Reputation Defenders

How much cost a bad corporate reputation?

How much cost a bad corporate reputation?
Steven Maddocks

7 min

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How much cost a bad corporate reputation?

Corporate reputation is important. Many companies spend millions of dollars each year trying to improve it. But how do you know whether your efforts are paying off? How much does it cost to maintain a positive image? And what happens when things go wrong? These questions are addressed in "The Cost of a Negative Business Reputation," a report published by the Boston Consulting Group.

The study found that a poor reputation can cause a loss of $1 billion per year in revenue for a Fortune 500 company. In addition, it can lead to lost customers, lower employee morale, and even lawsuits.

Corporate reputation is an intangible asset.

The concept of intangible assets is one of those things that seem like common sense but aren't really. Many people think of tangible assets, such as buildings, equipment, inventory, etc., as the most important part of a company. But what about intangible assets? They're just as important, if not more so. Intangible assets include customer relationships, employee skills, brand recognition, and a company's reputation.

Intangible assets are often referred to as "intangibles," which are very difficult to measure. For example, how do you quantify a company's reputation? What does it mean to say that a company has a good reputation? How much value does that add to the company? These questions aren't easy to answer, but they are essential to understanding why companies exist.

In corporate terms, what's an asset?

Intangible assets include brand reputation, customer loyalty, employee morale, and employee training. They're hard to measure, but they're still worth something. Companies use them to build competitive advantage. But how do you know whether you've got enough of them?

The answer lies in looking at the balance sheet. Assets include everything a company owns, including its real estate, equipment, inventories, accounts receivable, etc. Tangible assets make up about 70% of total assets. Intangible assets make up 30%.

Corporate reputation has stakeholders.

Stakeholder analysis is one of the most common tools in corporate communications today. But what exactly does it mean? And why do we care about stakeholder analysis?

The term "stakeholder" is often thrown around without much thought being given to the definition. Many people think that stakeholder refers to anyone with some relationship with a company. However, that needs to be more accurate. A stakeholder has an interest or concern in a particular organization. They might be customers, employees, suppliers, investors, partners, or competitors.

So, now you know what a stakeholder is. How do you find out who they are? Well, there are several ways to go about doing that. You could start by asking your customers directly. If you're lucky enough to have many clients, you could ask them what they like or dislike about your product or service. Or, you could look at your social media accounts and try to find mentions of your company.

Once you've identified potential stakeholders, you'll want to determine how they view your brand. This is where stakeholder analysis comes into play. There are three main types of stakeholder analysis: internal, external, and competitive.

The stakeholder map is a great way to start thinking about your stakeholders. Start by identifying the following categories:

• Customers

• Employees

• Suppliers

• Competitors

• Government agencies

Who are these stakeholders?

There are two broad groups of people who interact with a brand: internal stakeholders and external stakeholders. Internal stakeholders include employees, customers, shareholders, partners, suppliers, vendors, distributors, investors, etc. External stakeholders include consumers, competitors, media, analysts, bloggers, journalists, social media influencers, government agencies, law enforcement, regulators, etc.

Each stakeholder or group of stakeholders has a particular angle of concern or focus which affects how they view or react to the corporate reputation, including the following:

Internal stakeholders want to save face or maintain power; they don't care about the company's reputation. They want to keep their jobs, get promotions, or avoid being fired.

External stakeholders want to protect themselves from negative publicity. They don't want to lose money, miss out on deals, or be embarrassed.

Board members want the company stock price to go up. They might even try to manipulate it.

Employees want to keep their jobs. They might even try to sabotage the company.

Customers want to buy products or services. They might even try to sue you.

How do stakeholders view reputation?

Stakeholders have varying levels of interest in the company's reputation. Some want to know about the company's financial health, while others care about its products and services. Still, others are looking for information about the company s leadership or management team.

Because these stakeholders have different interests and motivations, they will seek out different types of information. For instance, investors might want to learn about the company's financial performance, while employees might want to find out about job opportunities.

