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MSLGROUP Reputation Impact Indicator Study 2015

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MSLGROUP has chosen to take a somewhat atypical approach to the study of reputation. Moving beyond simple rankings, or analyses of ‘drivers’ of reputation alone, we take a more holistic look at how a company must act to build a strong reputation that can facilitate success over time. The result of our research is this, the Reputation Impact Indicator study, part of MSLGROUP’s ongoing efforts to create better knowledge and tools for corporations to better understand how they can influence their reputation.

In the study, we have chosen to look at corporate reputation among a global general public. General public, because how they, as consumers and citizens, view corporations has a substantial and increasingly important impact on how other audiences view them. Global, because we live in an ‘always on’ and ‘on-demand’ world, where different audiences are constantly connected to each other. Today, more than ever, a multistakeholder perspective is necessary.

We hope you enjoy reading it and invite you to share your feedback and tips with us on Twitter @msl_group.

Follow #ReputationImpact on Twitter for insights from the report.

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MSLGROUP Reputation Impact Indicator Study 2015

  1. 1. Corporate Reputation in a Global Setting: MSLGROUP’s Reputation Impact Indicator Study
  2. 2. The MSLGROUP Reputation Impact Indicator A major global survey and report that combines both intuitive and rational dimensions when studying the reputation of leading multinationals.
  3. 3. Foreword The reputation of a corporation is its license to operate. It has a decisive impact on the success of the organization and is generally regarded as one of its most important assets. And yet, we would argue, there is clearly a need for a much deeper understanding of the multifaceted elements that contribute to corporate reputation than currently exists today. MSLGROUP has chosen to take a somewhat atypical approach to the study of reputation. Moving beyond simple rankings, or analyses of ‘drivers’ of reputation alone, we take a more holistic look at how a company must act to build a strong reputation that can facilitate success over time. The result of our research is this, the Reputation Impact Indicator study, part of MSLGROUP’s ongoing efforts to create better knowledge and tools for corporations to better understand how they can influence their reputation. In the study, we have chosen to look at corporate reputation among a global general public. General public, because how they, as consumers and citizens, view corporations has a substantial and increasingly important impact on how other audiences view them. Global, because we live in an ‘always on’ and ‘on-demand’ world, where different audiences are constantly connected to each other. Today, more than ever, a multi- stakeholder perspective is necessary. Among many new findings, the study also confirms a long-held assumption: actions speak louder than words. The factor with the largest impact on an organization’s reputation is simply how well it delivers its products and services, and if they are delivered in an ethical manner (you can of course follow rules and legislation, yet still fail in the court of the public opinion). In short, the study confirms that being perceived as a company that consistently delivers high-quality products and services in an ethical way is what matters most when it comes to building and maintaining a reputation. If actions do speak louder than words then does this mean that communication is of less importance in the building of reputations than we may have thought? No, on the contrary – communication has a very significant role that should not be underestimated. Not least when we consider, as our study shows, that while brands may be global, corporate reputation is most definitely local. Assuming broad brand awareness across multiple countries for the well-known global brands covered in the study, it seems clear that how a company communicates with people in different countries or regions influences what those people think of a company, how robust its local reputation is. In this sense, we should think of global corporate reputation as the sum of a company or brand’s local reputations. Anders Kempe EMEA President for MSLGROUP 1
  4. 4. Foreword Underlining our commitment to a more holistic view of corporate reputation, we analyzed how people retrieve the information that they then use to form an opinion about a company. What we found is that this is largely an intuitive process, and that abstract knowledge about a company is not enough to engender a strong reputation in the public’s mind’s eye. A significant part of a company’s reputation is a matter of instinct, based on how ‘relatable’ that company feels. We refer to this as the ‘Mind Space’ the company occupies. Here, communication plays an important role, as an organization needs to communicate its actions repeatedly and engage with its stakeholders, so as to build clear associations – linked to its core business – that can easily be held in a person’s mind. Our study findings underline that it is this more qualitative approach to brand awareness that is key to establishing a robust reputation. And authenticity and engaging storytelling are undoubtedly at the heart of any such approach. That an organization’s reputation is shaped most by intuitive, gut-felt pieces does not however mean that reputations can be quickly built. Instead it means that we have to think in advance: always have the communicative aspect in mind when making business decisions. MSLGROUP’s Reputation Impact Indicator study is an attempt to ‘dissect’ corporate reputation, to study the components of which it is made up, and to then take a holistic view of each one’s relative impact on reputation at both a global and industry level. I hope you find the report to be inspiring and thought-provoking reading. Kindly, Anders Kempe Our study findings underline that it is this more qualitative approach to brand awareness that is key to establishing a robust reputation. And authenticity and engaging storytelling are undoubtedly at the heart of any such approach. 2
  5. 5. Executive Summary This report summarizes and comments on the findings from MSLGROUP’s Reputation Impact Indicator, a global study of the general public, that forms part of MSLGROUP’s Corporate Reputation framework. The primary aim of this research was to find general reputation trends on a macro and industry level and to lay the foundations of a reputation framework for additional future research and insight. The field research was conducted during the last quarter of 2014, by means of a survey on a statistically validated sample of the general public in 10 countries, totaling 26,467 qualified respondents. The survey was complemented with analysis of social media content for 10 selected companies. The findings provide insight into what drives the general public’s views of some of the world’s best-known global corporate brands. MSLGROUP also carried out in-depth analysis of reputation drivers within four industry clusters, in order to study the relative impact of each for a given industry, and the differences between the four industries. The selected industries cover the pharmaceutical, consumer electronics, fast- moving consumer goods (FMCG), and internet-based businesses sectors. The key findings include: Among the general public, the main dimensions driving corporate reputation today are the perception of a company’s products and services, and that company’s business behavior: Is the company doing a good job delivering on its core business promise – represented by its products and services – and is it seen to be doing so in an ethical, transparent way. At the industry level there are clear differences in the relative impact of different reputation drivers within each dimension, e.g. corporate behavior is significantly more important in the pharmaceutical industry compared with the other three industry clusters studied, underscoring the importance of fact-based input for reputation management. There are significant regional differences in how companies are perceived, throwing into stark contrast the ‘new world’ and the ‘old world’. Respondents in Brazil, China, India, and South Africa have a more positive perception of companies than their counterparts in North America, and particularly in Europe, where respondents can be said to demonstrate greater skepticism towards companies in general. Brands are global, corporate reputation is local. There are large variances in the reputation of individual companies at a country level. Even though a brand is recognized globally, the reputation of the company is local. The findings provide insight into what drives the general public’s views of some of the world’s best-known global corporate brands. 3
