Maintaining the good name of a company isn’t just a matter of feel-good brand politics but actually has a quantifiable, and positive, impact on the bottom line, research shows.
In a paper published in the Journal of Marketing Management, researchers from the University of Technology Sydney, in Australia, calculate that companies viewed by consumers as having a good reputation can command an average 9% premium for products compared to those of less well-regarded competitors.
“The impact of corporate reputation on consumer choices is substantial compared to the competitive advantage offered by varying product features,” says study co-author Paul Burke.
“Marketing managers need to be concerned about corporate reputation not only because it builds loyalty and trust but also because product features appear more valuable, so consumers are willing to pay more.”
To make their finding, the researchers asked a cohort of volunteers to evaluate the corporate reputation of three television manufacturers: Sony, Panasonic and Toshiba.
The participants were then asked to choose between two ranges of TV models made by the three. The first set of choices involved broadly similar items. The second featured sets with additional, novel features, such as backlight control or dynamic range control.
The study found that consumers were willing to pay more for some types of extra functionality – for instance, larger screen size. The additional expenditure increased by an average of 22% if the company offering the product scored at least one standard deviation higher on a measure quantifying corporate reputation.
The measure took into account several elements, including the perceived quality of a company’s products, its reputation for treating its workforce well, participation in social leadership, and policies based on sound cultural and environmental responsibility.
“Corporate reputation is not something that can be readily controlled by marketing managers, but it is definitely something that should command their attention,” explains Burke.
“Companies need to work hard to communicate that they are environmentally and socially responsible, support good causes, have a positive work environment, and excellent leadership and financial performance, and do their best to mitigate brand damage.”