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What are the advantages of a good corporate reputation?

What are the advantages of a good corporate reputation?

Every company wants a good corporate reputation, but what business benefits does it bring? We look at the advantages of building a reputation among different stakeholder groups.

Investors 

Advantages: Greater access to capital markets, increased investor appetite facing greater risk or lower return, heightened share performance relative to peers

If a business has a track record of solid returns and consistent financial performance, it will have better access to capital and outside investment. Share value will increase if dividends are maintained, and outstrip the competition. The rise of sustainable, responsible and impact investing (SRI) means a reputation for socially conscious business practices will boost investment. 

The numbers: Estimates as to how much reputation contributes to corporate value vary from 10% – 80% depending on the research methods and companies/indices in question. In 2019, corporate reputations reportedly accounted for 35.3% per cent of total capitalisation of the world’s top 15 stock market indices, representing $16.77trn in shareholder value. 

Customers 

Advantages: Larger customer base, consumers paying a premium for products and services, longer lifetime client value, increased revenue, raised online profile

In an ultra-competitive marketplace, consumers can be fickle, so winning their trust in paramount. People are swayed by personal recommendations, so positive online reviews result in revenue. Once their trust is won, consumers are more willing to pay a premium for products and services, and loyalty means each client’s value has a longer lifespan. Conversely, customers will disassociate from businesses with a poor reputation.

The numbers: Research indicates that positive reviews make 91% of consumers more likely to use a business, while 82% are put off by negative reviews; 90% of consumers would boycott a company with irresponsible or deceptive business practices. 

Employees 

Advantages: More applicants per role, broader talent pool, attraction of top talent, increased employee retention 

People want to be proud of what they do, and who they do it for. A positive reputation as an employer helps attract and retain the best talent in the sector. Corporate social responsibility, financial performance, staff reviews, media coverage and brand value are all weighed by prospective employees when evaluating whether to work for a company. 

The numbers: In the US, reputation is important to 84% of jobseekers and 50% wouldn’t work for a company with a bad reputation; 64.7% of employees say not knowing, or disagreeing with, a company’s purpose, mission or values would stop them working there

Government, Regulators, and Policymakers 

Advantages: Less scrutiny, reduced regulatory burden, preferential access to future projects, influence on policy formation

Regulators and policymakers alike respond well to businesses that demonstrate good corporate citizenship. And it works both ways. By being seen complying with industry guidelines and rules, and paying its fair share of tax, a company will receive positive media mentions and potentially undergo less intense scrutiny. And by having a reputation for compliance, and earning trust, it may succeed in reducing its regulatory burden. It may also win a seat at the policy-making table.

The numbers: 68% of regulatory compliance professionals in financial companies see protecting their company’s reputation as their primary role, while 89% of the largest global companies are concerned about news coverage of how much companies pay in tax. 

NGOs and Think Tanks 

Advantages: Raised profile, positive media coverage, avoiding negative campaigns, broader networking, recruiting advantage, access to new sectors, influence on industry research

Among those shaping public perception are NGOs which campaign for a cause and think-tanks which sway opinion with targeted research. A well-managed reputation will see your business scoring highly in industry surveys, and invited to influence think-tank studies. Partnering with a charity aligned to your corporate values can increase favourable brand recognition, offer networking opportunities, boost staff morale and retention, offer exposure to new sectors, improve PR, and, coming full circle, enhance your corporate reputation.

The numbers: 82% of UK consumers’ decision to buy from a company is affected by whether a company engages with charities and its local community, 89% per cent think businesses should support charities and their local communities, and 59% that companies that do so benefit from increased profits. 

The Media 

Advantages: Avoid negative reporting or shorten bad news cycles, build public rapport, free publicity, opportunities to provide expert comment

Companies which have built a reputation for authenticity are less likely to be pursued by investigative journalists keen to bring down big, bad corporations. The news cycle will move on, as a reputable company experiencing one reputation crisis is less interesting than one suffering repeated shockwaves. And if they like a business, the media can provide positive publicity at zero cost. Positive framing by journalists will improve overall public perception. Company representatives will be the go-to sources for comment on sector coverage.

The numbers: In one study, on average, brands with negative stories appeared in 172% more headlines, which received 176% more social shares, than positive stories. 

Local Community

Advantages: Attract and retain talent, appeal to customers, boost local economy, gain competitive advantage through community promotion, links with community leaders, support for business expansion

Community relations are a key element in corporate reputation management. Partnerships, philanthropy, volunteering and charitable donations can promote a business’ long-term strategy. Being a good neighbour results in getting the benefit of the doubt if things go wrong. Staff feel rooted in the community and want to remain. Customers see a business that cares. And local government will offer incentives for it to remain or expand in the area.

The numbers: 80% of consumers would buy a product from an unknown brand if it had strong social commitments; 89% of US employees believe that companies who sponsor volunteer activities offer a better working environment.  

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