[Slidecast] The Metrics of Reputation - Jeff Smith, Partner, Prophet
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Jeff Smith discussed findings from Prophet’s 2010 Reputation Survey and discussed the process for measuring reputation and determining drivers that matter. He looked across categories, discussed key trends and illustrate how building reputation is not just about influencing policy makers and investors, it is critical to the commercial success of a business.
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[Slidecast] The Metrics of Reputation - Jeff Smith, Partner, Prophet
- 1. Produced!by! The!New!Metrics!of!Sustainable!Business! ! ! ! ! The!Metrics!of!Reputa;on! ! ! ! Jeff!Smith,!Partner,!Prophet! !
- 2. THE VALUE OF REPUTATION: INSIGHTS FROM PROPHET’S 2010 CORPORATE REPUTATION STUDY
- 3. Why does having a strong reputation matter? 2010 Corporate Reputation Findings: Master Deck Proprietary and confidential. Do not distribute. 1
- 4. FINANCIAL STRENGTH Over a 13-year period, the top 10 companies on Fortune Magazine’s Most Admired rankings showed an average stock price increase of 20.1%, while the average increase for the S&P 500 was only 13.1% On the other hand, the 10 firms at the bottom of the rankings showed an average decline in stock price of 1.9% 2010 Corporate Reputation Findings: Master DeckAPCO worldwide 2009 Source: Measuring your return on reputation, Proprietary and confidential. Do not distribute. 2
- 5. HIGHER SALES and PRICE PREMIUMS U.S. consumers are 4 times more likely to pay a premium, and 15 times more likely to recommend a leading company’s products/services versus others 2010 Corporate Reputation- Findings: Master Reputation Study Source: Prophet 2010 2011 Corporate Deck Proprietary and confidential. Do not distribute. 3
- 6. HIGH QUALITY TALENT In a recent study, 83% of MBA students said a company’s reputation is extremely or very important to them when choosing an employer 2010 Corporate Reputation The War for Talent” by Hill and Knowlton; survey conducted November 2007; report published in 2008 Proprietary and confidential. Do not distribute. Source: “Reputation & Findings: Master Deck 4
- 7. Framework for measuring reputation Prophet has a framework for measuring corporate reputation Prophet’s Corporate Reputation Framework: The face of the company and a key vehicle for supporting and driving reputation-building efforts The overall measure of reputation that gauges the degree to which customers trust, admire, and respect a company The key drivers of a company’s reputation. There are over 30 attributes across the 6 pillars 2010 Corporate Reputation Study Results Proprietary and confidential. Do not distribute. 5
- 8. The six pillars of reputation The reputation pillars allow for deeper understanding on what areas are influencing a company’s overall reputation People Pacesetters Products Describes the company’s Describes the quality of a Describes how the company employees and workplace company’s leadership, delivers value to end-users environment vision, and governance Performance Purpose Personal Relevance Describes the company’s Summarizes the company’s Reflect the way a company financial and operational track approach and commitment to connects with its record making the world a better stakeholders on an place emotional level 2010 Corporate Reputation Study Results Proprietary and confidential. Do not distribute. 6
- 9. Corporate reputation study Prophet’s annual reputation study, conducted among ~5,000 U.S. consumers, is currently in-field with results expected by late November Industry Selection Criteria Industries 18 industries are included in the Financial Services Entertainment Auto reputation study: Pharmaceutical Delivery Services Airline • Highly scrutinized Healthcare Fast Food Hotel • Well known to the general public Energy/Utility Chemical Agriculture/Industrial • Have fortune 500 companies Insurance Oil & Gas CPG Retail Technology Miscellaneous1 ILLUSTRATIVE Company Selection Criteria 150 companies are included in the reputation study: • Fortune 500 industry ranking (by revenue) • In Fortune’s World’s Most Admired Companies 1 Miscellaneous includes GE, Boeing, Philip Morris, 3M, and Avery 2010 Corporate Reputation Study Results Proprietary and confidential. Do not distribute. 7
- 10. Reputation metrics Reputation Management The measure of a company’s overall reputation and Index (RMI): the basis for overall company rankings and scores Strength of Overall Reputation A sub-set of the 30+ attributes (e.g., reliable Drivers of Reputation: customer service and support) with the greatest Attributes Most Important to Reputation influence on a company’s reputation The measure of how well consumers believe a Performance Score: company is performing on specific attributes and is Respondent Rating on Attribute presented on 100 point scale Leading Greater than 75 RMI and Performance Strong 70 – 75 Score Scale Average 60 – 69.9 Poor 55 – 59.9 Failing Below 55 2010 Corporate Reputation Study Results Proprietary and confidential. Do not distribute. 8
- 11. In 2010, CPG and delivery services had the highest reputation scores with healthcare, financial services, and oil and gas having the lowest CPG and delivery services have the highest, “leading” reputation scores Healthcare, financial services and oil and gas have the lowest industry reputation scores Industry Statistics Mean – 65.0 High Score – 75.9 Median – 65.7 Low Score – 46.4 1Difference between 2010 and 2009 is statistically significant at the 95% confidence level Miscellaneous industry includes GE, Boeing, Philip Morris, 3M, and Avery Source: Prophet data - based on US representative sample 2010 Corporate Reputation Study Results Proprietary and confidential. Do not distribute. 9
