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Reputation and Performance Corporate Reputation and Competitiveness Lecture 8.

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Presentation on theme: "Reputation and Performance Corporate Reputation and Competitiveness Lecture 8."— Presentation transcript:

1 Reputation and Performance Corporate Reputation and Competitiveness Lecture 8

2 Lecture Objectives To explore the links between reputation and Financial performance

3 The Existing Paradigm

4 The Corporate Reputation Chain Customer View Employee View Satisfaction Loyalty Revenue Satisfaction Retention Image Identity Reputation Other External Stakeholders: Suppliers, Investors Recruitment

5 Correlation with Satisfaction (all data) AllEmployeesCustomers Agreeableness0.6110.6650.572 Competence0.6130.6590.543 Enterprise0.4320.5100.338 Machismo0.3420.3760.290 Chic0.3230.3160.340 Informality0.0320.0620.051 Ruthlessness-0.180-0.243-0.194

6 Agreeableness and Conscientiousness FacetEmployeesCustomers Warmth0.5710.488 Empathy0.5980.494 Integrity0.6040.474 Conscientiousness0.6210.481 Drive0.5470.454 Technocracy0.5160.400

7 Strong Brands Brands that have a differentiated image Brands that have a better image for those aspects valued by customers Which would you expect to be the strongest brands here?

8 Differentiation and Brand Strength

9 Strong Reputations Added to the idea of a strong brand is the idea of a strong reputation, that is having a good image for those dimensions of personality valued by stakeholders. In the following example the first three are fashion retailers the last a food retailer who also sell some fashion.

10 Different Drivers of Satisfaction Retailer1 (219) Retailer 2 (431) Retailer 3 (232) Retailer 4 (385) Agreeableness0.4250.4230.1960.602 Competence0.5080.4200.3300.440 Enterprise0.3970.4180.4010.463 Machismo0.3070.3100.1580.171 Chic0.4390.4760.4670.347 Informality0.0000.1080.1030.185 Ruthlessness-0.068-0.132-0.036-0.156

11 Beware Mathematical Correlations Correlation does not prove causality (although a lack of it can imply that there is no causality) A correlation is evidence of causality but some reason to explain the mathematical relationship is essential.

12 Case 1 Fashion Retailer Targeted at the young with limited disposable income Price led Small shops with loud music Fashion follower rather than a leader


14 Agreeableness Agreeableness evokes trust and in fashion retailing to be told that you Look wonderful in that is a sure sign that you dont, unless you can trust the employee. Branches where Agreeableness was high had a much higher sales per employee figure.



17 Competence and Informality Customers were more satisfied in branches where they rated them higher for Competence and Informality. A picture emerges of a retailer where the customer likes an informal atmosphere but at the same time wants to be dealt with competently and given an honest opinion.

18 Case 2 Fashion Retailer Targeted at those on a budget and tending to attract an older, more conservative customer. Large stores lacking a bit in character. 100% own brand


20 Enterprise Enterprise correlating negatively with sales growth means that customers preferred stores that did not appear to be so enterprising (modernity, adventure, boldness). They didnt want to see too much at the leading edge of fashion.


22 Case 3 Fashion Retailer and Enterprise (Again) This time Enterprise correlated positively with sales growth. Branches that appeared more enterprising were doing better. The retailer had once been a fashion leader and had fallen behind Modernity (one of the facets of Enterprise) correlated strongly with the age of employees.



25 Case 4 Is Ruthlessness Always Negative? This company is in the construction industry. Business is won against tender. Profitability is won by being tough with the customer and employees to ensure the job is finished under budget and that the customer pays well for any additional work Dominance (inward looking, authoritarian and controlling) correlates with sales growth

26 Case 5 Does Image always correlate with performance? Answer no. In this example of a large food retailer, Chic and Agreeableness correlate with satisfaction and satisfaction with financial performance but neither image factor correlates directly with sales growth. The links may at times be more indirect still, such as via loyalty





31 Does Satisfaction Always Drive Sales Growth? Again no. In this example a financial services retailer had lower sales growth in branches where customer satisfaction was higher The explanation is that as the branches got busier customer service and satisfaction declined as management were reluctant to put on more staff, because the business as a whole was suffering


33 Whats Reputation Worth? Differences within the same organisation of between 12 and 20 % of sales growth Dimensions of personality and/or satisfaction explain about 50% or more Tidying up Reputation appears to be worth 3-7 % sales growth, i.e. merely learning from within Exxon Valdiz cost Exxon about 5% sales loss

34 Whats Reputation Worth? The capital value of reputation is about 50% of annual sales Improving reputation is worth 5% per annum sales growth, say 1% on profit Assuming a 20% ROCE then the maximum investment in Reputation should be 5% of sales, about the same as the advertising budget for a consumer product

35 Summary Reputation is worth about half a years turnover and about 4-5 % sales growth Different aspects of corporate personality will rive commercial performance fro even similar companies

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