Why is reputation important?

Brand is a core focus for organisations these days – and rightly so - as it is a crucial strategic driver for growth. That said, I believe reputation is an equally important but far less considered value driver.

We create brands in a test tube type environment, where creative directors envisage how to best represent a product or service in a way that cuts-through to consumers. A brand will evoke meaning and purpose, it will signal intent, it will create connection. Brands are created often by brilliant people, who understand the psychology of human buying behaviour.

Brand is static, a moment in time, whereas reputation is the dynamic interpretation of brand by the audience, with all their preconceived ideas and experiences. When a brand is let out of the creative lab, into the world, it takes on a life of its own.

This is where reputation takes over. The experience your customers have, or their cx , (Customer Experience) is what drives reputation. Your brand either does, or does not, deliver on its promise. It becomes open to interpretation or misinterpretation. Customers either have an experience that is aligned to your espoused brand values, or they do not.

Reputation management needs to be a conscious consideration in all business strategy. To leave it to fate, to the wilds of the market to define it, creates an unnecessary vulnerability in your armour.

Reputation and brand value are inextricably linked. Qantas, the once great Australian Airline, has recently fallen from its perch as a top 10 Global Airline according to the annual Skytrax World Airline Awards (voted by travellers), where it ranked number 5 in 2022 and dropped to number 17 in 2023.

As reported by Sebastian T Bowen “Qantas flyers infamously had to deal with a myriad of issues over 2022, including long delays and poor staffing levels. Two mechanical incidents at the start of this year probably didn’t help either.”

Further Bowen notes that Qantas’ share price has stalled as a reflection of its damaged reputation with customers.

Reputation plays a significant role in the value of a business.

A 2019 global report by AMO: What Price Reputation? further illustrates the role reputation plays in the share price of over 1,000 companies in the top 15 global markets.

Each company’s reputation value was measured by calculating the difference between the share price and standard financial metrics such as earning multiples.

They reported that corporate reputation accounts for 35.3% of the value of the top companies in the world’s leading markets.

In short – 1/3 of the share price of top performing companies is accounted for by reputation, not business performance.

This same report also shows that 21% of companies researched have reputations that are so poor as to be actively destroying their market value.

And yet, many companies will focus on brand strategy, but very rarely commit time and resources to assessing reputational risk.

Good organisations actively consider their ‘Reputation Dynamic’, as the nexus between brand, risk and recovery.

It is in this space that I work with leaders and organisations to navigate the complex environments in which they operate.