2010 - 2011 European Reputation - Tech Companies Reign; Oil and Gas Firms Bring Up Bottom

When it comes to corporate reputation, European consumers have the highest regard for technology companies. Automakers, too, seem to have emerged from the dark side of the 2009 industry collapse to regain some lost reputational luster.

At the other end of the spectrum, however, the oil and gas industry is held in the lowest regard—no doubt led by the months-long aftermath of the U.S. Gulf Coast oil spill that left BP solidly occupying the bottom with a failing ranking.

And across the board, European consumers are less lenient on reputation than their counterparts in the United States, with 80 percent ranking corporations’ overall reputations as just “average,” versus 70 percent in the U.S.

Such were among the findings of the first annual European Corporate Reputation study conducted by Prophet. The global brand and marketing consultancy surveyed 3,200 consumers in the United Kingdom, Germany, and Switzerland, asking them to rank 30 leading corporations in five industries against various attributes related to six key pillars of a reputation (see “The Corporate Reputation Framework”).

And the winners are…

Although there were variations in company rankings from country to country, technology brands dominated the top five positions across the board. Apple, Microsoft, and Intel held the first through third spots in the U.K.; Intel, Hewlett-Packard, and Apple in the second through fourth places in Germany; and Apple, Hewlett-Packard, and Intel in first, third, and fourth places in Switzerland (see Exhibits 1A/1B/1C).

Automakers also managed to shine, with Mercedes and Volkswagen grabbing fourth and fifth spots in the U.K.; BMW in first, and Volkswagen in fifth in Germany’s ranking; and Volkswagen in fifth in Switzerland’s results. Against the backdrop of the BP Gulf Oil crisis and ever-rising oil prices, European consumers gave oil and energy companies failing grades on reputation. In all three countries, BP ranked lowest in the rankings, joined in the bottom five by Exxon Mobil (28) in the U.K.; and by Exxon Mobil and Chevron in Germany (29 and 26) and Switzerland (28 and 27).

Financial services also tended toward a poor reputational showing, and, interestingly, the closer to home, the worse the rating. In the U.K., the bottom of the rankings was dominated by Royal Bank of Scotland (29); Lloyds TSB (27); Natwest (26); and Halifax (25). In Germany, HypoVereinsbank/Unicredit occupied the 27th position, with Commerzbank at 25. And in Switzerland, the five lowest rankings included UBS at 29 and Credit Suisse at 25. Swiss respondents, however, also were the only group to include a financial services player in the top five—Raiffeisen in the No. 2 slot (see Exhibit 2 for an overall industry rankings view).

Why reputation matters

While headlines can help make or break a business’ reputation, other drivers also play into public perceptions. All of these reputation drivers have a cumulative impact on a reputation, although the weight they’re given by consumers varies according to circumstances and influences among industries.

Indeed, Prophet’s study found that European consumers are five times more likely to pay more for products and services from a leading company, and 12 times more likely to recommend them, illustrating reputation’s role in business results.

It’s important to understand and manage the drivers of reputation for your company’s specific industry as a clear connection can be found between reputation drivers and purchase-related decisions. In short, it makes good business—in every sense of the term—to build and actively manage your reputation.

Three key categories of attributes consistently emerge as critical reputation drivers across Europe. These included attributes related to leadership and ethical behaviour; product characteristics, like reliability and quality; and business performance, such as perceived ability to execute on strategy and innovativeness.

Across Europe, consumers considered attributes around leadership and ethics as among the most critical reputation qualifiers. In fact, U.K. and German respondents put being “a leader in the industry” as the most important reputation driver, and it wasn’t far behind among the Swiss.

It’s not enough to have an innovative flair or reliable customer support to earn a reputation for excellence. The public looks for, and expects, businesses to do more, to walk the responsibility talk, as that, ultimately, can make or break a reputation and, ultimately, a brand.

Translating it into action

All companies should have a consistent way to measure and manage their reputation. Syndicated reputation studies provide a solid benchmark of overall reputation performance relative to other companies. But to actively manage reputation requires understanding the reputation drivers, with a goal of creating a tailored and actionable plan for closing the gaps. The resulting strategies and programmes to address gaps must align with and support the organization’s overall business goals. They must also have measurable benchmarks for evaluating progress, and a framework for making judgments.

