Posted on March 29, 2020 at 2:19 am

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How brand reputation increases the valuation of a company

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It’s easy to assume that a business’s tangible assets are the main signatures of brand value. However, it is the intangible concept of brand reputation that makes up the more realistic value total of a corporation. What this means is that it is the reputation and good name of a business that is its most vital and valuable asset. A brand’s reputational value is directly linked to profitability, and there are many examples of well-known brands that suffered profit loss after a reputation-damaging incident. Reputational value comes down to four basic components:

  • Expectation

  • Perception

  • Relationships 

  • Unique IPs

 

By taking steps to ensure consistency in these four areas, the valuation of a company can be dramatically affected. 

 

‘If this business were split up, I would give you the land and bricks and mortar, and I would take the brands and trademarks, and I would fare better than you.’ John Stuart, CEO of Quaker

 

How Improving Reputation Boosts Value

 

Image by <a href="https://pixabay.com/users/geralt-9301/?utm_source=link-attribution&utm_medium=referral&utm_campaign=image&utm_content=1651259">Gerd Altmann</a> from <a href="https://pixabay.com/?utm_source=link-attribution&utm_medium=referral&utm_campaign=image&utm_content=1651259">Pixabay</a>
Image by Gerd Altmann from Pixabay

We live in an age where customers are more than happy to spend more with the brands that they trust, and that’s where reputation becomes the key factor for differentiating your company from others in the same sector. However, it’s not just about being able to sell more at a higher price. Employee retention can be a costly expense for all business models, and by managing your brand reputation more effectively, you will be better able to attract and retain the top talent.

 

The Intangibility Issue

One of the main problems that investors and business owners have when addressing a brand’s reputation is that it can be hard to determine just how much that reputation is worth. Measurement of reputation can be very challenging, although it has become significantly easier through a combination of cutting edge technologies and a more robust reputation management strategy. This dual approach is better able to put a more realistic valuation on brand reputation, based on measurable data and ongoing monitoring of brand mentions. 

 

“Demand for your business is driven by the quality of your reputation. Live and breathe your values to maintain control of your brand reputation.” Stacey Kehoe, entrepreneur and author

 

Losing Positive Brand Reputation

As we move deeper into a whole new decade, there are now three main areas that can have a dramatically negative effect on the reputation of a company. By not being aware of these potential pitfalls, brands become much more vulnerable to reputation damage, and that then leads to a loss of company value. Those three key areas are:

 

Online Presence and Social Media

When mistakes are made online, they are there forever. If a company makes a false move on a bad review, tackles customer service ineffectively, or fails to engage proactively, then the reputational damage can be catastrophic. PR departments often have to race to keep up with damage limitation, and brands like Chrysler, KitchenAid, McDonald’s, Dell, and Domino’s have all had ongoing issues with inappropriate tweets, Snapchat stories from unprofessional staff, and online jokes that were more offensive than funny. Each company suffered a dramatic profit loss as a result. We live in the midst of the 24-hour news cycle and even a deleted Facebook post can be in the news for long enough to cause real harm to a company, and a dramatic loss of both revenue and reputation.

 

Partnerships

Subcontracting roles and outsourcing whole departments is often one of the keys to improving a business. In terms of business management, outsourcing can be invaluable, but it is not without its risks. If a firm that you outsource to makes a wrong move, then that can affect your company as well. When a receptionist was sent home from her accounting firm for not wearing heels, the backlash was immediate and ongoing, but it wasn’t just her accounting firm that ran into reputation damage. The companies that made use of that accounting firm suffered reputational damage as well. Sometimes, as in the case in 2009, when ExpressJet delivered appalling treatment of passengers, it was Continental Airlines that suffered the biggest damage to their reputation, as well as a regulatory fine.

Image by <a href="https://pixabay.com/users/Peggy_Marco-1553824/?utm_source=link-attribution&utm_medium=referral&utm_campaign=image&utm_content=1027862">Peggy und Marco Lachmann-Anke</a> from <a href="https://pixabay.com/?utm_source=link-attribution&utm_medium=referral&utm_campaign=image&utm_content=1027862">Pixabay</a>
Image by Peggy und Marco Lachmann-Anke from Pixabay

Staff and Management

One of the biggest issues for big companies is employee theft or fraud. Cases of fraud can be particularly harmful to a company because it can cause that company to break laws or not adhere to 100% with regulations. Of course, this exposes that company to potentially damaging fines, but the cost to reputation should not be overlooked either. Even if the team member that commits a crime is not part of upper management, it is the brand itself that will suffer. The Lehman Brothers were hit so hard by brand reputation damage that they quickly went bankrupt, and the Indian company Satyam Computers suffered so much reputational damage that it affected the reputation of India as a whole.

 

“Image and reputation are just as important as finances and associations.” Germany Kent, a broadcast journalist. 

 

Improving Brand Value through Asset Management

Brand reputation is an asset like any other, which means that it will only grow more valuable the more time and money that you invest in developing it. Improved reputation management is essential if you want company value to grow, and that means the priority needs to be on:

 

  • Focusing on major areas: It’s vital that a company identifies the main areas of risk, and prioritizes investment in those areas. These could be areas such as marketing, growth strategy, quality control, or IP management. By focusing on the key areas of concern, a company can make it easier to monitor and control its reputation.

 

  • Think long-term: When it comes to reputation and ethics, the goal should be to think in the long term. Trends and consumer preferences evolve, and brands need to be one step ahead of the current needs of their clients. The more that a business looks to the future and makes an educated analysis of what to expect in the five to ten years, the easier it will be to trim the areas that may harm reputation in the long-term.

 

  • Transparency: One of the sure-fire ways to improve the value of your reputation is to be open and transparent in all communications. That refers to both in-house and public-facing communications. When private messages between departments can be leaked online at any minute, the more transparent your communications, the less likely that harm can be caused by inappropriate messages, emails, or badly-planned marketing strategies.

 

  • Hiring: It only requires one bad hire to potentially damage your reputation and your company value. Take the time to check all references of any potential new employee and remember to check their online presence before making an offer of employment. Unprofessional team members can cause untold harm to your brand.

 

Reputational value is one of the most misunderstood assets of the business world. Take the time to understand just what it means and how it affects the valuation of your company and start taking a more proactive approach to its management. When the right reputation can lead to more sales and higher profits, managing your reputation is more important than ever before.