  6. 6. A strong ‘Mind Space’ can engender a robust corporate reputation. There is a correlation between how easy it is for respondents to mentally associate with a specific company or brand – its ‘relatability’ – and reputation. High brand awareness alone is not enough. The ideas, images, feelings one associates with a given company need to be easy and quick to draw upon, positive in sentiment, and linked to that company’s products and services. Companies that have this clearly defined ‘Mind Space’ will enjoy a more robust corporate reputation, while companies that do not easily invoke such connotations, or invoke neutral rather than positive connotations, will have a weaker reputation. There are also differences for which factors have the largest impact on reputation between respondents with positive, neutral and negative connotations. For the former, the perception of products and services is most important, but for the latter group aspects of corporate behavior play a more significant role. The research also confirms: • Reputation drivers linked to actual consumer experience are of greater significance when it comes to evaluating Net Promoter Score (NPS) than corporate reputation. This difference aside, there is unsurprisingly a clear correlation between corporate reputation and NPS, and for both of these measures the most important driver is how well a company is perceived to deliver its products and services. For some of the other drivers we see different patterns around which factors contribute to NPS and which to corporate reputation, and in general, consumer experience is brought more sharply into focus. • Age, media habits, and educational background matter. Demographic factors play a significant role, and have a large impact on the strength of a corporate reputation and how companies are perceived. • Social media content reflects the relative importance of the reputation dimensions. A large majority of discussions online are about topics related to company products and services, and this is also the area with most un-aided engagement. A majority of negative posts online are related to corporate behavior, confirming the negative impact of this dimension. The report is structured in two parts, where the first part is a detailed description of the Reputation Impact Indicator study, its methodology, and its main findings. In the second part, three senior representatives from MSLGROUP share their observations on the findings and their implications for corporate reputation building. EXECUTIVE SUMMARY DEFINITIONS AND EXPLANATIONS OF CONCEPTS IN THIS SECTION Corporate reputation: The general collective judgment of a corporation based on assessments of the impact of performances and actions attributed to the corporation over time. Net Promoter Score (NPS): The inclination to recommend a company. Brand awareness: The extent to which a brand is recognized by potential customers, and is correctly associated with a particular product or service. ‘Mind Space’: The ease with which a respondent can answer questions about the company. Measures the strength of brand awareness. 4
  7. 7. PART ONE: THE STUDY Part One: The Study “…and yet, we would argue, there is clearly a need for a much deeper understanding of the multifaceted elements that contribute to corporate reputation than currently exists today.” Anders Kempe President, EMEA, MSLGROUP
  8. 8. Part One: The Study The Need for a New Framework Reputation sounds like a simple thing. Individuals and companies all want one that is good, there are different paths you can follow to secure such a thing, and many of us instinctively think we know which path to follow – particularly when we’re passing comment, looking ‘from the outside in’. The reality though is a lot more complex. Reputation is fickle; a reputation that is hard-won can be easily lost. And importantly, reputation is not a generic concept: the ‘right’ reputation for one company may not be the right one for another. The way in which we form an opinion of a company or brand is at base a function of what we experience when we interact – directly or indirectly – with that company or brand. Out of our experience of a company – and the experiences others have – is born reputation. In the pre-digital era, the number of interactions between a company and a customer were limited and each had time to leave an impression. A brilliant ad perhaps. Or maybe an enjoyable visit to a store. Whatever the specifics, a customer’s view of a company or brand was likely to be a rational one, formed after some deliberation, deliberation that was possible because people simply had more time. It was against this backdrop that if such experiences were managed effectively by a business, a customer’s loyalty could be assured. There was also less competition for experiential in the bricks and mortar world of the pre-digital era, as communications channels had yet to invade every waking minute of our lives. Impressions – and reputations – could therefore ‘set’, or establish themselves. By contrast, in today’s digital era, the number of exchanges between a company and the customer has exploded, with each interaction leaving a progressively smaller impression. Industry competitors from all corners of the world now scramble to create even small, brief connections with the customer. But do all these impressions and connections carry equal weight in terms of aiding an individual to form an opinion about a company? Probably not. With the ever-increasing volume of communication and number of information channels around us, it is crucial that companies use fact-based input to evaluate which elements have the largest impact on their reputation. These factors will of course vary across industries and markets, and also depend on the audience. Given the sheer volume of data that now washes across our screens, it would stand to reason that a customer’s view of a company or brand is now necessarily arrived at more quickly, and therefore intuitively, than in days past. It has to be – who has the time to sit down and think anymore? But is that the case? And what are the implications for a company’s reputation? Most reputation modeling or reporting assumes a rational, deliberative model. None has tried to quantify a more intuitive approach, let alone figure out how first impressions turn into long-held views. And this is one issue at the heart of MSLGROUP’s Reputation Impact Indicator study: How does the intuitive, gut-feeling view an individual holds about a company impact upon that company’s reputation? How can fleeting interactions between companies and individuals be gelled into more permanent impressions? In an era of more frequent interaction between businesses and their customers, which drivers really matter when it comes to building reputations? And finally, what precisely should companies emphasize in each interaction with every potential or existing customer, in order to bolster their reputations? 1 Given the sheer volume of data that now washes across our screens, it would stand to reason that a customer’s view of a company or brand is now necessarily arrived at more quickly, and therefore intuitively, than in days past. ? 6
  9. 9. PART ONE: THE STUDY ABOUT THE RESEARCH The research behind the Reputation Impact Indicator was designed by Robert Gelmanovski, a researcher in reputation management at the Royal Institute of Technology in Stockholm (KTH) – who is affiliated with MSLGROUP in the Nordics, and Dominic Payling, Director and Head of Planning & Insight at MSLGROUP in London, alongside a reference group of senior consultants from MSLGROUP’s global network. The research was then conducted by Robert Gelmanovski. A statistically validated sample of the general public aged 16–65 in 10 countries was surveyed in the last quarter of 2014 in online panels provided by CINT, a company with a presence in more than 60 countries. A total of 26,467 interviews in 10 countries were conducted, at least 2,500 interviews per country. Countries covered: United States, Canada, United Kingdom, France, Germany, Sweden, China, India, Brazil, and South Africa. The questionnaire consisted of 38 questions on reputation, plus background questions on media consumption, age, and educational background. The MSLGROUP Reputation Impact Indicator With the Reputation Impact Indicator we aim to layer intuitive brand associations and expectations over a more traditional, ‘deliberate’ reputation measurement approach. We also analyze the various types of content a company produces, and link them to reputation scores, to better understand how to help companies produce reputation- enhancing content. The MSLGROUP Reputation Impact Indicator is one of the first studies to examine the link between spontaneous, intuitive associations with companies and a more deliberate and rational response to statements about companies. The research also sheds light on the drivers of corporate reputation and the challenges of managing corporate reputation from a global perspective. This has been achieved through a detailed exploration of the drivers of reputation and the relative significance of each driver across industries and markets. The resulting model, the Reputation Impact Indicator, is based on a Reputation Core consisting of three questions: • Do you like company x? • Do you trust company x? • Do you respect company x? 2 10countries 26,467interviews Robert Gelmanovski 7
