Research

The New York Times had a very interesting article yesterday for a variety of reasons. But one reason that hit the spot was about how consumers make decisions and how the author went about choosing the right baby formula for his infant. After he and his wife researched every possible formula on the market and found that they were all basically the same, he came to this conclusion:

"Despite knowing this, I still insist on paying twice as much for Enfamil, which its maker claims is “scientifically designed.” (Aren’t they all?) I splurge because Mead Johnson is a 107-year-old company that has been promoting a single baby-formula brand for more than 50 years. I figure that it’s less likely to squander its name by skirting the rules or engaging in shoddy manufacturing than a company with less to lose. This peace of mind costs me about $7 per day."

This is emblematic of our research on how the company behind the brand matters more than ever. The author was reassured in his purchase of Enfamil because he learned that the company behind it, Mead Johnson, had been around long enough that they were not going to risk their century-old reputation by messing around with the manufacturing and production of  its baby formula.  The parent company made a significant difference in a confirming to the writer that this was the better buy, even at a premium. And not only did this infant get to taste Enfamil but the writer blasted his choice around the world. There you go for serendipity public relations. After reading this gem which was fairly upfront in the article, I kept reading.  The Enfamil example led into the article's main message which is that information overload is plaguing us all and making it increasingly hard to find what we are looking for unless we want to devote days to researching.  "Too much information, it turns out, is a lot like no information."  Therefore to deal with this information smog, people need guides orsherpas to guide their way through the data chaos. According to the author, "economists have a name for these cues that companies employ to convey their hidden strength: signaling." Reputation-building uses the strategy of signaling.  Good reputations serve as a shorthand to identify whom you want to buy from. A company that is a best place to work for or most sustainable or trains its leaders best helps to narrow the choices between products. Do I want to buy my infant formula from a company that treats its people right? You bet.  The thinking goes like this: if they treat their employees well,you can make the leap that they turn out safe products.  In our research on parent brands, we had an open-ended question on why the parent company mattered when buying a product brand. Over and over, consumers mentioned that knowing the parent brand helped them sort out which products to buy. For example, one consumer said: "The integrity of a company will ultimately show in its products." The article also made me think about anniversary celebrations. Many companies make a big deal about how long they have been in busines -- 50, 100 or 200 years. It turns out that it is good to do so in order to remind consumers and other stakeholders that there's alot of reputational equity behind those promises.

I have to say that the headline in today’s WSJ re the $2 billion trading loss at JPMorganChase strongly resonated with me. The title is “J.P. Morgan Trades in Its Crown.”  In our research on safeguarding reputation, we start out by summing up reputation failures among the world’s most admired this way:

 

“The last decade has seen many of the world’s most admired companies descend from their once lofty positions. They were in a class by themselves — corporate reputation royalty whose invincibility was universally accepted by business executives around the globe. No one could have predicted that these companies would ever part with their crowns. How the world has changed!”

 

It looks like we now have another major kingpin to add to our Weber Shandwick “stumble rate” analysis that we calculate every year. You can find more about it in an earlier post.  But…between 2011 and 2012, 49% of the world’s largest companies experienced a reputational stumble, up from last year’s 43% but exactly the same as 2010’s rate.  There seems to be no more untouchables among the Fortune 500 with this recent news.

 

I was also intrigued by Jamie Dimon’s remarks about what he could have done differently to have caught this $2 billion blunder earlier. Dimon’s deadpan answer was paying more attention to the “newspapers” among other things. He was referring to earlier reports in the papers about the trading problem. Have to hand it to him for taking the blame and being brutally honest in his response. He’s been true to his reputation on that count.

“In hindsight, the new strategy was flawed, complex, poorly reviewed, poorly executed and poorly monitored. The portfolio has proven to be riskier, more volatile and less effective an economic hedge than we thought.”

Another side note of interest is that this reputation crisis did not start in social media. It has certainly taken off online but as far as we know now, there's been no social media assault that instigated this crisis. No online cloak and dagger here.

Will be interesting to see how this pans out reputation-wise. Will this tarnish the bank’s reputation for the long-term or just be a stain? No doubt it will be headline news for a while. Dimon is eminently quotable --the WSJ has his most notable quotes already listed. I hate to have to say it but another one hits the dust.

