Reputation and brand went head-to-head—how did it end?
As I mentioned in my previous post, corporate reputation is more important than brand. This is demonstrated by the vast amount of data we have collected over the years through our Reputation & Trust research. Our analysis of this data reveals that corporate ethos accounts for 71% of purchasing decisions, while brand accounts for only 29%.
This, however, is not the whole story. Below, I will discuss two important concepts that are part of the picture.
First, products and services need to be relevant. Consider, for example, something as ordinary as slippers. If your goal is to keep your feet warm indoors, slippers, as a product, are indeed relevant.
Now, if three different companies manufacture exactly the same kind of slippers, which one will sell the most? The obvious answer is the one that sells them at the lowest price.
Therefore, second, if you don’t want to compete on price, you need to differentiate yourself.
Differentiation means that one of the three companies starts making slippers using leather and studs. Another one begins decorating its footwear with lace.
This way, all three manufacturers will likely find their own customers. The competition is no longer about price. Furthermore, consumers can express themselves through simple slippers, or leather, studs, or lace, depending on their preference. Differentiation occurs, and everyone wins.
With manufacturers this clever, what could possibly go wrong on the road to success? I’ll answer with another question: What would happen if the public found out that one of the companies—the one whose slippers they like—uses child labor?
A tarnished reputation is highly likely to result in a loss of business.
So, we’re back to the original question: Is brand more important than reputation? The answer, of course, is “no.” It’s pointless to try to decide whether to prioritize reputation or brand, because a successful business can’t do without either.
Reputation builds credibility and drives demand. Without credibility, you don’t have a business. On the other hand, a brand helps set relevant products apart from the competition.
Any internal squabbling over reputation and brand only increases the likelihood of failure in a highly competitive market.
A good brand and reputation manager recognizes this balance and understands the need to integrate reputation and brand management. A leadership team that embraces this holistic approach will gain a competitive edge.
A company’s reputation has overtaken its brand. This became clear in my previous post. Ethos (which refers to the public’s perception of a company) appears to have a much greater impact on people’s willingness to buy than the product brand itself. This is supported by Reputation&Trust collected over the years, which, upon analysis, revealed that ethos influences purchasing intent by 71 percent and the product brand by only 29 percent.
However, that’s not the whole story. Now I’ll discuss two important factors that have a significant impact on the matter.
A key part of branding is making products or services meaningful. Take checkered slippers, for example. If three companies make exactly the same slippers, which one will sell the most? Obviously, the one that sells them at the lowest price.
To avoid having to compete on price, you need to stand out.
Another company starts making its morning slippers out of studs and leather. A third one covers its slippers in lace. This way, all three companies will find their own customers. Competition in the slipper industry thus shifts away from price, and consumers get to enjoy the freedom of self-expression through studs, leather, and lace. Everyone is better off.
Slipper companies are thus expanding their relevance from keeping toes warm to self-expression. When this is done in a unique way, it results in differentiation from competitors.
However, success is still far from certain. If a company has a bad reputation, its product is out of the running.
So we’ve come back to the original question: is a company’s brand more important than its reputation after all? The answer is simple: no, it isn’t.
It’s crazy to think that reputation and brand should be evaluated in relation to one another, because business can’t function without either one. Reputation creates legitimacy and generates demand. Without legitimacy, there is no business. A brand, on the other hand, expands relevance and creates differentiation. Meaningless products are just run-of-the-mill goods.
A good brand or reputation manager embraces this yin-yang approach and takes an integrated view of the various aspects. If there are people and concepts within the same company that are competing against one another, the battle against other companies has likely already been lost.
In other words, the most successful companies are those that are managed collaboratively, with an understanding of the interplay between reputation and brand.