- 12. In 2010, products, personal relevance and pacesetters were key to driving reputation across industries 2010 Top 10 Cross-Industry Reputation Drivers Products/services Personal Relevance Performance Pacesetters Purpose People # Attribute Reputation Pillar 1 The company’s products and services make a difference in my life Personal Relevance 2 I look to this company for the newest products, services, and technologies Products/Services 3 Behaves in an ethical manner Pacesetters 4 Gives me peace of mind Personal Relevance 5 Is open Pacesetters 6 Offers reliable products and services Products/Services 7 Is for people like me Personal Relevance 8 Communicates clearly Pacesetters 9 Balances priorities Pacesetters 10 Has high quality products and services Products/Services Source: 2010 Prophet reputation study 2010 Corporate Reputation Study Results Proprietary and confidential. Do not distribute. 10
- 13. How can reputation change the demand-side discussion? 2010 Corporate Reputation Study Results Proprietary and confidential. Do not distribute. 11
- 14. While familiarity is largely driven by brand, reputation drives 60% of a consumers decision to recommend a brand. 2010 Corporate Reputation- Study Corporate Reputation Study & internal Reputation Work Source: Prophet 2010 2011 Results Proprietary and confidential. Do not distribute. 12
- 15. While familiarity is largely driven by the brand itself, reputation drives ~60% of the decision to recommend a brand. Reputation Vs. Brand Reputation Vs. Brand Relative Driver Importance for Familiarity Relative Driver Importance for Recommendation 70 70 59 60 60 57 50 50 % Of Total Importance % Of Total Importance 43 41 40 40 30 30 20 20 10 10 0 0 Reputation Drivers Brand Drivers Reputation Drivers Brand Drivers Source: 2010 Prophet reputation study & internal Prophet studies % of Total Importance calculated by taking relative share of brand drivers vs. reputation drivers standardized beta weights within each regression. 2010 Corporate Reputation Study Results Proprietary and confidential. Do not distribute. 13
- 16. Reputation is twice as important as brand when people consider doing business with a company. 2010 Corporate Reputation- Study Corporate Reputation Study & internal Reputation Work Source: Prophet 2010 2011 Results Proprietary and confidential. Do not distribute. 14
- 17. Reputation is nearly twice as important as brand when people consider doing business with a company. Reputation Vs. Brand Average Driver Weight for Consideration 0.50 0.40 0.30 0.25 0.20 0.16 0.10 0.00 Reputation Drivers Brand Drivers Source: 2010 Prophet reputation study Average driver weight is the average standardized beta score for each type of attribute with consideration as dependent variable 2010 Corporate Reputation Study Results Proprietary and confidential. Do not distribute. 15
- 18. How relevant is purpose in the minds of consumers? 2010 Corporate Reputation Study Results Proprietary and confidential. Do not distribute. 16
- 19. Role of the purpose pillar The purpose pillar includes attributes that describe the company’s approach to making the world a better place Purpose attributes • Environmentally responsible • Gives money to good causes • Volunteers in its communities • Socially responsible The importance of the purpose pillar is growing over time… Number of 2009 2010 industries with purpose attributes among the top 10 drivers 2 5 2010 Corporate Reputation Study Results Proprietary and confidential. Do not distribute. 17
- 20. Where does “purpose” matter Purpose attributes have moved up into the top 10 drivers in industries including Chemical, Agriculture, Oil & Gas, Delivery Services and Pharmaceutical Industry Top 10 Drivers Agriculture • Socially responsible • Socially responsible Chemical • Volunteers in its communities Delivery Services • Environmentally responsible • Environmentally responsible Oil & Gas • Socially responsible • Socially responsible Pharmaceutical • Volunteers in its communities Social and environmental responsibility and volunteerism are increasing in importance. Giving money is no longer enough. 2010 Corporate Reputation Study Results Proprietary and confidential. Do not distribute. 18
- 21. Why does “purpose” matter As social & environmental responsibility becomes more important, their impact on reputation in other industries is likely to increase with some already seeing purpose attributes increasing in importance Auto Healthcare Energy/Utility Environmental Social Environmental Responsibility Responsibility Responsibility 2.5x More important in 2x More important in 1.5x More important in 2010 than in 2009 2010 than in 2009 2010 than in 2009 Fuel Efficiency Responsible Renewable Pricing & Policies Energy 2010 Corporate Reputation Study Results Proprietary and confidential. Do not distribute. 19
- 22. Investment in reputation has an impact on both in-market sales response and long-term business results Reputation needs to be more holistically defined and more strategically managed Measured proof is an objective way to move minds and gain momentum on the marketing side of the business 2010 Corporate Reputation Study Results Proprietary and confidential. Do not distribute. 20
- 23. For more information please contact: Jeff Smith Partner (312) 878-4921 jsmith@prophet.com www.prophet.com 2010 Corporate Reputation Study Results Proprietary and confidential. Do not distribute. 21
- 24. Produced!by! The!New!Metrics!of!Sustainable!Business! ! !Thank!You!to!Our!Event!Partners! ! !! ! ! ! ! !
- 25. ! ! ! The!New!Metrics!of!Sustainable!Business! ! ! ! ! ! www.SustainableBrands.com!