines without local protests.3

However, too many supposedly sophisticated companies manage their brand reputations poorly. Recently, News International’s disastrous reputation management of its News of the World brand led to the forced abandonment of its 2011 bid for BSkyB; BP’s corporate reputation for incompetence and poor safety culture has materially diminished its brand value in the United States after the 2010 Gulf of Mexico incident; and the Royal Bank of Scotland is struggling to escape the massive damage to its various brands caused by its corporate reputation for arrogance and mismanagement exposed by the global credit crunch in 2008.

But for every newsworthy brand reputation failure, there are many other companies reaping real benefits from managing their reputations well. For example, Apple’s reputation for design and innovation allows it seemingly easy access to already crowded product markets. Tesco’s 20-year reinvention from discount retailer in the early 1990s to today’s high-street behemoth has reaped market-beating shareholder returns. Virgin Group’s reputation as a trendy upstart has shielded it from its patchy customer service levels. This chapter briefly sets out to address the gap in both the academic and business practice literature around brand reputation. It looks at the value that can be achieved by balancing brand and reputation through proactive management. It briefly examines why measuring brand reputation has proved so difficult to date. An innovative approach to brand reputation is presented, using data collected on the UK energy market in June 2011 and on Toyota in May 2010. It offers a case study of a well-known company that is currently engaged in brand reputation management. Last, it offers a summary for your company to balance its brand and reputation management to achieve sustained commercial success.

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Further reading

Books:

  • Carpenter, Daniel. Organizational Image and Pharmaceutical Regulation at the FDA. Princeton, NJ: Princeton University Press, 2010.
  • Fombrun, Charles. Reputation. Realizing Value from the Corporate Image. Cambridge, MA: Harvard Business School Press, 2008.

Articles:

  • Aron, Debra J. “Worker reputation and productivity incentives.” Journal of Labor Economics 5:4, Part 2 (October 1987): S87–S106. Online at: www.jstor.org/stable/2534912
  • Bhattacharya, Rajeev, Timothy M. Devinney, and Madan M. Pillutla. “A formal model of trust based on outcomes.” Academy of Management Review 23:3 (July 1998): 459–472. Online at: www.jstor.org/stable/259289
  • Fisher, Justin, Jennifer van Heerde, and Andrew Tucker. “Does one trust judgement fit all? Linking theory and empirics.” British Journal of Politics & International Relations 12:2 (May 2010): 161–188. Online at: dx.doi.org/10.1111/j.1467-856X.2009.00401.x
  • Herbig, Paul, and John Milewicz. “The relationship of reputation and credibility to brand success.” Journal of Consumer Marketing 10:3 (1993): 18–24. Online at: dx.doi.org/10.1108/EUM0000000002601
  • Kwon, Ik-Whan G., and Taewon Suh. “Factors affecting the level of trust and commitment in supply chain relationships.” Journal of Supply Chain Management 40:2 (March 2004): 4–14. Online at: dx.doi.org/10.1111/j.1745-493X.2004.tb00165.x
  • Lewellen, Katharina. “Risk, reputation, and IPO price support.” Journal of Finance 61:2 (April 2006): 613–653. Online at: dx.doi.org/10.1111/j.1540-6261.2006.00850.x
  • Pharaoh, Andrew. “Corporate reputation: The boardroom challenge.” Corporate Governance 3:4 (2003): 46–51. Online at: dx.doi.org/10.1108/14720700310497113
  • Prahalad, C. K., and G. Hamel. “The core competence of the corporation.” Harvard Business Review (May–June 1990).
  • Rindova, Violina P., Ian O. Williamson, Antoaneta P. Petkova, and Joy Marie Sever. “Being good or being known: An empirical examination of the dimensions, antecedents, and consequences of organizational reputation.” Academy of Management Journal 48:6 (December 2005): 1033–1049. Online at: www.jstor.org/stable/20159728
  • Roberts, Peter W., and Grahame R. Dowling. “Corporate reputation and sustained superior financial performance.” Strategic Management Journal 23:12 (December 2002): 1077–1093. Online at: dx.doi.org/10.1002/smj.274

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