Decline in Corporate Reputation impacts both multinational and Chinese brands
The rebalancing of China’s economy is not only about slower growth, it also pertains to the changing expectations that consumers have about the brands they choose and the organizations that own those brands. More afuent and sophisticated, Chinese consumers seek not only price, but also value. And the calculus of value increasingly includes products that are safe and socially responsible.
The good news is that the erosion of Trust following the food scandals of a few years ago has stabilized. The bad news is that Corporate Reputation continues to decline. Trust alone strengthens a brand, but a trusted brand surrounded by the fortifying power of Corporate Reputation provides greater protection from the unpredictable vicissitudes of the marketplace. Trust in a brand is firmer when its corporate parent has a reputation for integrity and social responsibility.
BrandZ™ measures Corporate Reputation with an index called RepZ, where 100 is average. RepZ measures how consumers view corporations based on Trustworthiness and three other components: Responsibility (attitudes toward environment, society and employees); Fairness (pricing and interaction with suppliers and others); and Success (innovativeness and financial performance). (For more information, please visit BrandZ.com).
Corporate Reputation in China declined from a score of 101, around average, to a below average score of 97. In general, Chinese consumers express confidence in the government’s ability to manage the economy and sustain economic growth. However, even the major State Owned Enterprises (SOEs) have not been immune to the decline in Corporate Reputation that has touched both local Chinese brands as well as multinational brands operating in China.
Corporate Social Responsibility (CSR) activities can help repair Corporate Reputation. But consumers expect a corporation’s social commitment to be more than a marketing addon. They respond most positively when the commitment to the social good is a genuinely connected to the corporate mission.
In China, that means producing products and services that help individuals, families, and the nation advance to what the government has articulated as the Chinese Dream, a better life for individuals and a respected country internationally. The take away for corporations is to pursue growth without degrading the environment and ofer products that are safe and useful, and make life better or easier.
Implications for BrandsBrands have a major opportunity to improve Corporate Reputation by contributing more to Chinese society and communicating more about their contributions. They can begin by focusing on any of the four RepZ™ components. Strong Corporate Reputation helps ensure that brands will progress rapidly from awareness (consumer knowing about the brand) to trial (consumer testing the brand) to bonding (consumer preferring it over other brands). Brands with higher RepZ enjoy greater market share.
This prescription applies to both Chinese and multinational brands. Multinationals that have built Corporate Reputation in China based on their business success will strengthen Corporate Reputation by demonstrating that their presence in China goes beyond profitability alone and is rooted in a long-term commitment to helping advance the welfare of the nation and its people.