  10. 10. PART ONE: THE STUDY 1. This online analysis was carried out by our agency in Bulgaria – Publicis Consultants MSLGROUP – specialists in social media monitoring, analytics, and research. The team has worked for clients from the automotive, FMCG, IT, and pharma industries, and offers its services for a broad range of languages, including most European and major Asian languages. Combining hand-coding techniques in processing data from automated analysis tools with robust knowledge of the dynamics of human behavior online, and related consumer trends, the analysts are able to provide deep qualitative insights that help inform strategy. ABOUT THE KNOWLEDGE BASE Fombrun, Charles J., Naomi A. Gardberg and Joy M. Sever (2000), ‘The Reputation Quotient: A Multiple Stakeholder Measure of Corporate Reputation’, The Journal of Brand Management, 7 (4), pp. 241–255. Wartick, S. (2002), ‘Measuring Corporate Reputation’, Business Society, Vol. 41 No. 4, pp. 371–392. Helm, S. (2007), ‘One Reputation or Many? Comparing Stakeholders’ Perceptions of Corporate Reputation’, Corporate Communications: An International Journal, Vol. 12 No. 3, pp. 238–254. Walker, K. (2010), ‘A Systematic Review of the Corporate Reputation Literature: Definition, Measurement, and Theory’, Corporate Reputation Review, Vol. 12 No. 4, pp. 357-387. ABOUT THE METHODOLOGY The questionnaire was divided into two parts: one covering spontaneous associations and expectations, and a second part with 25 reputation statements with a 7-grade scale (1 = do not at all agree, 7 = agree completely). Answers were indexed to a scale 0–100. An index difference of 2 points was considered statistically significant. Respondents were asked to evaluate 41 global corporations, chosen because of their worldwide operations and international outlook, and only respondents with a higher degree of brand awareness of the companies (‘somewhat familiar’ or ‘very familiar’) were allowed to complete the survey. In parallel with the quantitative research, online content was analyzed for 10 of the 41 companies, with this content categorized into one of the four reputation dimensions of the MSLGROUP Reputation Impact Indicator model. While we have chosen to focus on the overall findings and implications of the research for reputation management, not on company-specific insights, data about individual companies is sometimes used to illustrate a general point. Answers to the three questions around the Reputation Core were then combined and expressed as an index from 0–100, giving an indication of a company’s reputation. In order to better understand what is driving the Reputation Core Index we then looked at four dimensions that contribute to the building of reputation, each reflected through a number of questions: 1. Strength of relationship (how well a company builds relationships with external audiences) 2. Perception of products and services 3. Perception of corporate behavior 4. Perception of financial performance These four dimensions were drawn from international academic research in the field of reputation and are reflected in a number of questions, with each question then correlated to the Reputation Core – thus identifying reputational drivers. In addition, the survey examines the link between strength of reputation and the degree of recommendation (NPS). The survey takes a global perspective and covers 10 countries on five continents: the United States, Canada, United Kingdom, France, Germany, Sweden, China, India, Brazil, and South Africa. Alongside the four dimensions of reputation, the study also looks at intuitive reputation awareness and the impact on corporate reputation. This intuitive aspect of reputation is then linked to a more rational, deliberate view of reputation. We define the capacity to create spontaneous associations with a company as ‘Mind Space’, a metric that demonstrates strength of brand awareness. Underlying the results in each area is ‘reputation content’, i.e. the messages and conversations linked to a company, the majority of which are today delivered and digested via digital channels. Our online listening metric therefore looks at reputation content online for 10 of the companies, and then links that content to the reputation dimensions and the Reputation Core, thus exploring which pieces of content are building or eroding reputation. In order to get a deeper understanding of reputation content the researchers examined what types of content the general public within the 10 markets published on the web during the data collection period, for 10 of the researched companies. By conducting social media listening and classifying the content into the model’s four dimensions of reputation1 , we are able to link a type of content to a level of reputation strength and further understand the significance of each driver. 8
  11. 11. MSLGROUP’s Reputation Impact Indicator model Examining the relationship between the Reputation Core, the underlying reputation drivers and the content produced by and about companies. Reputation Content Reputation Drivers Reputation Core PART ONE: THE STUDY 9
  12. 12. Definitions and explanations of concepts in this section Reputation Core Index: The measure of corporate reputation used in the study. A combined score that answers the questions “Do you like company x?”, “Do you trust company x?”, and “Do you respect company x?” Products and services: The term used for a group of reputation drivers reflecting the quality of the company’s offering. • X offers high-quality products/services • X meets customer needs • X offers products/services that are good value for money • X is an innovative company • X produces its products/services in a sustainable way Corporate behavior: The term used for a group of reputation drivers reflecting a company’s actions and business behavior. • X acts ethically • X is open and transparent about the way the company operates • X has a positive influence on society • X cares for the environment • X cares for its employees Relationship: The term used for a group of reputation drivers reflecting the quality of the company’s relationship with its customers. • X involves the customer in the creation of new products/services • X delivers on its promises • X is open to criticism and suggestions for improvement • X communicates in an honest and sincere way • X offers good customer service Financial performance: The term used for a group of reputation drivers reflecting a company’s financial performance. • X is a profitable company • X has a capable leadership • X has a clear vision for its future • X has good potential for future growth • X delivers better financial results than its competitors Alongside the four dimensions of reputation, the study also looks at intuitive reputation awareness and the impact on corporate reputation. This intuitive aspect of reputation is then linked to a more rational, deliberate view of reputation. PART ONE: THE STUDY 10
  13. 13. After products and services, corporate behavior (the degree to which a company is perceived to be doing business in an ethical, transparent way) correlated most strongly with a high Reputation Core Index. Our study shows that perceptions around products and services create the strongest reputation driver in all countries surveyed. By contrast, how a company is perceived to be performing financially is the least important driver for enhancing reputation among the general public – a statement true for all markets surveyed. Financial performance and the quality of a company’s management obviously has a defining impact on many other stakeholders, not least investors, but it is not surprising that the general public can be said to form opinions about a company’s reputation first and foremost as consumers or citizens, rather than as investors. This finding can and should guide the priorities of a management team. If scoring on ethical behavior is at risk, research shows that reputation can suffer. When facing an issue, the way the issue is handled and the perceived level of transparency and sincerity can often have as large an impact on the reputation of the company as the issue itself. On the other hand, quality of products and services and making it known that they are appreciated are key contributors to a positive reputation that should not be underestimated. The impact of different dimensions on Reputation Core Index Our study shows that perceptions around products and services create the strongest reputation driver in all countries surveyed. Actions Speak Louder Than Words Strong perceived delivery of products and services and positive perceptions of corporate behavior drive up the Reputation Core Index among the general public. • For companies that scored low on the Reputation Core Index there is a clear correlation to low scoring on corporate behavior. • There are significant variations between industries concerning the relative impact of different reputation drivers on the Reputation Core Index. What is the strongest driver of corporate reputation among the general public? To answer this question and others, we analyzed the degree to which different attributes of the four reputational dimensions (strength of relationship, perception of products and services, perception of corporate behavior, and perception of financial performance) drive reputation. Perception of products and services showed the strongest correlation to the Reputation Core Index. This dimension is made up of five different drivers, which together reflects the quality of the company’s offering. 3 FINDING Financial performance Relationship Corporate behavior Products and services 0 – + PART ONE: THE STUDY 11