Years ago at my former job, the research we did caught fire due to one simple finding. In fact, I used to think of myself as the 50 percent woman. Our research on CEO reputation revealed that 50 percent of a company's reputation was attributable to the CEO. For some reason, this one simple factoid traveled around the world like wild fire. People just found it incredibly memorable. Part of the reason that the "50%" was so radioactive was because CEOs had became better known (Jeff Bezos, Steve Jobs, John Chambers, Jack Welch, Bill Gates, Carly Fiorina) and no one had really asked the question. Reputation as a body of knowledge was still nascent (not like it is now) but it was just about to tip. And tip it did. In our new survey on the corporate brand, we asked the question again.  It's been about 10 years since that earlier study. And despite all the ups and downs in the stock market, CEO compensation issues, scandals, Occupy Wall Street, celebrity CEOs, the Internet, etc etc, the executives in our study reported that 49% of a company's reputation is due to the CEO's reputation. As interesting, when we asked consumers -- the general public -- 66% say that their perceptions of top leadership also affect their opinions of company reputations a great deal to a moderate degree. Only 7% say that there is no link between the two.  So CEO reputations arenot going over their heads whatsoever. Thus as much as it might be politically incorrect to admit that the reputation of the CEO plays a significant role in how companies are viewed, it does. Of course, product quality matters most but leadership from the top, how they behave and what they communicate is not to be ignored. A large 59% of consumers cite leadership communications as influencing company perceptions. It no longer pays to be silent.

P&G is announcing its new corporate campaign that is a "global serenade to mothers." It is covered in an article today. The reason this is big news to me (and I am not an Olympian's mother) is that it is part of the P&G initiative to focus on the corporate brand behind the products they sell. Our research on The Company behind the Brand: In Reputation We Trust is all about the increasing interdependence between corporate and product brand reputation. As the global CMO says, "P&G is in the business of helping moms." Or he could have said that P&G is in the business of building its corporate brand reputation. The new campaign is focused on the moms of athletes, particularly Olympians. Right on. As we learned in our recent survey, 87% of executives report that the corporate brand is as important as the product brand. And consumers also agree -- 70% of consumers in markets around the world say that they avoid buying products if they do not like the company behind the brand. We are releasing some more information shortly from the study on the link between CEO and reputation as well as the impact of leadership communications so check here soon.

Although I made a wholehearted attempt not to work on Sunday, I could not pass up musing on an article I read on Walmart's new partnership with the Environmental Defense Fund and a few stats on reputation recovery. Thought I could post it today. When companies ask how long it takes to recover and restore reputation, I usually say four years, give or take.  Back in 2005, Walmart's then CEO Lee Scott decided to behave differently and reclaim its reputation. It had a lot of work to do, certainly in the public's mind. One of the ways Scott decided to do that was by reducing its environmental footprint. Fast forward to 2012 (seven years later). In the article, it says that,  "About a quarter of Americans now have a favorable impression of Wal-Mart, about double the percentage that did in 2007 (the earliest available figure for Wal-Mart), according to the YouGov BrandIndex, which measures consumers’ impressions of companies and products." I think that it has been a steady build from 2005 and seven years later, Walmart is seeing the fruits of its reputation labor. [I am not sure why The New York Times refers to Walmart as Wal-Mart but it does. I checked the website and Walmart changed its name to Walmart, no dash and small M, a while ago. ]

Prophet, a brand consultancy, released its recent reputation survey today. The survey was conducted among over 5,000 consumers in the U.S. Among the most important drivers of reputation rankings were:

• Is a company whose products and services make a difference in my life
• Is a company that inspires me
• Gives me peace of mind
• Is for people like me

Clearly, the above highlights that consumers are thinking of reputations in terms of emotionally-driven factors and ones that resonate with their personal lives. Not a surprise considering how difficult the past few years have been economically speaking. Companies need to think about communicating less in terms of functional performance and more in terms of what they stand for. We've noticed this shift ourselves and it continues to be more dramatic each year. It falls in line with the findings from BAV (Brand Asset Valuator) that I have mentioned on this blog before where they found that generosity and kindness have risen profoundly in terms of key reputation drivers among consumer populations. The world is going soft! Maybe that is all you can depend on these days. Another finding is that consumers are twice as likely to purchase, pay a premium for and recommend products from companies with the best reputations versus those that are less liked. Reputation pays!  They also report that companies with the best reputations "convert customers from considering a company's products/services 90% of the time." This conversion figure is lower at companies with less than stellar reputations -- 60%. Another result that confirms again that reputation and brand reputation are aligning at a greater speed than ever imagined is mentioned in their report: "Prophet’s reputation study found that reputation and brand have overlapping drivers that make both critical for creating impact throughout the purchase funnel. While a company’s brand often plays a crucial role in making customers aware of a company, and is important for driving long-term loyalty, reputation is critical for ultimately driving consideration and purchase." The survey looked at 150 reputations so take a look. Winners and losers for all.

