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 or enhanced.
Trust is a vital part of our society and economy. While there exists a distinction between the application of trust in our social relations and that, which is implicit within our economic decision-making, broadly speaking the 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 fulfilment, 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 see new expressions of value emerging that require more complex forms of trust, as companies seek to satisfy heightened consumer expectations of wealth in its fullest sense. When a customer invests his critical assets such attention, information, time or even expertise, he wants an appropriate return that extends beyond mere functional utility and which satisfies in its broadest sense, a human centric exchange of 'values' as well as 'value'. 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. Consequently demonstrating the right values and reputation is crucial for any organization or brand that seeks to attract exchanges that extend beyond one dimensional value exchange. For many companies accumulation of this social capital and the development of a strong emotional commitment is now a critical business success criteria. 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'.
Reputation and Brands
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 networked 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. Such brands, in the face of the time poor consumer and proliferation of 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, writer.
Other brands have begun to emerge 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 examples of this 'consumer agency' approach, such as 'independent' financial brokers, have floundered and lost credibility by becoming tainted by the commission structures of financial service providers. Consequently the reputation of these emergent customer centric brands must first overcome the cynicism created by these negative precedents. 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 bias is just such a brand and effectively offers the consumer a means of outsourcing timely 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 GM foods, but what Tesco have done recently to enhance its reputation as the 'consumers champion' raises the stakes considerably, as we see companies ruthlessly competing on the basis of 'share of trust'. 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 nonetheless Levi's pricing duality got ruthlessly exposed (in the US the jeans are not premium positioned) and maybe this was just a reputation disaster waiting to happen, with Tesco's merely demonstrating a predatory instinct to raise its reputation. A high-risk reputation strategy when you play j'accuse, but one that Tesco's was confident of winning. Tecso's 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 responsibility required of them. 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. This 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. The business community is learning that it pays to be guiding and influencing debate through engagement, rather than opposing, denying, or worse, remaining 'outside' the diologue. 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 mis-informed 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.
Reputation and the Networked Consumer
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 threats to reputation (and conversely its reputation enhancing opportunities) that the information age brought. Indeed most pure play e-commerce of last year failed because it was simply not seen as credible but this misses the point. Information, that most precious of marketing resources, is now in the hands of pressure groups, regulators, campaigners, competitors, and most importantly the consumer, and the more protest driven of these groups have certainly acquired an authority that's 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 'set to' with 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, at a time when previous bastions of professional know how have become public domain such that we are all our own 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 commercial falsehoods and 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 the brand managers have their work cut out. The ease with which a disillusioned consumer can switch brands is apparent, hence marketing's current obsession with relationships and CRM (incidentally how do you manage a relationship, surely a relationship is negotiated?) 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.
The arrival of the information age and the proliferation of other media has caused that other vital marketing resource, consumer attention, to rise appreciably in value. Consumers are beginning to understand the fact that they posses other assets which are invaluable to business and that the value they represent as customers stretches way beyond mere financial exchange. This is why some businesses have recognised that it is profitable to aggregate such assets and take them to market as trusted agents. 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, and the sheer scale of connectivity in today's knowledge economy 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 commonplace. 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' view of society (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 at 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.
We're all Stakeholders
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. Insecurity reigns supreme and there are those who can skilfully manipulate this to satisfy their ends. At the moment corporations are having to learn reactively about what they need to do to preserve perceptual 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.
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. As we have seen threats to reputation are equally, if not more likely, to come from our daily brand experiences that fall short of our expectations, as they are to momentous global events or social ills. Or perhaps the perceived and often real disconnect between the commerce we have created and the society we have neglected. Our need as loyal customers is 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 of our needs. As I mentioned, the bottom line 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, which in turn represents an opportunity cost to 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 the new battleground. This is where most loyalty programmes have floundered; it's about real values 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 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 much for the 'marketplace' being the final arbiter and clearing house of one-dimensional value.
A good example of what I mean was contained within a short telephone call I made to a bank as a prospective customer, I got a salesman who simply could not hide his admiration for the company he worked for. As you would expect from the Co-op bank, they have a policy of recruiting elderly people who have little chance of being re-employed due to their advancing years. The result: extended service, empathy and an immediate reaffirmation of the Co-op's ethical reputation, embedded in to a high value and personable service. Any such 'community' (in this case loyal Co-op customers) which generates a strong identity and exhibits clear emotive values, carries with it strong inclusive desires, which 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 and values lived
As we have discussed there is apparent and considerable 're-negotiation' taking place between business and society, mostly at the level of the brand. The recent vogue for product centred cause related marketing initiatives is such 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 that 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 new found values, beliefs and responsibilities. As we have seen, this has the potential for powerful strategic gains in terms of reputation and in a number of other ways besides.
What CSR is not, and why I have an objection to this phrase, is that it implies a kind of benevolence or 'giving back' to society to offset some kind of corporate guilt. While this may be the case for a lot of companies, it does however miss the point. If harnessed to its fullest extent it is a vehicle for pro-actively seeking out means of being an agent for positive social change and demonstrating your vales through real actions. 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 where able to spread their distribution footprint across India by acting as a force for good. People got their coke and their vaccinations! As creative and as pragmatic a business solution as you'll see and when communicated effectively, as compelling a corporate communication as you'll come across. A statement of intent that is universally appealing, that transcends through its substance, any degree of fame that an advertiser has ever managed to create. A reputation powerhouse that also creates other tangible dividends in tandem with the softer attributes we have discussed. Earning a 'licence to operate', employee strategy tools, the development of new products and the discovery of new markets to name but a few.
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.
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'. 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, maybe 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 deconstructed!) and who they can be managed. Adopting a 'sense and respond' approach to stakeholder engagement as opposed to 'decide-announce-defend' mentality has always been present in certain relations but it is CSR that is encouraging its wider adoption. 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 benefits and the additions to the accumulated corporate learning are apparent. Where would 3M be in the reputation stakes without its emphasis on responding to, and nurturing employee innovations. That is 3M's reputation. 'Sense and respond', whether its to consumers, employees, investors, suppliers, media, pressure groups, government or the local community, is creating learning precedents for business just 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. Worth noting too that each stakeholder will have a specific information requirement and that understanding that group's access to that information is vital.
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 the business model spawns off shoots as quickly as the music industry can shut them down. The genie of expectation has been released. 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 the existence of powerful threats that lie outside the corporate radar.
New product developed through stakeholder engagement of low income groups with social inclusion in mind, is creating a whole new breed of loyal customer that has massive reputation leverage when communicated correctly, for both those that have and for those that have not. Reputation aside, today's appreciative lower income user, is tomorrow's loyal higher income user. 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 rather common in retention strategies and is an excellent example of where divisional priorities conflict within a business. In this case marketing's gain is the firm's reputation loss.
The Internal Environment
Marketing's obsession with product focused communications, has left its legacy in a deprived 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 CEO's 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 firms take ownership of certain social issues and commit to its alleviation, reporting authoritatively on its success or otherwise, just as mortgage lenders regularly issue economic forecasts to the mass media.
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 or 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 Willmotts of The Future Foundation so accurately pointed out 'corporate citizenship is part of the service you offer your customer'. Managers of reputation beware.
Biography
Angus matthew is an environmental science graduate who has worked for the last few years as a relationship marketer and who has an interest in social enterprise and corporate reputation management. He is a regular contributor to Pool on Line, a business and marketing strategy website and is seeking to practice in the area of reputation management using his understanding of marketing communications and his social and environmental background.
Contact angusmatthew@yahoo.com