  14. 14. This shows that people have higher expectations with regard to the corporate behavior of pharmaceutical companies than they do of companies in the other three industries under review. the three other industries where ‘value’ is one of the core drivers, especially in the pharmaceutical industry. Another interesting difference is that ‘producing products in a sustainable way’ has a much smaller impact on corporate reputation for internet companies than for companies in the other three industries. It appears the internet industry continues to be evaluated by somewhat different criteria when compared with more mature industries. Overall, the financial performance of a company is not a positive driver for corporate reputation among the general public, but there are some statistically confirmed differences between the industries. Additionally the impact of this dimension appears to be affected by pre-existing views respondents may hold about a company. With the exception of FMCG, a high profit margin has a negative impact on the reputation of all three other industries: ‘profitable’ seems to be seen as a dirty word. In the FMCG and internet industries, strong company leadership has a positive impact on corporate reputation but we do not see the same pattern in the pharmaceutical and consumer electronics industries. For consumer electronics and internet businesses, a perceived potential for future growth has a positive impact, yet by contrast, there is no statistically confirmed relationship between this driver and the reputation of companies in the pharmaceutical and FMCG industries. On an industry level there are significant variations in how different reputation drivers contribute to the Reputation Core. The reputation drivers for companies within the pharmaceutical industry display some unique characteristics: Although corporate behavior is important for all industries, it has a larger impact on reputation within the pharmaceutical industry. ‘Acts ethically’ is the second most important driver for corporate reputation in all industries, but in the pharmaceutical industry this driver is much closer in relative importance to the first. This is followed by other drivers that are closely linked to corporate behavior, ‘producing products and services that are good value for money’, ‘communicates in an honest and sincere way’, ‘has a positive impact on society’, and ‘is open and transparent about the way the company operates’. This shows that people have higher expectations with regard the corporate behavior of pharmaceutical companies than they do of companies in the other three industries under review. That is to say, to act in a non-ethical way will be more damaging to a pharmaceutical company than to a company in one of the other three industries covered in the study. Companies within the internet sector also display an industry-specific pattern. Providing products and services that are perceived as ‘value for money’ does not have the same impact on corporate reputation as it does in PART ONE: THE STUDY 12
  15. 15. The top 10 reputation drivers in the pharmaceutical industry 1. Offers high-quality products/services 2. Acts ethically 3. Offers products/services that are good value for money 4. Communicates in an honest and sincere way 5. Positive influence on society 6. Open and transparent about the way the company operates 7. Meets customer needs 8. Produces its products in a sustainable way 9. Capable leadership 10. Profitable company 1 2 3 4 5 6 7 8 9 10 SignifcanteffectonReputationCore + 0 – The top 10 reputation drivers for internet businesses 1. Offers high-quality products/services 2. Acts ethically 3. Positive influence on society 4. Meets customer needs 5. Communicates in an honest and sincere way 1 2 3 4 5 6 7 8 9 10 6. Open and transparent about the way the company operates 7. Offers good customer service 8. Offers products/services that are good value for money 9. Innovative company 10. Capable leadership SignifcanteffectonReputationCore + 0 – PART ONE: THE STUDY 13
  16. 16. Companies’ commitment to social issues seems to be largely judged as a sum of their perceived overall contribution to society. We can see that a positive influence on society has a significant impact on the Reputation Core, and a change in this driver will bring about the greatest change for corporate reputation across all industries – with the exception of pharmaceutical companies. Ethical behavior is also a significant reputation driver, especially in the pharmaceutical industry, as we have seen. The two more specific questions around ‘caring for the environment’, and ‘caring for employees’, were not found to be as strong a driver of corporate reputation, by contrast. One interpretation of this is that the industries analyzed are perceived to have a comparatively slight negative impact on the environment, versus others, and the significance of this driver will most likely be greater for other industries that are thought of as more harmful to the environment. When it comes to the ‘relationship’ dimension of reputation (reflecting the quality of a company’s relationship with its customers), the driver that stands out as having the biggest impact is ‘communicates in an honest and sincere way’. This further illustrates the importance of ethical business behavior. It is not enough to only act ethically but companies also need to be ethical and open in their communication. Also interesting here are differences across the four industry clusters, when we look at expectations around customer service and the impact of this factor on corporate reputation. For pharmaceutical companies and those in the FMCG sector, the customer service element does not have a significant impact, while for consumer electronics and internet businesses, this factor has a confirmed positive impact on corporate reputation. From the analysis above we can see that there is no ‘one size fits all’ solution where communication is concerned. There are significant variations between the relative importance of a reputation driver when looking at different industries, and it is crucial for management and communications professionals to have an understanding of the specific dynamics in their industry, and use this information as input when making business and communication decisions. Impact of the financial dimension on the Reputation Core Index Profitable company Capable leadership Good potential for future growth Pharma Consumer electronics FMCG Internet We can see that a positive influence on society has a significant impact on the Reputation Core. + 0 – SignifcanteffectonReputationCore PART ONE: THE STUDY 14
  17. 17. Impact of the relationship dimension on the Reputation Core Index Impact of the corporate behavior dimension on the Reputation Core Index Acts ethically Open and transparent about the way the company operates Positive influence on society Cares for the environment Cares for its employees Pharma Consumer electronics FMCG Internet Pharma Consumer electronics FMCG Internet Delivers on its promises Communicates in an honest and sincere way Offers good customer service SignifcanteffectonReputationCore PART ONE: THE STUDY 15
  18. 18. Use it, Like it, Recommend it: The Drivers of Recommendation (NPS) • Reputation drivers linked to actual consumer experience are more important for driving NPS than they are for corporate reputation. • There are some differences between industries, but those differences are not as distinct as for the drivers of reputation. Some have called it ‘the ultimate question’: Would you recommend a company to a friend or a colleague? Our survey attempted to answer this question by asking respondents to tell us how likely they were to indeed recommend the companies surveyed. Respondents were asked to rate a company from 0 (‘not at all likely’) to 10 (‘very likely’). By looking at the number of ‘9’ or ‘10’ answers and subtracting them from the 0–6 answers, the survey produced an NPS. While an NPS can be negative, most successful companies have a number of dedicated promoters or fans and therefore a high NPS score (more than +50). Independent research2 has shown a link between a high NPS score and business success in terms of sales. In this study we correlated high NPS scores (where respondents indicated either 9–10) with the Reputation Core. In all countries, there was a clear correlation between a strong reputation and a high NPS score. While this conclusion in itself won’t raise many eyebrows, we were able to further analyze the factors behind this correlation and uncover precisely which reputational elements have the strongest impact on NPS. What we discovered is that the area of reputation that is most strongly linked to a high NPS score is the perception of products and services. As was the case with overall reputation, the dimension with the least impact on NPS among the general public is a company’s financial performance. 4 2. Marsden, P, Alain Samson and Neville Upton (2005), ‘Advocacy Drives Growth’, Brand Strategy (198), pp.45–47. FINDING Reputation dimensions as drivers of NPS Financial performance Relationship Corporate behavior Products and services 0 – + PART ONE: THE STUDY 16
