Corporate reputation’s contribution to brand equity
Senior Research Director, Public Practice Leader
Corporate reputation is the halo or shadow that a company casts onto its constituent brands. It is part risk management and part opportunity to engage and differentiate – and it delivers significant value to an organization. Brands with a strong corporate reputation grow their value 39 percent faster than those with weak reputations.
In tumultuous times, reputation is more important than ever as it makes a significant contribution to brand equity. Recent structural equation modeling research by Kantar found at an aggregate level that corporate reputation drives nine percent brand of choice. For some brands, this halo can be much bigger.
Corporate reputation is driven by a range of factors of varying importance. Success and fair pricing have declined in importance to consumers over the last 10 years, while responsibility (i.e. environmental, social, supply chain and employee treatment) has grown 3 times in importance from 17 to 49 percent.
With issues like climate change and social inequality coming to the forefront of consumer consciousness, as well as the millennials’ desire to work for companies that make a difference, there is an ever-increasing demand on companies to give back to society. A company’s social impact is intrinsically linked to its brand image — and its bottom line.
Corporate reputation is driven not only by corporate values but also by behaviours. Now, more than ever, CEOs need to prioritize being socially conscious and demonstrate their company’s commitment by showcasing business practices that impact the world in a positive way.
The commitment, however, must be genuine. Consumers can quickly identify disingenuous social impact commitments and call brands out for it. For example, in spring 2020, after many brands put out messages of support for the Black Lives Matter movement, consumers quickly asked brands to prove their commitment by revealing the racial makeup of their executive suite and corporate workforces. So, while CEOs should be socially conscious, they must also demonstrate their commitment with action and investment.
So, how can senior leadership demonstrate a corporation’s commitment to being socially conscious?
Tell your company’s story, not just your brands’ stories. When people care about the stories behind the products they buy — the place of origin, working conditions, and impact on the environment — social responsibility becomes a new catalyst for brand loyalty.
Be transparent and take ownership. The public often condemns the coverup more than the transgression. In 2008, Maple Leaf Foods CEO Michael McCain demonstrated how being transparent works. During a listeriosis outbreak, he went against legal and financial advice and took full responsibility for it. He made himself the point person on the issue, used plain language with the public, and was genuine and apologetic about the problem. Further, he made it clear to the public how the situation was being remedied and how it would be prevented moving forward.
Use your company’s reputation to engage and deepen relationships. Strong reputation correlates with high market share and improves key brand equity metrics.
Live up to your brands’ purposes. If a company’s brands have purposes, they also need to be embedded in the corporate DNA. Tell consumers about them, ensure employees understand them, embody them at work, and make them part of the decision-making process. You should also ensure that suppliers align with those same values.
Align activism with the company’s culture and values. Social activism needs to be undertaken with caution as polarizing issues require a delicate balance that avoids alienating consumers, employees and investors. Above all, activism should be authentic and aligned with the company's culture and values.
While many talk about brand purpose and activism, it’s important to recognize that behind many great brands are corporations that have reputations too. If a company wants to be successful today, it should make sure that its purpose extends throughout the entire organization, not just across individual brands. Live your values and consumers will reward you, ignore them at the corporate level and you may find that all of your brands’ hard work on their reputations can be undone.