3 Ways Corporate Reputation Impacts Stakeholder Support

3 Ways Corporate Reputation Impacts Stakeholder Support

At RI, we define reputation as the emotional bond that forms between you and the people who matter most to your company: your customers, employees, investors, policymakers, and the General Public.

These groups represent a company’s stakeholders and reputation is measured by the perception these stakeholders have of a given company in a specific location. 

Companies rated with a good to strong reputation score are companies that have an emotional bond with each of these key stakeholder groups.

Enhancing reputation is about building strong relationships with the people who matter most to your company. And building those relationships gives companies leeway to grow and take risks in ways they otherwise could not:

  1. A good reputation makes local communities more likely to welcome you.
    Our data shows that improving your reputation from average to strong increases the likelihood that the General Public will welcome you into their neighborhood by more than 50%. Reputation, in other words, makes it easier for companies to expand into new markets.
        

    Real World Example: Apple

    Take, for example, Apple. How often do you hear about communities protesting an Apple Store coming to their nearest shopping center or even down the street? 

    When Apple was at the height of its popularity in the mid-Aughts, you were more likely to hear about the long line of customers waiting in the cold and rain just to get inside. 

    Apple, of course, offers quality products in an attractive space; but it also tends to adapt its spaces to the surrounding community. Do a Google Image Search for the Apple Store in Amsterdam or London; Apple manages to stay true to its clean, minimalist aesthetic while also preserving the character of these beautiful old buildings. It shows these cities, towns, and their people, respect. 
     

    Real World Example: IKEA

    In 2018 IKEA opened its first store in Hyderabad, India, but the company has been playing an active role as a corporate citizen in the country since 1990. IKEA’s proactive reputation strategy has been rewarded with a strong global reputation score, but it earned it.
     
    IKEA works hard to locally source materials, adapt to local cultural expectations around food offerings, types and sizing of furniture, and in-store customer service. The company is additionally known for its commitment to corporate responsibility and environmental sustainability. 

    IKEA was able to create reputational equity before having opened a single retail location in India by making meaningful contributions to the local communities. 

    Such thoughtfulness by companies like Apple and IKEA takes time and costs money, but it’s worth it. It makes it that much easier to expand business throughout the world and to secure prime locations in central areas. It builds trust. 
     
  2. A good reputation allows for big bets (and occasional failure).
    There’s an apocryphal quote from Henry Ford about the necessity of defying customer expectations: “If I had asked people what they wanted, they would have said faster horses.”
     
    To stay competitive in a crowded marketplace, you sometimes have to zig when everyone around you zags. And that can throw your customers for a loop. 

    Reputation—that strong bond you’ve built up over the years—can smooth over any misgivings. Our data shows that almost three-quarters of customers would trust a company with an excellent reputation (a RepTrak score of 80+) to do the right thing.
     
    By contrast, only 14% would trust a company with a poor reputation (a RepTrak score below 40). 

    Customers may not always immediately understand why you do what you do. It also doesn’t guarantee that they’ll always come around. (Remember the New Coke?)

    Having a good corporate reputation builds up reputational equity and mitigates reputational risk, empowering companies to leap further by taking bigger bets. Should they miss, these companies are far more likely to be gifted with the benefit of the doubt. 
     
  3. A good reputation makes it easier to move on from a public misstep
    Just as a strong emotional bond makes it easier to take risks, it also makes it much easier to move past a mishap. Consistent misses won’t help, but our data shows that 63% of the General Public give the benefit of the doubt to companies with excellent reputations.

    If a customer loves your product and feels that you value their business, they’ll be much more likely to give you the benefit of the doubt when something goes wrong. They’ll be willing to view the mistake as an anomaly, not an indication of systemic issues. 
     

    Real World Example: Google

    On November 1, 2018, 20% of Google’s employees participated in a walkout to protest Google’s sexual harassment policy. The company, which tops out on many of global and US reputational rankings—despite a recent scandal—remains reputationally intact. 
    google reputation
    This statistically insignificant decline is Google’s reputational equity at work.

    But a strong reputation means your stakeholders won’t immediately run for the nearest exit.

     

With Reputation, a Little Goes a Long Way

Our data shows that even small improvements in reputation—moving up from weak to average, and from average to strong—have a major impact on your stakeholders’ behavior: It makes them more likely to sing your praises, buy your products, work in your office, and buy shares of your stock. 

Tending to your reputation is about keeping your most important relationships strong, ensuring they endure for the long term. 

Melanie LoBue

Melanie LoBue
Reputation Institute
mlobue@reputationinstitute.com

Get Reputation Ready

Join the conversation.

Access our Reputation Intelligence newsletter to learn more about your company’s reputation and how to win in the marketplace.