How likely are you to purchase a product or do business with a company that has misled, mistreated, or outright lied to you or others? Not likely.
When you get burned by this company, you won’t return, and you’ll tell others of your negative experience. It’s just how it works. With the social networking, websites, and other methods of instant communication these days, things can go viral quickly. Once you lose your good name, your customers and sales go with it.
While honest reviews help to reduce bad business practices, false claims can also destroy perfectly good ones.
It takes many good deeds to build a good reputation, and only one bad one to lose it.
You can’t stop all damaging reviews or bad press, but you can soften the blow and improve the process through proper reputation management.
Reputation Management Matters to Four Groups
Companies rely on customers, employees, vendors, and investors for survival. Not managing it will have an adverse impact on these four groups.
Besides reducing sales and profits, a poor standing will affect the future value of the organization in the marketplace.
Consumers Purchase Products Based on Reviews
Prior to purchasing any product, 93% of consumers read local reviews to determine the company’s reputation and 49% won’t buy from a company with less than 4-stars.
Firms with favorable reputations are more attractive to investors, customers, suppliers, exchange partners and employees
The Challenges of a Reputation Formation case study by Rebecca Reuber & Eileen Fischer
In 2016, the public learned that Wells Fargo employees had opened more than 1.5 million bank accounts and 565,000 credit cards without the permission of their customers, all while charging fees on the phony accounts. Wells Fargo was fined $185 million in customer lawsuits and federal penalties.
Following the fraud, Wells Fargo reported, “New consumer checking accounts were down 41% in November compared to the same month last year. And applications for consumer credit cards dropped by nearly half, or 45%.”
And…It’s not only large corporations that can suffer. Bad reviews affect businesses of all sizes. For example, for every star increase a restaurant receives on Yelp translates to a 5 to 9 percent increase in revenue. 88% of shoppers say that online customer service reviews directly affect their buying decision.
Employees Prefer To Work at A Company With Integrity
Your company’s status matters. In a survey regarding employees and reputation, 76% revealed they most likely would not accept an offer from a business with a poor image. The best-of-the-best employees will only work with a reputable organization.
Recruiters and job seekers can size up a company’s character with just a few clicks. There is Yelp for local businesses, Glassdoor for work reviews from ex-employees, Angie’s List for local contractors, and Dunn and Bradstreet for company information.
And, those are just a few. Employees and prospects can search public companies using the SEC’s EDGAR or perform a “v (company name)” Google search to reveal any past or pending lawsuits.
Because reputation matters, 84% of working people would leave their current jobs for a new company with a better image.
Vendors Base Relationships on Trust and Confidence
Every company depends on quality vendors for steady business and growth. Your relationship with them is as important as your relationship with your customers. Besides supplying you with goods, they can help you develop new products, improve current products, and cut costs.
Vendors prefer to work with reputable companies because they know that they will be treated fairly, get paid on time, and build a long-term relationship.
Bad online reviews or word-of-mouth worries them. It affects the relationship by ruining their confidence and trust.
Investors Look Beyond the P&L to Determine Risk
One study of 9,276 used the reputation rankings from Fortune magazine’s “America’s Most Admired Companies” list. The report concluded that companies with higher standings paid lower interest or received higher amounts of funding as a result.
Bad press, litigation, or poor business track records (reputation) can be challenging. We expect our entrepreneurs to exemplify the highest standard of professionalism and quality and that starts long before our investment.
Lauren Jupiter, Investor & Managing Partner of AccelFoods
It is an intangible asset that is almost impossible to measure, yet it impacts every business. A report by World Economics, “The Impact of Reputation on Stock Market Value,” placed a value of reputation on several companies at over 50%. For example, over 57% of Apple’s stock value was directly related to its good name and was the highest on the list. Clearly, a clean image matters to the individual as well as institutional investors and venture capitalists.
A bad rep can be expensive and can take years to turn around, if ever.
The Importance of RM Strategy
Having a reputation management strategy can help prevent PR disasters and extinguish minor issues before they can fester into business killing social issues.
Not all tarnished images come from poor management decisions. Vendettas from bloggers, consumers, competitors, journalists or even disgruntled former employees can sow bad seeds. Your RM strategy should have contingencies to meet each complaint head on for every issue.
Great respectability and integrity mean better relationships, higher revenues, and opportunities.
Reviewing and Maintaining A Spotless Image
A good RM strategy is essential for gaining trust and credibility.
Here are five tips to manage a good image:
- Set up Google alerts with your brand or company name including misspellings. You’ll be one of the first to know if there are any falsehoods or harsh reviews spreading.
- Be as transparent as possible, especially when addressing critics.
- Handle all criticism with a positive, professional response. Whatever you do, don’t overreact like the owner of ABC Bistro. Insulting a customer who gave a negative review will blow up in your face.
- React quickly to negative or false reviews. Ignoring false claims is a de facto admission of guilt. It shows that you don’t care what people say.
- If the negativity or falsehoods persist, hire a pro. Don’t wait for the flames to shoot through the roof before you call the fire department.
Most companies handle it one of two ways, internally or outsourcing it.
There are dozens of companies that specialize in reputation management, some work with companies while others work only with individuals. Regardless of how you decide to manage it, you must be proactive and professional at all times.
The larger the company, the more opportunity for problems. A pristine corporate and brand image matters just as much as personal reputation.
With so much at stake, it’s much less expensive to proactively manage and maintain a positive reputation than it is to repair a damaged one.
If you develop a company culture based on mutual understanding and respect, your employees are more likely to enjoy their jobs and become ambassadors for your brand and reputation. Likewise, customers will put their trust in your company and purchase more of your products; investors and potential partners will consider your proposals seriously, and vendors will want your business. Building a business is not rocket science; it’s about having an idea and seeing it through with integrity.
Image credit: Glassdoor / Glassdoor.com
Image credit: Yelp / Yelp.com