The Cost of Negative Corporate Reputation

John Lewis customer service on Twitter, moving complaint to DMs

Pret a Manger in the dock – reputation disasters

Food retailer Pret a Manger suffered a serious reputation disaster following the death of customer Natasha Ednan-Laperouse – a British 15-year-old who died after eating one of their sandwiches.

Pret hadn’t flagged the fact that the meal contained sesame seeds and Natasha suffered a severe allergic reaction. At the inquest into her death, the Coroner criticised Pret’s food labelling as ‘inadequate’ and referenced six previous examples of customers suffering serious reactions in the 12 months before the tragedy. Since then, spot checks continued to find problems with their food labelling and Pret struggled to rebuild their shattered reputation. Customer trust in Pret declined, despite Pret announcing it was to start printing full label ingredients. Another death linked to a sandwich is being investigated.

On a purely financial level the company does seem to be weathering the storm – a planned expansion into more spaces in the US is going ahead – but consumer confidence has taken a huge hit here in the UK. For a company that prides itself on delivering honest, no nonsense food, rebuilding customer trust must be a priority for 2019.

Persimmon pay row

The massive payment was seen to be hugely at odds with a housing market where many are struggling to secure an affordable home. The housebuilder said the distraction around his remuneration is having a negative impact on its reputation and on his ability to continue in his role. As one Guardian commentator put it: “Firms, including Persimmon, protest their innocence but the whole industry has an image problem when there is an affordability crisis in housing. Mega-million payouts to lucky managers look appalling.”

Following the BHS pensions scandal in 2016/17 – during which he was spotted relaxing on a £100 million yacht and calls were made for him to be stripped of his knighthood – this year saw him facing even more serious allegations. After a super-injunction stifled a Daily Telegraph story accusing him of sexual misconduct, Labour peer Peter Hain used Parliamentary privilege to share the details. Aside from the obvious damage to his personal reputation, industry experts say the crisis is likely to affect his business interests too.

Sales were already down across many of his retail interests and the trend appears to be continuing at his flagship London Topshop store. Staff in some shops even threatened to walk out following the revelations, causing further problems for the ailing Arcadia group. There have been rumours Green is looking to sell assets but for now, his tarnished reputation could make that an even trickier proposition.

Corporate reputation is an intangible asset

Any discussion of corporate reputation must deal with that jargony phrase intangible asset. Opaque though it might be, the intangible asset aspect of a corporation’s reputation is a necessary first place to start.

In corporate terms, what’s an asset?

It’s anything of value owned by a company. Most of the time we think of assets in terms of a corporation’s land, buildings, inventory, or cash. These are tangible and quantifiable — something that is relatively easy to look at on a spreadsheet or even physically touch.

Into this nebulous category, we place corporate reputation. It’s an asset, yes, and can be of immense value. But it’s not something that gets a line item or is tallied up at the end of the fiscal year. It’s intangible. But it still has value, huge value.

In The Conglomerate, a journal on business law and economics, one writer makes the point that “The quality of a firm’s choices and outcomes are one driver of reputation, but reputation also has a life of its own.” This life of its own accurately describes the risks and rewards of corporate reputation.

But there are upsides as well, at least for corporations with a good reputation. This good reputation as an asset, is one that’s very difficult for competitors to steal or to replicate. The authors of an academic paper in the International Journal of Business and Social Science make this point:

“Good corporate reputations are critical not only because of their potential for value creation, but also because their intangible character makes replication by competing firms considerably more difficult.”

Admitting its unwieldy nature, both advantages and disadvantages, is the first step towards taking effective action in terms of reputation management. But in order to manage a corporate reputation, you need to understand something very important — your reputation stakeholders.

Brand inconsistency

As part of your brand image, you should have a specific personality you want to convey. This will encompass your values and objectives, your target audience, your tone of voice and your website design, to name just a few. At the heart of this image, you will have traits you want people to associate with you, such as being knowledgeable, trendy, friendly, daring and so on.

Once you have outlined your brand image and personality, you need to ensure that every touchpoint encapsulates those values. This will help your customers learn precisely who you are and what they can expect from you. It will also help them to garner the associations with your brand that you want them to have.

Brand inconsistency will confuse your audience and make it unclear what they will receive when becoming your customer. For example, if your social media channels are full of memes and jokes, but your website gives a formal, corporate feel, customers may be confused as to whether you’re aiming for ‘fun’ or ‘serious’. As such, it is essential to have the right brand values shown in your content and interaction across all your online and offline channels.

An inconsistent brand image will also directly link to your reputation. Imagine an eco-friendly business that is found to use harmful, unsustainable materials in their products, or a brand aimed at young people that is found to exploit young workers. Instances like these would entirely contradict your brand image and undo your hard work, showing you as untrustworthy and likely leading to a PR scandal. Burger King felt the brunt of this when they launched their ‘plant-based burger’, for it to be found that their product wasn’t actually vegan or vegetarian.

Ensuring that your brand values are embodied in everything you do will avoid these harmful mistakes and prevent hits to your reputation. Instead, your customers will understand who you are and believe it, allowing you to craft a credible image.


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