Does Your Reputation Create A Competitive Advantage?

If I ask you to list elements of your organization that make it competitive you would probably list your product, your sales team, your education, your leadership strategy, maybe your pipeline of products, or your longevity in the marketplace. What about your reputation though? The idea of reputation as a competitive advantage is a fairly new market consideration that has been born in the times of market frustration with governmental and corporate mistrust. We have discussed here previously that marketers are waking up to the awareness that trust is a perishable asset. Distrust of corporations is at an all time high, and that is not good news. “Trust is what drives profit margin and share price,” says Larry Light, consultant veteran with McDonald’s. It is what consumers are looking for, and share with each other.

Typically companies would be categorized into one of several types such as banking, pharmaceuticals, retail, fast food or medical. The goal is to carve yourself out from the category in which you find yourself. It is important to not be one of the masses as a large, faceless entity, but rather to be a distinct company with your own creative presence, personality and REPUTATION. The primary way to keep your organization from moving toward being perceived as a commodity where your market is based only on price is to succeed in building a positive reputation. A positive reputation will allow you to sustain premium pricing. A strong value proposition that includes a good reputation for quality and innovation will allow a company to charge and price goods accordingly.

How do you do this? Transparency in executive pay as well as company performance and responsibility is a good beginning. A strategic effort toward creating a more socially responsible face is key as well. Customers are watching and they are looking for a more altruistic and ethical corporate face. In fact, there is an evolving reputation-monitoring science. Companies appraise a reputation not only on specific values such as trust, esteem, admiration and good feeling but also how the company engages its stakeholders. Yes the products and services are key, but they are evaluated not just in quality but also on innovation, workplace governance, sense of citizenship, and leadership.

. According to BusinessWeek (July 2007), “Sure it looks great to tell the world about your innovative culture or that you are the greenest company, but does this really move the needle with your target customers and investors?” How does reputation effect the bottom-line? While this is early science, a few general connections have been found. The Reputation Institute (Singapore, December 2004) has found that a 5% positive change in reputation translates into a 3-5% change in market capitalization. Indeed, according to the Edelman Trust Barometer in 2006 quality, customer service and strong financial performance drove trust. After the financial meltdown that we have been through it is little surprise that financial performance dropped to number ten on the trust list. The top drivers for corporate trust in 2010 are transparency, honest practices, and high quality products.

Whether you are an AIG or a Ford, a local grocery store, or a neighborhood salon, take a look at the loyalty factor of your employees. Employee loyalty is the only way to insure the health of your reputation. We can not assume that employees are grateful for dodging the last downsizing bullet. With corporate loyalty down, it is not surprising that customer trust is down too. Sylvia Ann Hewlett writes in the Harvard Business Online to “Go Pro Bono to Rescue Morale.” Corporate involvement in philanthropy can help polish your brand and hold on to top talent. As we have written here previously in the Top Ten Ways to have Great Customer Service, you need to partner with your customer in something bigger than just your sales model. Pick a project with your employees and customers in a philanthropic endeavor as a tool to recreate that positive energy that may be dwindling. There are many advocacy groups with direct impact on your bottom-line. Now is the time to roll up your shirt sleeves, jump in with your team and customers and help out.