  19. 19. As for any differences between markets with regard to what drives NPS, we found none. In all markets, being good at delivering your offering builds recommendation levels the most. At the industry level, we did see some differences with regard to what drives NPS, but those differences are not as significant as for the reputation drivers. One interesting variation is that a company’s financial performance is a positive factor for NPS in the consumer electronics, FMCG, and particularly the internet industries. Only where the pharmaceuticals industry is concerned do we see a negative impact. One further difference is that the relationship dimension is more important, and will become even more important, when compared to ethical business behavior as a driver of NPS within the consumer electronics industry. While the importance of the different dimensions where NPS is concerned is much the same as it is for the Reputation Core Index, the ranking of the specific drivers is slightly different. ‘Offers high-quality products and services’ still has the largest impact, but ‘produces its products in a sustainable way’ has a bigger impact on NPS than products being seen as value for money and meeting customer needs. To have a ‘positive impact on society’ is more important for NPS than to ‘act ethically’, which is similar to the impact of this dimension on corporate reputation. ‘Caring for employees’ has the third largest impact in the category for NPS, but this piece is of low significance when it comes to building corporate reputation. With regard to the relationship dimension, the ranking is also different. ‘Delivering on promises’ is the most impactful question for NPS, followed by ‘delivering good customer service’ and ‘communicating in an honest and sincere way’. This is also the inverse of the ranking where impact on reputation is concerned. Not surprisingly, from the observations above we can see that the drivers linked to actual consumer experience are more important for driving NPS than for corporate reputation. This underlines the need to carefully evaluate and balance the message depending on the purpose of, and audience for communication.The area of reputation that is most strongly linked to a high NPS score is the perception of products and services. NPS Driver Strength by Industry Financial performance Relationshiip Corporate behavior Products and services 0 – Consumer electronics Internet FMCG Pharma + PART ONE: THE STUDY 17
  20. 20. Brand Awareness is not Enough, Building a Strong ‘Mind Space’ and  Positive Connotations is Key • Not only the quality, but also the ease with which people can create mental associations with an organization has a significant impact on reputation. • Engendering neutral associations is not enough to build a strong corporate reputation. • The relative importance of different reputation drivers is affected by pre-existing attitudes towards a company. Only respondents claiming to know the companies that were surveyed ‘fairly’ or ‘very well’, and could spontaneously associate things with the company, were allowed to answer the subsequent questions on the drivers of reputation, meaning all respondents effectively were brand-aware of the participating companies. Seventy-eight per cent of respondents found it easy to come up with spontaneous associations with a company, and the Reputation Core Index was 43% higher among that group. In other words, occupying a customer’s ‘Mind Space’ – the ease with which an image of a company is created in an individual’s mind’s eye – is an advantage. When respondents were asked to define these connotations, 53% defined them as positive, 38% as neutral, and 9% thought of them as negative. Unsurprisingly, associating negative things with a company is linked to a low reputation score. But what was surprising was the significant difference in impact upon reputation found between neutral and positive associations. Positive associations resulted in an average Reputation Core Index that was 60% higher than that of neutral associations. Clearly a more qualitative approach to brand awareness – building positive associations that are easily accessible in the minds of stakeholders – is therefore a key to a strong reputation. And the more closely this ‘Mind Space’ is linked to a company’s products and services, the better. These findings were true for all markets, age groups, and industries covered in the study. So, in a world where businesses and brands are constantly battling for attention, simply grabbing people’s attention is not enough. Organizations need to generate positive ‘Mind Space’, if they are to build a robust reputation. 5 Share of respondents who thought it was easy versus difficult to identify things they associate with a company in the survey Share of positive, neutral, and negative associations A more qualitative approach to brand awareness building positive associations that are easily accessible in the minds of stakeholders – is therefore a key to a strong reputation. And the more closely this ‘Mind Space’ is linked to a company’s products and services, the better. FINDING Difficult Easy Positive Negative Neutral 22% 78% 38% 53% 09% PART ONE: THE STUDY 18
  21. 21. Dominant brands are not only recognized, they also occupy ‘Mind Space’ in relevant stakeholder groups that is in line with the qualities with which the brand wishes to be associated. Creating a robust and relevant ‘Mind Space’ goes beyond creating brand awareness. A company not only needs to grab attention and make stakeholders aware of its existence, it needs to create an impression that allows one to easily attribute characteristics to the brand, thus increasing the chances of making it the brand of choice. In this respect, ‘Mind Space’ can be said to be the quality of awareness about a brand. In today’s world of speed and transparency, ‘Mind Space’ is created from a number of brand conversation sources. What do we think of when we hear a particular brand name? How automatically were those connotations invoked? Are the characteristics we ultimately associate with a brand in line with the desired brand positioning? A robust ‘Mind Space’ requires two parts. The things one associates with a company need to be easily drawn upon, thus making the process intuitive: if a person has to spend time going through a structured thought process in order to work out what they think, then the ‘Mind Space’ in question is already weaker than if sentiments are gut-felt. Secondly, the associations need to reflect a positive, company-specific understanding of the brand. If the associations are generic and equally true for all companies in the industry, ‘Mind Space’ is also weakened. Brand x How do we define ‘Mind Space’? Positive associations linked to a stronger Reputation Core Reputation Core Company I like Company I trust Company I respect 0 85 Neutral associations Positive associations Neutral associations lead to a much weaker reputation PART ONE: THE STUDY 19
  22. 22. The importance of building positive associations is also confirmed at the industry level, with levels of corporate reputation being significantly higher among respondents who associated positively with a company versus those who demonstrated more neutral associations. This was true across all industries. One interesting observation here is that the positive impact of ethical business behavior and drivers including ‘acts ethically’, and ‘produces its products in a sustainable way’ is much stronger Citizenship dimension drivers linked to type of association among respondents who judge their own associations to be negative than among respondents who associate positive things with a company. For this group of respondents, the questions related to ethical business behavior have a bigger impact on corporate reputation than drivers related to product and service quality, value for money and meeting customer needs. How the financial performance of a company is perceived is also dependent on whether the respondent judges the things they associate with a company Acts ethically Open and transparent about the way the company operates Positive influence on society Cares for the environment Cares for its employees Pharma Consumer electronics FMCG Internet PositiveassociationsNegativeassociationsNeutralassociationsPART ONE: THE STUDY 20
  23. 23. Financial performance drivers linked to type of association Pharma Consumer electronics FMCG Internet to be positive, neutral, or negative. For respondents with positive associations, ‘profitable company’ has a slightly positive impact on corporate reputation, whereas for respondents that judge their associations as negative, the profitability has a strongly negative impact on reputation. An interesting observation is the large impact of capable leadership among respondents with negative associations. One explanation for this could be that respondents with negative associations put more trust in a company’s leadership to change the perceived negative aspects of their business. From the below, we can see that the attitude of the target group not surprisingly has a large impact on corporate reputation, and also that the relative contribution of different drivers varies significantly between respondents with positive and negative attitudes. Again, this highlights the need to adapt communication to the relevant audience, based on a thorough understanding of their attitudes and motivations. PositiveassociationsNegativeassociationsNeutralassociations Profitable company Capable leadership Clear vison for its future Good potential for future growth Delivers better financial results than its competition PART ONE: THE STUDY 21