Reputation Institute came out this week with their RepTrak Pulse survey for the US. It measures the reputation of 150 largest US public companies among consumers.  In addition to the usual who's up and who's down, RI reveals some interesting stats that confirm our research results on Companies Behind the Brand. I was delighted. As RI says in its press release, "Since 2009, U.S. companies have been competing in a new Reputation Economy, where WHO THEY ARE matters even more than WHAT THEY PRODUCE, according to general public sentiment. Framing this in the context of critical consumer behaviors, including purchase consideration, loyalty and recommendation–company or “enterprise” perceptions explain 60% of these behaviors, with product perceptions only accounting for 40%." This is a big shift which we agree with. In addition, RI asked Chief Reputation Officers (CEO, CMO and CCO) several questions and learned that 51% name the CEO as the person with the responsibility to set reputation strategy. Fascinating results.

A Wall Street reputation study among marketing and communications executives at financial services firms was released this week.  When asked to rate themselves, only 34% gave themselves an above average grade while 9% gave themselves a grade of  "perfect."  Wonder who those 9% are? The remainder -- 57% -- gave themselves average or below.  The survey by Makovsky and Company had some intriguing results:

• 53% said that Occupy Wall Street impacted their business
• 71% said that Occupy Wall Street will last beyond the upcoming election
• 38% were surprised by Occupy Wall Street (time to be better prepared)
• 74% believe that increased regulation of the industry will help to improve financial service firms' reputations and rebuild trust with customers
• 81% are worried about negative perceptions that exist about executive compensation
• somewhat more than 40% believe that social media has a positive impact on their company's reputation; over half only perceive a neutral effect (fair enough)

So what's a company in the financial sector to do? According to the findings, executives believe that management leadership, quality products and service, and a focus on reputation management will help restore reputation. The killer finding is that 96% of executives agree that the industry brought the problems on themselves. You don't get too much higher than 96%. That's a outright acknowledgement. Of course, today I saw an article saying that college students are still dying to get into the financial services industry. Many are waiting to hear news of summer internships and they are eager to make their way to the the cavernous alleys of Wall Street. So be it. However, I do think that this is the time for financial services firms to hunker down and repair their reputations for the long-term. I vote "yes."

I spent last Saturday afternoon reading the Harvard Business Review issue which has Reinventing America on the cover. The March 2012 issue. It holds alot of information about how to bring back America and make it a desirable location for businesses around the world. It is rich with information and insights. I highly recommend. In one article on what's wrong with politics in the U.S., (definitely read), you start to realize that one big problem facing the reptuation of the USA is our intractable political warfare. It is hurting America's reputation as a place to do business. The point is that there are many advantages to locating business in the U.S. but the political problems are creating barriers to consideration. One suggestion from the article is the following which falls in line with our work on Civility in America. We are hoping to conduct our third wave on Civility in America in May or June so we will be sure to look into the demand for getting civics classes back into the classroom. A call for action. America's reputation has to turn around and Congress is not going to be the stimulus. Business will.

 

Stand up for civics. Business leaders should urge public officials—and the public at large—to restore civics to its rightful place in the classroom. Data show that many schools fail to effectively teach the workings of U.S. democracy or the responsibilities that go with citizenship. Just as America cannot be globally competitive without a well-educated workforce, it cannot retain its economic edge without a well-educated electorate that is ready to meet the relentless challenges of democratic governance.

 

 

 

While I am on the subject of Social CEOs (see my last post), I wanted to mention a study that was released by BRANDfog, a firm that helps executives get social.  Survey respondents report that more than 80% of respondents believe that CEOs who engage on social media are better equipped than their peers to lead companies in a Web 2.0 world. What’s more, 93% of respondents believe that CEO engagement on social media helps communicate company values, and grow and evolve corporate leadership in times of crisis.  Similarly, 82 percent of survey respondents said they were more likely to trust a company whose CEO and leadership team engage in social media. Since reputation is all about trust, it sounds like the demand is there....we've just got to supply it with examples and role models.