Here are three considerations to guide thinking along the way:

1. As developments over the last two years have reinforced, reputation drivers are influenced by macro-economic forces as well as industry-specific factors. The poor reputation grades of the oil and gas industry and the still struggling financial sector are proof of that fact. Thus, it’s critical to be mindful of changing circumstances in managing a reputation programme.

2. Word-of-mouth and peer influence are powerful forces in shaping a reputation, and only gaining in strength as social media channels become more mainstream. Attempting to control their power is a dangerous game. But engaging in the dialogue, openly and authentically and in a way that makes sense for the business, will pay off over time.

3. There is a clear relationship between reputation and brand (see “The Reputation/Brand Connection”). We included specific brand valuation attributes to assess how brand value changes when a company’s reputation score shifts over time. In our analysis, we saw a direct relationship between brand value and reputation. Simply put, when reputation scores move up or down, a brand’s value follows in the same direction. Clearly, reputation and brand strategies should not be kept in separate silos to drive optimal results.

Reputation building is a journey that requires commitment and discipline. Those companies with the strongest reputations are clearly benefiting in the form of higher customer loyalty, increased market value, and more. How is your company doing on its reputation journey?

The Reputation/Brand Connection

No one’s going to argue there isn’t a link between reputation and brand. The extent of the interplay between them may be surprising, however, and can serve to inform reputation strategy development.

In both years of Prophet’s U.S. reputation study (surveying 4,900 consumers about 145 companies in 18 industries), we incorporated five brand-specific questions as a means of measuring over time the movement of brand value and how it tied back to reputation.

As part of this exercise, we pulled out six businesses that had experienced major and well-publicized swings in reputation—three on the downside, and three on the upside.

The year-to-year comparisons showed that damage to reputation also harmed the brand value, though to a lesser extent. BP, for example, fell 62 percent in our reputation index, with a 39 percent drop in brand value. The reverse also held true: Improvements to reputation also helped brand value. On the heels of improved sales and profits, Mercedes saw its reputation ranking gain by 23 percent in 2010, accompanied by a 2 percent gain in its brand value.

What does this all suggest? First, that brand value and reputation are highly linked. Second, that brand value follows reputation. Third, that the degree of swing in reputation and brand value by the six sample companies argues that reputation is more fragile and brands are more robust and stable.

Europe & U.S. Aligned on Reputation Leaders and Losers

For all the cultural differences that may divide U.S. and European consumers, they’re remarkably aligned on reputation—good and bad, and the attributes that shape it.

Prophet’s 2010-2011 Corporate Reputation Study also surveyed a broader base of U.S. consumers (4,900) and corporations (145 in 18 industry segments) to gauge their views on the attributes that shape and influence reputations. This was the second year for the U.S. initiative.

Overall, U.S. consumers rated companies as having just average reputations—similar to their European counterparts. However, U.S. respondents tended to give higher reputation scores overall than participants in Europe.

Across both continents, the technology sector garnered some of the highest reputation scores, and shifting U.S. sentiment caused a general improvement in placements over 2009 levels. In the U.S. survey, Sony, for example, moved up to fifth place from ninth in the rankings, which, interestingly, put it ahead of media darlings Amazon (to 9 from 11) and Apple (to 13 from 20). Google, meanwhile, saw its ranking drop to the No. 28 from 10—perhaps reflecting a backlash against its growing pervasiveness.

Like their European counterparts, U.S. respondents gave failing grades to the oil and gas and financial services industries. The oil and gas sector as a whole saw a 10-point drop in its reputation score from 2009. And despite financial services’ overall poor-to-failing ratings, individual companies tended to see marginal improvements in their reputation scores. JP Morgan Chase, for example, outperformed many of its retail and investment banking peers except Wells Fargo.

There were also similarities in what both groups considered the most important reputation drivers. Attributes related to leadership and ethics were among the predominant in the top 10 on both sides of the pond. But while “is a leader…” was the No. 1 driver among U.K. and German respondents, and also important to the Swiss, U.S. participants put a greater emphasis on attributes related to openness, ethics, and the kind of public dialogue companies foster in response to marketplace events and circumstances.