  24. 24. Social Media Discussions Reflect the Relative Impact of the Reputation Dimension on Corporate Reputation The Reputation Impact Indicator includes an analysis of the relationship between corporate reputation and discussions on social media. The importance of perception of products and services is supported by our analysis of online content from the 10 sample companies. For companies selling products directly to consumers, the proportion of social media content related to the products and services varied between 50–90%. Products and services is also the reputation area where we observed the most ‘organic’ posts, i.e. content and conversations that are sustained without active involvement from the companies in question. A majority of the conversations relating to the company products and services were positive. Also in line with the importance of the reputation drivers, the other area where we observed a number of ‘organic’ posts was topics relating to a company’s corporate behavior. These topics created a high degree of engagement, with conversations focused on ethical conduct, transparency, and consumer rights. In contrast with conversations around core business, most of the conversations around corporate behavior were negative. Linking this to the main area of research, we noticed, perhaps unsurprisingly, that companies with a poor corporate reputation, evidenced by a low Reputation Core Index, appeared so largely due to negative perceptions of their position on corporate behavior. 6 1. McDonald’s 2. BP 3. GoldmanSachs 4. Citibank 5. Shell 6. PayPal 7. Microsoft 8. Johnson Johnson 9. Samsung 10. Google Perception of products and services Perception of corporate behavior/CSR Perception of financial performance Online content classified into the three dimensions of corporate reputation The importance of perception of products and services is supported by our analysis of online content from the 10 sample companies. FINDING 10 20 30 40 50 60 70 80 90 100 Values in percentage points, from data derived through a qualitative and quantative analysis of a sample of content for each company in each of the 10 countries. PART ONE: THE STUDY 22
  25. 25. Global Brands, Local Reputation A global corporate reputation might well be the sum of local reputations in each individual market, but how reputation is constructed in those markets means that each must be attended to with insight and care. This is a significant challenge not least given the growing importance (and reach) of web-based communication. As far as local differences within the survey findings are concerned, two particular areas stand out: 1. Europeans are more skeptical about companies than respondents from the BRICS The average Reputation Core score for companies was 66, across the 10 countries surveyed. However, the study found that reputation varies significantly between countries and companies: the lowest Reputation Core score was 28 and the highest 91. Examining different regions we observed that Europeans rate companies much lower than their counterparts in North America do, who in turn lag behind respondents in the BRICS countries surveyed – Brazil, India, China and South Africa. Indian respondents produced the highest average Reputation Core score of 79, while Swedish respondents evidenced the lowest average Reputation Core score of 51. The study demonstrates that in general, Indians hold corporations in very high regard, with the lowest Reputation Core score among the companies surveyed being 72. These differences observed between ‘the old world’ and ‘the new world’ underline the need for a finely-tuned reputation strategy, one that avoids a ‘standardized’ global definition of reputation. 2. There are considerable market variations when it comes to a company’s reputation score Globalization has become one of the most dominant business trends in the last three decades, and a significant amount of corporate and marketing communications work is carried out with the purpose of building a robust, global corporate brand. Indeed, the brands we have studied in this research are companies with an impressive global presence. The study demonstrates that despite having high brand awareness in all markets, a company’s brand can have a markedly different reputation in individual countries. We found numerous examples where both the strength of the Reputation Core and the associations people make with, and discussions they have about brands were very different. For example, GlaxoSmithKline has a Reputation Core Index score between 42 and 81, the highest being in India and the lowest in Sweden. On the other hand, AstraZeneca sees its Reputation Core score vary between 52 in Canada and 84 in Brazil. Taken together with the previous finding regarding different population’s overall attitudes to and views of corporations (less skeptical in Asia, more so in Europe), this highlights the challenges facing marketing communications leaders at global brands, and the clear need for local knowledge of the stakeholder environment. 7 FINDING The study found that reputation varies significantly between countries and companies. PART ONE: THE STUDY 23
  26. 26. Showing the difference in Reputation Core across countries ReputationScore 79 76 75 74 67 64 61 60 59 51 Stronger Weaker India Brazil China South Africa United States Canada United Kingdom Germany France Sweden New world Old world PART ONE: THE STUDY 24
  27. 27. Globalization has become one of the most dominant business trends in the last three decades. 90 0 – The Reputation Core score of GlaxoSmithKline in different countries 81 76 69 67 57 56 56 54 52 India Brazil China South Africa Canada United States United Kingdom Germany France Sweden 42 90 0 – The Reputation Core score of AstraZeneca in different countries 84 78 77 68 58 57 56 54 52 52 Brazil China India South Africa Germany United States France United Kingdom Sweden Canada PART ONE: THE STUDY 25
  28. 28. Demographics and Media Habits Matter The development of the Reputation Core Index among different age groups follows a different pattern in each of the four industries. Where pharmaceutical companies are concerned, reputation is significantly weaker among both younger and older age groups, while higher among middle-aged respondents. For consumer electronics, reputation is at a similar level across all the age groups. For FMCG and internet related businesses, reputation is highest among younger sections of the population, and decreases with age, with reputation being at its lowest among older respondents. As part of the study we also analyzed a possible relationship between gender and corporate reputation, but we were not able to find any statistically significant patterns that could support the notion that the gender of a respondent has an impact on the Reputation Core Index. There is however a link between reputations score and the educational level of the respondents, with the highest reputation scores emerging from respondents with college or university degrees, and students. This is true for all industries except pharmaceuticals, where students provided somewhat lower scores. We also see a relationship between online habits and the Reputation Core Index. This is particularly true for the pharmaceutical and internet industries where reputation is much higher among respondents that spend more time online versus those with lower internet usage levels. The same pattern is true also for consumer electronics and FMCG, but the difference is less significant. The research highlights the increasing importance of digital channels as a source of company information. In fact, 36% of the respondents in the study said that online channels are their main source of information about companies. These numbers are increasing year on year, making online content critical for reputation management. 8 FINDING 36% of the respondents in the study said that online channels are their main source of information about companies. Industry Reputation Core Index by age group Pharma Consumer electronics FMCG Internet 80 0 16–17 18–22 23–26 27–32 33–35 36–40 41–45 46–50 51–55 56–60 61–65 65+ PART ONE: THE STUDY 26
  29. 29. Where do you mainly get your information about companies? Breakdown: 1. Company websites 16% 2. Twitter 1% 3. Facebook 5% 4. Other online source 14% The rest: 5. Other 1% 6. Newspaper ads 10% 7. Newspaper stories 10% 8. TV ads 13% 9. TV news 17% 10. Radio ads 2% 11. Radio news 3% 12. Magazine ads 1% 13. Friends or family 7% 36%online 6 7 8 9 101112 13 12 3 4 5 PART ONE: THE STUDY 27
  30. 30. 80 Reputation Core Index and education level Reputation Core Index and online usage Primary Secondary College, university Still studying Less than 1 hour 1–3 hours 3–6 hours More than 6 hours Pharma Consumer electronics FMCG Internet 0 40 80 Pharma Consumer electronics FMCG Internet 0 40 More time spent online results in a higher reputation score PART ONE: THE STUDY 28
  31. 31. PART ONE: THE STUDY 29 “…in situations where reputation effects may be the key determinants of business success or failure, companies can and should expect to be able to do more than just reflect on previous experience, or review data. Experience certainly takes us a long way. But it is time to move on and to improve.” Part Two: Observations Maria Grimberg Partner
