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Corporate reputation perceived to contribute more to a company’s market value than financial performance

By The Drum Team, Editorial

Weber Shandwick



February 15, 2012 | 5 min read

A study has found that 70% of consumers avoid buying products if they dislike the parent company, and also reveals key insights surrounding the interdependence of corporate and brand reputation, including the contribution of corporate reputation to a company’s market value.

The global research, commissioned by Weber Shandwick, suggests that consumers want assurance that products they buy are being produced by companies that share their values. The research reveals the following insights:
  • Corporate brand is as important as the product brand. The leading reasons cited by the vast majority of executives (87%) for believing that a strong corporate brand carries as much weight as strong product brands, is their recognition that product brands benefit from the overall reputation of the company (65%) and that people care about the companies behind the brands they buy (55%). Executives in China and Brazil are even more likely to agree in the equal prominence of corporate and product brands.
  • Corporate reputation provides product quality assurance. Products are the beneficiaries of strong corporate reputations. Over two-thirds of consumers surveyed stated that they avoid products made by companies they do not like, as well as checking product labels to see who the parent company is.
    • 70% avoid buying a product if they don't like the company behind the product
    • 67% are increasingly checking product labels to see what company is behind the product
    • 61% get annoyed when they can’t tell what company is behind a product
    • 56% do research to learn about the companies that make what they buy
    • 56% hesitate to buy products if they can’t tell who makes them
    To many consumers, a highly-regarded corporate reputation provides assurance that brands will be of high quality, ethically sourced and made responsibly. As one consumer said, “It is the company you are financially supporting when you buy its product. We have too many choices to buy a product from a company we don't like.”
  • Disconnection between corporate and product reputation triggers sharp consumer reaction. 54% of consumers reported being surprised to find out that a product or service they liked was made by a company they did not like. 40% then stated they would stop purchasing the product and 34% said they would search online to find out what other products are made by the company. This element of surprise in regards to a product’s lineage does not usually work to the company’s benefit – surprised consumers are twice as likely to stop buying the product as they are to continue buying it.
  • Products drive discussion, with reputation close behind. Wrongdoing overshadows rightdoing. Consumers were asked what they talk about when they discuss companies. At the top of the list is products — nearly seven in 10 consumers said they frequently or regularly discuss how they feel about a product they bought. Also included among their top five talking points are customer service, how employees are treated, company scandals or wrongdoing, and their feelings about the company as a whole. Perhaps unsurprisingly, consumers are more likely to discuss corporate scandals and wrongdoing (43%) than corporate good deeds (37%), environmental protections (31%) and community services (29%).
  • Consumers shape reputation instantly. What influences consumer perceptions of companies? Not surprisingly, consumers say that word of mouth is the leading influence (88%) when it comes to impacting opinions of companies. Also influential are online reviews (83%) and online search results (81%). Brazilian consumers rate more traditional sources about companies — news sources, awards and advertising — as significantly more important than consumers in the other three markets.
  • Corporate reputation contributes more to company market value than financial earnings. Executives estimate that, on average, 60% of their firms’ market value is attributable to its reputation. This explains why companies have ramped up their reputation-building activities, with the vast majority of executives reporting that their company increased efforts to build reputation over the past few years. For consumers and executives alike, the reputation of a company is perceived as more important than positive financial earnings. More than half of consumers say they are more confident in buying products from a company with a most admired standing than one with a positive share price forecast. Nearly six in 10 executives say they would rather see their company in the news for a most admired standing than a positive share price forecast. The findings imply that both consumers and executives now recognise that reputation is long-lasting and enduring while financial performance can be cyclical and short-term.
For more information, download the infographic of these results below.

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