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Good Corporate Reputation
Draws Consumers and Investors
by Ronald Alsop
Does my company’s reputation really affect my business results?
That’s a question I often hear from corporate executives and
public-relations managers. My answer: “Of course! It’s your most valuable
asset.”
Given that reputation is an intangible asset, however, it often is
difficult to measure precisely its impact on the bottom line. But a good,
if indirect, gauge of reputation’s impact on financial results and stock
prices is its effect on the behavior of consumers and investors. This
year’s Reputation Quotient study by Harris Interactive Inc. and the
Reputation Institute offers some valuable insight into what they call
“future supportive behaviors” toward some of the companies in the ranking.
In analyzing the survey data, Harris concludes that there is indeed a
powerful statistical correlation between a sterling reputation and the
public’s intentions to buy a company’s products and services, recommend
them to other people, buy a company’s stock, and recommend the stock to
other investors.
The highest percentage of Americans said they would definitely buy
and recommend the products of Coca-Cola Co., ranked No. 3 among the 60
companies in the reputation study. Many people also said they would buy or
recommend the products and services of Johnson & Johnson (No. 1),
Procter & Gamble Co. (No. 4) and United Parcel Service Inc. (No. 5).
As for investments, U.S. respondents were high on Dell Inc. (No. 12)
and Starbucks Corp. (No. 17). An exception to the rule was Altria Group
Inc., an investor favorite despite its 48th place ranking for
reputation.
In the European studies of 15 companies per country, respondents were
most inclined to buy or recommend products and services from such companies
as Tesco Corp. (No. 5) and The Body Shop International PLC (No. 3) in the
U.K.; Groupe Danone (No. 2) and L’Oreal Group (No. 1) in France; and
Aldi Group (No. 2) and Fa. Anton Schlecker (No. 11) in Germany .
Harris didn’t report on respondents’ plans to buy and recommend
specific stocks in the European countries.
The Reputation Quotient study also shows the potentially dangerous
effects of a negative reputation on a company’s sales or stock price. About
60% of the respondents to the U.S. survey say they have engaged in at least
one anti-corporate activity in the past year, while 45% say they have been
involved in at least two. That could include boycotting a company’s
products and services—the most common type of protest—encouraging others to
join the boycott, signing a petition, or urging others not to invest in a
company’s stock.
This year, the top targets for anti-corporate activism by Americans
were MCI Inc., Martha Stewart Living Omnimedia Inc., Altria Group Inc.,
Halliburton Co., AT&T Corp., McDonald’s Corp. and Exxon Mobil Corp.
Europeans are even more likely to take action against a company they
don’t like—65% in the U.K., 63% in France, and 64% in Germany. Top targets:
McDonald’s, British Telecom PLC and Royal Dutch/Shell Group in Britain;
France Telecom SA, McDonald’s and Credit Lyonnais SA in France; and
Deutsche Telekom AG, Deutsche Bahn AG and Deutsche Post AG in Germany.
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