  32. 32. Part Two: Observations Reputation Moments We believe that the information age that we live in today has changed the way that audiences judge our reputation. Theirs is less and less a thoughtful assessment of our carefully constructed narrative and more and more an intuitive assessment based on the immediate beats and moments that define those individuals’ most recent interactions with us. The importance of building and nurturing a reputation, over time, remains undiminished, indeed it has become more important than ever. But today it is the way that an organization or company helps its audience to judge it positively, moment by moment, that will increasingly determine its success. As we head for an era of machine learning and programmatic reputation – with its ever shortening cycle of action, reaction, and interaction – these moments will occur more frequently and with ever greater rapidity. We’d better be ready. But how should we ‘be’ in this new reputation dynamic? We know from the evidence provided by behavioral scientists such as Nobel Laureate Daniel Kahneman that simple assertion is not however enough. To have any immediate and future value the promise an organization makes must be underpinned by what it does to create the ‘skin in the game’ and that is what allows the organization to play on. Historically the reputation acquisition process was slow and hard-won. It took a major investment, in time, money, and effort to create reputation equity, which made reputation equity a significant barrier to competition. All very useful if you were an old, established brand, business, organization, or industry. Of course today, two network effects have disrupted the status quo: 1. Social Networking Online the actions of an organization can be judged by many people and those judgments then circulated among many others. Furthermore these actions and judgments are preserved, in a sort of digital aspic, some of it factual and accurate, some less so, some born of advocacy, some of malice, but all accessible. In real-time. Today, the communication costs associated with building a reputation have been reduced. And the ease with which your reputation can be damaged has increased. Substantially. 2. The Sharing Economy In the last year more strangers got into each other’s cars and beds than ever in the history of trust. Disruptive technologies from businesses such as Über and Airbnb demonstrate the way that reputation can be instant. You have a bed, in a place I want to be, it looks clean and doesn’t cost too much – let’s book! Thousands if not millions of instant and valuable off-the-shelf reputations appear to have been created overnight. Furthermore businesses like Airbnb and Über actively incentivize our mutual reputation engagement – encouraging us to build or destroy each other’s reputations at will. Dominic Payling Director and Head of Planning Insight at MSLGROUP in London 30
  33. 33. PART TWO: OBSERVATIONS In the sharing economy a widely distributed reputation can be acquired at low cost and seemingly at speed. The barriers that protected old established industries are falling and their destruction will accelerate. The dynamics, scale, and economics of reputation have shifted and we believe that this has affected the way people think about corporate reputation. We believe that this is in line with Daniel Kahneman’s theories about how actual influences on behavior compare with the influences economists predict people should respond to when making decisions. The economists’ view is straightforward and common sense. Every person works out his or her preferences independently of each other based on what is best for him or her. However, Kahneman and his Co-laureate Amos Tversky showed that the ‘working out’ that really influences our behavior doesn’t conform to logical, rational models of behavior. To describe the psychology underlying this and the influences behind many of the decisions we make many times every single day of our lives, Kahneman uses an elegant metaphor: ‘fast’ versus ‘slow’ thinking. Slow thinking is the thinking we optimistically imagine we use all the time to make decisions (just as economists imagine we do). It is deliberate, conscious, calculating, mathematical, and rational. What is more, it is hard work and it is slow. Although we can and do think like this, we don’t think like it very often. Such thinking is restricted in its influence over our lives. Fast thinking is the far more influential mode. It is automatic, only slightly conscious – or completely unconscious – associative, and intuitive. It is effortless and it is speedy. We should be mindful of fast thinking when we consider reputation too. At MSLGROUP we believe this points to a new understanding of reputation. With the removal of barriers to judgment created by the networked world, where once it might have been enough to communicate at scale, organizations must now behave correctly and be seen to be behaving correctly at scale. Build on top of this the active creation of instant reputations in which participants are incentivized to judge each other and a new type of economy emerges: one in which the reputation equilibrium is truly dynamic and a sustainable business must seek to optimize that reputation at all times. In the new world of reputation moments, uncertainty has become much more pronounced and success lies in constantly evolving, or optimizing your organization’s popularity among those people who have not yet decided to what extent they like you or not. Competitive advantage lies increasingly at the margin. We believe that reputations can now be formed more quickly – if not yet overnight – and can now change more quickly. They are more fragile than they once were and subject to faster, harder headwinds, crosswinds, and tailwinds. We now live in an era of reputation moments that we must seek to optimize – always. Today, the communication costs associated with building a reputation have been reduced. And the ease with which your reputation can be damaged has increased. Substantially. 31
  34. 34. Reputation: A Matter of Buy, Sell, or Hold? Some might attract global profile, others might be noticed by many fewer, but there are a significant number of examples each year when we observe a clear link between corporate reputation and stock market valuation. Almost all of these are where a company has not delivered in a manner that has been expected by its customers, suppliers, staff, or to society more generally. The transgressor’s reputation has taken a hit and so has its share price. The impact is often immediate and can be challenging to overcome. But MSLGROUP’s research shows that for most people, how a company is doing financially is not something that concerns them when it comes to their own views of a company’s reputation. A company is either doing well (and can therefore be expected to deliver on a series of reputational positives), or it is not. Most people do not read the financial pages of the newspapers. For them, the only time that business results appear to enter the public consciousness is when a company’s performance has been so spectacularly bad or when the CEO is seen to have been so inappropriately remunerated that it is front page rather than business page news. This research has also determined that although a public perception of ‘good management’ (whatever that actually means) can support a positive reputation, actually making money is something that might raise questions. For a pharmaceutical company, for example, the research shows a negative relationship between profit and reputation – a small, but important indicator that post the financial crisis, business as a whole has yet to clearly set out an accepted argument for profit and corporate financial success. So if the general public does not really care how a business is doing financially, should the financial markets really care how the business is doing reputationally? The answer would appear to be an obvious yes. But in reality how many companies are actually demonstrating the link between reputation and performance in a way that is built into analyst models and investor decision- making? In our experience, there are not many who are (for example Allianz, American Express, Philips) but when a company does take the time to provide a detailed insight into this dimension it appears such an obvious thing to do. Kevin Soady Partner PART TWO: OBSERVATIONS 32
