Does a bad company reputation matter?

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We’ve all heard that reputations destroy companies. Word of mouth – that antiquated mechanism for vouching – is resurgent. With so much choice, we pick the paths those we trust have already trodden. We buy what influencers buy; their relatability and nearness enabling us to hear their promotion as authentic recommendation. Equal to that of a close acquaintance.

Clients want to trust the companies they work with. Customers want the same, but also to like them: to see in an organisation’s every move a sign of grace. To be the best – which is, to have the best products – while acting better than the rest.

Acting, here, is the operative word. The companies we’re talking about aren’t charities; they’re for profit, and act accordingly. But reputation is a cornerstone of a brand. It has value. Like any currency, it can be lost and gained, spent and accrued.


The value of reputation

Obviously, reputation matters – but just how valuable is it? What’s the conversion rate? Companies thrive without it. Others flounder despite having it.

Bad reputations aren’t equal; arguably, in a product-centric culture, we can more easily tolerate a company with a reputation of being unethical if it competently delivers products. Conversely, we’d struggle to trust a company that acts ethically but can’t deliver; the do-goodery has to come after the product’s success. If not, it can easily be seen as disingenuous. A PR tool to dress up and make more of what’s on offer.

The consequence of highly marketed-to demographics – a generation raised amidst a maze of advertisements – is that they’re shrewd. They look for what they feel is authentic: a careful mix of behaviour and result, voice and action. Those that speak big but can’t deliver are unlikely to be believed, or trusted, in a lasting way; their charitable contributions can be interpreted as hollow gimmicks. Virtue signalling. For audiences, what a company says has to be substantiated by what they do. Reputation isn’t a simple matter of behaving in the correct way. It’s an intricate balance of competency and credibility. To be believed, a company has to first be believable, which requires a platform of success.

Reputation, in other words, cannot make a company successful; it can nurture success, but not be the catalyst for it.


Cautionary tales

Many support companies for their reputation. Reputation that is accrued, carefully, over time. When it is spent – on a failed product, a security mishap – it is done so sparingly. The company has earned enough good faith with its consumer base to take a hit. But there are limits: repeated reputation hits will put a company in the red. An evangelised consumer base will forgive missteps if made in moderation. Done consecutively, however, and a positive reputation can be quickly eroded.

So how do some survive even with a poor reputation?

EA thrives despite its reputation – named three times as America’s worst company – because its products cast a broad net. It dominates the market to the extent that it erodes choice; gamers play the publisher’s games in spite of what they feel about the organisation, or are indifferent to the publisher, as a brand, beyond the products they put out. But many aren’t in this position. In most markets, consumers have choice, and it’s when choices are made that the price of a poor reputation is paid.

Reputation establishes roots. Secured, strong winds will bend branches, but not uproot. Controversies pass through and, inevitably, move beyond.

But there’s more to it than this. Activision Blizzard has courted no small degree of controversy over the past two years. At the same time, its products have struggled to meet customers’ expectations. The nature of the controversy is reason enough to boycott the company – but it is the absence of successful products that have led its once-evangelised consumer base to turn away. It is the double offence, and the double failing. The exposure of an internal saga betraying the artifice of its external image, and product deliveries that have fallen short of customer desires.

Others are critically aware of this balance. Customers have to like what you sell, as a foundation, and then also want to buy it from you. Brands are quick to respond to global conflicts for this reason, and establish a position. Even a deeply rooted tree may be felled by an unprecedented storm. People are unlikely to stop drinking Coca Cola, but it’s in respect to the balance that action is taken; avoiding all calamity is the surest way of avoiding any casualty.


Reputation: carefully earnt, sparingly spent

There’s no easy way to win reputation; no lottery cash fall. It’s earnt in every step and action; every communication, reaction, customer engagement and product pivot. This is especially true for younger companies, brands or products without a parent’s reputation to inherit or take shelter under. While it is the tallest trees that catch the strongest winds, it’s also the saplings that are least likely to withstand a storm. Reputation building, like brand building, becomes an intricate game of Jenga. Not every decision has to benefit it, but every decision must be made with it in mind.

Similarly, hits to reputation can be strategically planned and accepted. To every action there is always a reaction – and the more that action deviates from those that have come before, the stronger the reaction. Customer-brand dissonance is the result of this deviance.

A company cannot always act in the precise way its existing customer base desires, however. To do so would preclude growth, restricting its avenues, prohibiting movement and growth. ‘Spending’ reputation means intentionally accepting a negative reaction in order to explore a new market, strengthen an existing one or introduce a new product.

A bad company reputation does matter. A lot. But it’s not a barometer for success. It won’t stop a fire – a bad product is a bad product – and nor will it provide the kindling for success. The product must always come first. That said, reputations change, and change isn’t always bad. It must, however, be planned. If a company is taking reputation hits because of a toxic internal culture, poor products or because it’s fallen out of touch with its core market, that matters. And just as good reputations are difficult to build, bad reputations are difficult to dismantle.

For more information on building positive, lasting reputation with audiences through an impactful digital marketing strategy, please contact us today.

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