Post on 29-Mar-2015
Reputation and Performance
Corporate Reputation and Competitiveness
Lecture 8
Lecture Objectives
• To explore the links between reputation and Financial performance
High Reputation Ranking
Positive Financial Performance
CRISIS
Negative Effecton Sales
DecliningFinancial Performance
FallingReputation Ranking
?
The Existing Paradigm
The Corporate Reputation Chain
Customer
View
Employee
View
Satisfaction
Loyalty
Revenue
Satisfaction
Retention
ImageIdentity
Reputation
Other External Stakeholders: Suppliers,
InvestorsRecruitment
Correlation with Satisfaction (all data)
All Employees Customers
Agreeableness 0.611 0.665 0.572
Competence 0.613 0.659 0.543
Enterprise 0.432 0.510 0.338
Machismo 0.342 0.376 0.290
Chic 0.323 0.316 0.340
Informality 0.032 0.062 0.051
Ruthlessness -0.180 -0.243 -0.194
Agreeableness and Conscientiousness
Facet Employees Customers
Warmth 0.571 0.488
Empathy 0.598 0.494
Integrity 0.604 0.474
Conscientiousness 0.621 0.481
Drive 0.547 0.454
Technocracy 0.516 0.400
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?
Differentiation and Brand Strength
Fashion Store Images Compared
2
2.5
3
3.5
4Agreeableness
Enterprise
Ruthlessness
ChicCompetence
Informality
Machismo
Department Store Ladies fashion chain
Chain store Department Store
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.
Different Drivers of Satisfaction
Retailer1 (219)
Retailer 2 (431)
Retailer 3 (232)
Retailer 4 (385)
Agreeableness 0.425 0.423 0.196 0.602
Competence 0.508 0.420 0.330 0.440
Enterprise 0.397 0.418 0.401 0.463
Machismo 0.307 0.310 0.158 0.171
Chic 0.439 0.476 0.467 0.347
Informality 0.000 0.108 0.103 0.185
Ruthlessness -0.068 -0.132 -0.036 -0.156
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.
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
Agreeableness and Sales per Employee
R2 = 0.2265
50
70
90
110
130
150
170
190
3.6 3.65 3.7 3.75 3.8 3.85 3.9 3.95
Agreeableness
Sa
les
pe
r E
mp
loye
e
Agreeableness
• Agreeableness evokes trust and in fashion retailing to be told that you ‘Look wonderful in that’ is a sure sign that you don’t, unless you can trust the employee. Branches where Agreeableness was high had a much higher sales per employee figure.
Competence & Satisfaction
R2 = 0.7036
3.55
3.6
3.65
3.7
3.75
3.8
3.85
3.9
3.5 3.6 3.7 3.8 3.9 4
Competence
Sa
tisf
act
ion
Informality & Sales
R2 = 0.8196
-5
0
5
10
15
20
3.7 3.75 3.8 3.85 3.9 3.95 4
Informality
Sa
les
Tre
nd
%Y
ea
r o
n
Ye
ar
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.
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
Enterprise with Sales
R2 = 0.3192
-15
-10
-5
0
5
10
15
20
2.5 2.55 2.6 2.65 2.7 2.75 2.8 2.85
Enterprise
Ye
ar
on
Ye
ar
Sa
les
Enterprise
• Enterprise correlating negatively with sales growth means that customers preferred stores that did not appear to be so enterprising (modernity, adventure, boldness). They didn’t want to see too much at the leading edge of fashion.
Enterprise & Sales
R2 = 0.6344
-15
-10
-5
0
5
10
2.45 2.5 2.55 2.6 2.65 2.7 2.75
Enterprise
Sa
les
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.
Modernity and Staff Age
R2 = 0.8167
2.3
2.4
2.5
2.6
2.7
2.8
2.9
3.4 3.6 3.8 4 4.2
Staff Age
Cu
sto
me
r M
od
ern
ity
Sco
re
Dominance and Sales Growth
R2 = 0.3001
-20
0
20
40
60
2.6 2.7 2.8 2.9 3 3.1
Sales growth
Do
min
an
ce
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
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
Customer Chic & Satisfaction
R2 = 0.6498
2.6
2.65
2.7
2.75
2.8
2.85
2.9
2.95
3
3.05
3.1
3.4 3.5 3.6 3.7 3.8 3.9 4
Satisfaction
Ch
ic
Customer Satisfaction & Agreeableness
R2 = 0.6574
3.5
3.55
3.6
3.653.7
3.75
3.8
3.85
3.4 3.5 3.6 3.7 3.8 3.9 4
Satisfaction
Ag
reea
ble
nes
s
Customer Satisfaction and Sales Growth
R2 = 0.4507
-10-8-6-4-20246
3.4 3.6 3.8 4
Customer Satisfaction
Sa
les
Gro
wth
Customer Agreeableness & Sales
R2 = 0.263
-10
-8
-6
-4
-2
0
2
4
6
3.5 3.55 3.6 3.65 3.7 3.75 3.8 3.85
Agreeableness
Sal
es
gro
wth
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
Satisfaction
R2 = 0.3346
-1
-0.5
0
0.5
1
3.4 3.5 3.6 3.7 3.8
Customer Satisfaction
Sa
les
Tre
nd
What’s 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
What’s 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
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