Your company’s reputation is not merely a reflection of your public image, but a tangible asset with measurable impact on the most essential aspects of your operations. This five-part series by ReputationUs investigates the key areas where the concrete value of managing your reputation has clear business benefits–financial and otherwise.
PART 1 (of 5)
In this first part we’ll consider the positive FINANCIAL impact of actively managing your good reputation. Later series will explore 2) risk evaluation; 3) influencers and marketing; 4) customer loyalty; and 5) staff retention.
Financial Impact
Recent studies confirm that corporate reputation is an invaluable asset with an appreciable impact on a company’s bottom line. Back in 2012, a World Economic Forum study estimated that reputation accounted for more than 25 percent of a company’s market value, according to Global Finance magazine. Today that figure that has radically increased.
- In January 2020 Weber Shandwick, in partnership with KRC Research, released “The State of Corporate Reputation in 2020: Everything Matters Now.” Executives in all but the UK and Hong Kong SAR estimated that their companies’ reputations contributed to more than half of their market value. On average, global executives attributed 63 percent of their company’s market value to their company’s overall reputation. (Executives in Brazil (76 percent) and Mexico (75 percent) thought their corporate reputation made the greatest contribution to market value.)
Additionally, 33 percent of global executives attributed at least 76 percent of their market value to company reputation, actively leveraging their company reputations for maximum financial returns. Regarding the top three benefits of a strong corporate reputation, executives noted customer or client loyalty; competitive advantage; and better relationships with suppliers and partners.
- New data from Deloitte published in the book, “The Four Factors of Trust: How Organizations Can Earn Lifelong Loyalty” (Wiley/Nov. 1, 2022), shows when it comes to business reputation, the importance of trust is at an all-time high, while the inclination to trust is at an all-time low. The research shows trusted companies outperform their peers by up to 400 percent, directly correlating with the bottom line. (This is partially because customers who trust a brand are 88 percent more likely to buy again.)
- For businesses, reputation has never been more crucial, based on new research from the USC Annenberg Center for Public Relations. According to its “2023 Global Communications Report,” “tangible benefits accrue to companies that build and maintain positive reputations. …Those benefits include improved financial performance.”
The report shows 93 percent of investors believe a company’s reputation is “Very Important,” when considering investing in a company. Regarding which aspects of a business benefit the most from a company’s positive reputation, investors ranked consumer brand loyalty; stock performance; employee morale/retention and product sales as the top four.
The direct correlation between a positive corporate reputation and financial success is clear across many areas of impact. Research highlights from recent years reinforce the recognition that reputation is not just a soft metric, but a concrete asset with measurable returns on investment that come from managing it well.
Engaging ReputationUs to conduct a reputation assessment can be an excellent first step in enhancing your reputation future.
NEXT: The Value of Reputation Management – Quantifying Risk