But because every stakeholder wants to access the same data, it makes sense that they use the same sources to gather information. Nearly all these stakeholders will look up the company's name online. They will use Google to perform searches like "united airlines stock quote," "united airlines customer reviews," "United Airlines CEO compensation," and "United Airlines flight attendant salaries.

How a reputation is made

Therefore, corporate reputations aren't formed based on what companies do, or the blunders CEOs commit. They're made by how stakeholders perceive brands. And that perception depends on three things.

What are they interested in? When people think about a particular brand, what do they want to know? Do they care about the product itself or the experience of buying it? If you're a consumer, you probably don't care much about the manufacturing process; you want to buy something that works well. But if you're a supplier, you might care deeply about the quality of the raw materials used to make the product. Or maybe you're a government regulator concerned about whether your food is safe.

What are they searching for? People use search engines like Google because they're looking for information. So if you're trying to find out whether a certain company makes good products, you'll likely look for reviews online. You might even ask friends or family members for recommendations.

What shows up when they search? Searching for a specific product or service often leads consumers to sites where they can read reviews or learn more about the company behind it. In fact, according to Google Trends, searches for a given term tend to correlate strongly with interest in that term. For example, when people search for "best mattress," they usually look for information about mattresses.

So let's say you're a mattress manufacturer. Your goal is to build a strong reputation among consumers. To do that, you need to understand what they're interested in and what they're searching for. Then, you need to provide those kinds of experiences on your site.

Corporate reputation has everything to do with the sales funnel.

When we think of a corporate reputation, most people imagine it as separate from sales and marketing. But nothing could be further from reality. Corporate reputation is all about shaping a company's image among its stakeholders. It's one of the most critical factors affecting whether or not a customer buys from a brand.

The reason is simple: customers won't buy from a brand if they don't trust it. They'll go elsewhere if they don't believe a brand cares about them. This is true even if the product or service offered by the brand is better than what is being sold by competitors.

In short, corporate reputation matters.

And it matters because it affects every part of the sales funnel.

Salespeople must sell to customers. Marketing people must market to prospects. Managers must manage employees. All of these things influence corporate reputation.

So, if you're trying to increase sales, you need to understand how corporate reputation works. You need to know how to build, protect, and nurture it.

You also need to know how to measure it.

Because without measurement, there's no way to tell if you've succeeded.

The stakeholders shape corporate reputation.

In his book "The Reputation Economy," author John Hagel III explains that companies' reputations are shaped by stakeholders - those who interact with the firm regularly. These stakeholders include employees, customers, suppliers, partners, investors, and regulators.

Hagel says that the most important stakeholders are customers because they determine whether or not a company succeeds financially. He notes that even though consumers don't always know what they want, they're the ones who decide whether or not a product or service is worth buying.

He adds that employees are equally influential since they provide the backbone of every organization. Employees make decisions about whether or not to do their jobs well, and they often influence others.

Other stakeholders include suppliers, partners, and investors. Suppliers help keep costs down and increase profits, while partners help build relationships and generate revenue. Investors look for ways to profit from a company's success.

Stakeholders matter because they shape a company's reputation and financial performance. For instance, a dissatisfied customer might post negative reviews online, or a disgruntled employee could leak sensitive information to competitors.

Conclusion

Corporate reputation is one of a company's intangible assets. You cannot taste, smell, or touch it, but you can certainly benefit from its improvement or hurt from its decline. It all depends on your stakeholder's perception of your brand. They are the ones who have a vested interest, and their opinion of your brand matters most.

They might use it to decide whether or not to do business with you. Or perhaps they're looking for information about your products or services. They'll probably trust what they see and hear if they find what they seek. And if they don't find what they seek, well...they won't.

So how does your brand fare? What impression does it give off? Is it positive or negative? Does it reflect positively or negatively upon your organization? How can you improve it?

Updated

November 20, 2022

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