  35. 35. We have seen through this research that Net Promoter Score has a very strong correlation with core reputation. There are many examples where it has been demonstrated that a better NPS leads to better business performance. Promoters spend more, tell others about their positive experience, and are less likely to switch providers. This has been shown consistently across disparate businesses and sectors from insurance and credit cards, telecommunications and healthcare, technology and global shipping services. Many companies that are using NPS or equivalent metrics as a business management tool are beginning to understand that the results are not just of use in terms of sales and marketing, they can also offer the financial markets an insight into the potential within a business if reputational targets are achieved or improved upon. So, for them, a business that is being managed on the basis of maximizing customer satisfaction (whether those customers are the general public or other businesses), is a business that will be taking market share, will be making more money, and should be achieving a premium rating. The next step to tying reputation to financial performance may well then rest with the investors themselves or the sell-side analyst community. Our recent survey of global investors, covering many of the same markets as covered in this study, showed how important non-financial factors are to investor decision-making, with corporate strategy and quality of management the key issues for many. But it is hard to define exactly what quality management is or represents. Corporate reputation is most definitely one of the factors but how should this be defined? This Reputation Impact Indicator study provides us with some insights and as more begin to learn from the relatively few examples, it should become the norm rather than the exception for the CEO, CFO, or Head of IR to be asked on an earnings call “So what happened to your key reputational KPIs in the quarter and what are you doing to improve them?” Because reputation can be the key to buy, sell, or hold. If the general public does not really care how a business is doing financially, should the financial markets really care how the business is doing reputationally? PART TWO: OBSERVATIONS 33
  36. 36. Guiding Corporate Reputation Management in the Next Decade: “A Little Less Conversation, a Bit More Action Please?” Management teams and leaders are giving the reputation aspect of their decision-making considerably more weight than just a few years ago. Their interest is primarily in understanding the potentially positive or damaging effects of decisions and investments. It is against this backdrop that MSLGROUP’s Reputation Impact Indicator study was conceived part of our effort to create a new framework around corporate reputation as a fundamental corporate asset, built for a decade where it is one of the top priorities and challenges for many companies’ business success. Today, the financial, commercial, or legal aspects related to any business decision are heavily scrutinized. The models used to do so are well established and well known. We believe that the reputational aspects of those same business decisions also need to be treated in the same rigorous way. Currently, those corporate communication managers and advisors committed to elevating reputation in business decision-making processes will seek to draw on experience from similar situations, gather historical data from stakeholder research, and implement real-time monitoring and measurement – it is as much as current models enable them to do. MSLGROUP sees the clear need to expand on and deliver better reputation models and tools for such situations, to create a more robust and accurate Corporate Reputation framework. Access to fast and deep data in any situation is a huge advantage, but in order to really be able to give sound advice in today’s fast-moving world we need a more in-depth understanding of how corporate reputation is constructed among various stakeholder groups, and how it can be influenced both positively and negatively. Put simply, in situations where reputation effects may be the key determinants of business success or failure, companies can and should expect to be able to do more than just reflect on previous experience, or review data. Experience certainly takes us a long way. But it is time to move on and to improve. MSLGROUP’s research confirms what several previous studies have shown: Reputation scores do have a direct impact on the inclination to recommend a business, which in turn has a proven impact on business performance. So it matters. Reputation in a New Era We do not live in a new world. But we do live in a new era where over the last two decades several waves of technological innovation, globalization, and value shifts have deeply influenced the way brands, companies, and organizations operate. Unsurprisingly, they must now include reputation insights in their corporate decision-making. The new era is often discussed as seen through the lens of the consumer, a consumer who is more important and carries more influence than ever before. They are empowered by knowledge and by access to channels for Maria Grimberg Partner PART TWO: OBSERVATIONS 34
  37. 37. ‘voice’ or ‘exit’ that are increasingly important. The walls between external and internal are coming down and the concept of transparency must be redefined in order to stay interesting, credible, and respected. This makes many businesses nervous. The speed at which a consumer’s opinion can spread is, frankly, daunting. It is easy to become more risk- averse than ever before and to start avoiding making decisions that might upset consumers, even if they are sometimes the right ones to take. But the truth is, innovation and progress require courage. And to survive and thrive, companies need to be given the opportunity to weigh reputation opportunities as well as risk. Optimal versus Maximal Reputation Here is where things get interesting. We recognize that in a multi-stakeholder environment, businesses face reputation risk in everything they do. In order to mitigate these risks, we need a true and deep understanding of the possible effects on business results. But the risk measure has become too simplistic. In our view, reputation has too often been gauged by standards based on falsely objective criteria rather than on the effect it really has on business. Companies from completely different industries are ranked against one another, rather than against their competitive set, and their own ‘optimal’ reputation level is ignored. Many existing frameworks take the starting point that a business reputation is formed and developed steadily and progressively over time, an evolutionary process if you like. The aim is to constantly improve, and the higher the score, the better the chances for business success. But the truth is that every company is unique, and that reputation is largely formed by the expectations people have of a company. If we understand the building blocks we can also get closer to understanding what the optimal level for any given company is. (Optimal reputation can only be understood in a multi-stakeholder context. While the general public is important, companies have conversations with many stakeholders.) Our hypothesis is that there is an optimal level of reputation for every company, which does not necessarily have to be the highest one possible. Companies should strive for the optimal level of reputation and ‘Mind Space’ for the industry and business situation that they are in. A reputation that is optimal will also be in a dynamic equilibrium. When pushed in one direction, it will after some time, if companies do the right thing, bounce back more or less to its original levels. The optimal level and makeup of a reputation will change over time. We also believe that there are thresholds within the dynamic equilibrium which companies should not fall below, and thresholds that those companies could seek to move beyond, in order to positively impact reputation going forward. These thresholds are based on factors that have the strongest correlation to reputation within a specific industry, but also related to society as a whole. So our conclusion is this: What really matters is our ability to foresee how a company’s business decisions affect the Reputation Core and to understand where it will move away from its equilibrium. From that base a company can assess the benefit and cost of any reputation opportunity and the associated risks. Deeds versus words. We look forward to a time when more of our clients perhaps say to us, “A little less communication – a bit more understanding of the consequences of our actions, please.” Of course, we need to robustly test these hypotheses – all be they well-founded. Stand by for more from our follow-up research project next year. What really matters is our ability to foresee how a company’s business decisions affect the Reputation Core and to understand where it will move away from its equilibrium. From that base a company can assess the benefit and cost of any reputation opportunity and the associated risks. PART TWO: OBSERVATIONS 35
  38. 38. About the Editor: Pär Uhlin is a consultant in the Corporate Communications practice at MSLGROUP in Stockholm. He has a rich experience from communication in a global environment, and has spent 15 years in Asia working at MSLGROUP offices in Beijing, Hong Kong, and Shanghai. Pär has been a senior advisor to several large multinationals in Asia and has considerable experience in both crisis and reputation management. He has a Bachelor’s degree in Business Administration with a Major in International Marketing, and a Master’s degree in Asian Studies, from the University of Stockholm, Sweden. 36
  39. 39. About MSLGROUP We are Publicis Groupe’s strategic communications and engagement group, advisors in all aspects of communication strategy: from consumer PR to financial communications, from public affairs to reputation management, and from crisis communications to experiential marketing and events. If you would like to talk to us about how MSLGROUP can support you with reputation counsel, strategic planning, insight- guided thinking, and big, compelling ideas, please contact Maria Grimberg at maria.grimberg@jklgroup.com.
  40. 40. MSLGROUP.COM Trudi Harris Chief Communications Officer trudi.harris@mslgroup.com

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