Corporate Reputation and Service Firms: Which Elements Impact Consumer Choice? The Impact of Corporate Reputation on Learners Choice of University

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1 Page 1 of 8 ANZMAC 2009 Corporate Reputation and Service Firms: Which Elements Impact Consumer Choice? The Impact of Corporate Reputation on Learners Choice of University Elsamari Botha, University of Cape Town* Ali Sanders, University of Stellenbosch Obie Viljoen, University of Stellenbosch Abstract Many studies have been done to define and measure the concept of corporate reputation but few have focused on the importance of corporate reputation for service organisations. This is particularly important for universities, who provide an educational service to students. In order for universities to function sustainably, the question can be asked: Which reputation factors influence university choice for learners? Also, are these factors similar to the traditional six elements of corporate reputation given the service nature of universities? This study focused on the influence of corporate reputation, specifically the corporate reputation of the University of Stellenbosch, on learner choice in the Helderberg region of South Africa. Four schools were identified where 313 learners were surveyed. The study found that organisations should not forsake communicating their core service as this greatly influences the corporate reputation of that firm and a one-size-fits-all approach may not be appropriate in measuring the reputation of service organisations. Keywords: Corporate Reputation, Service Marketing, Learner choice, Reputation Measurement 1

2 ANZMAC 2009 Page 2 of 8 Corporate Reputation and Service Firms: Which Elements Impact Consumer Choice? The Impact of Corporate Reputation on Learners Choice of University Introduction The last few decades have given rise to a steady increase in the importance that corporations place on the value of their corporate reputation. This is especially important for service firms because it is difficult for customers to evaluate a service prior to purchase due to the intangible nature of services (Walsh & Beatty, 2007). Walsh and Beatty (2007:129) define corporate reputation as The customer s overall evaluation of a firm based on his or her reactions to the firm s goods, services, communication activities, interactions with the firm and/or its representatives or constituencies (such as employees, management, or other customers) and/or known corporate activities. Recent changes in the structure of the South African tertiary educational sector have led to an increase in competition between tertiary institutions. This is largely due to the fact that government has reduced funding and changes have been made to ensure a uniform standard of education throughout South Africa (Weise, 2008:2). These changes are forcing tertiary educational institutions to focus on attracting and retaining students, by projecting a good image and reputation. University reputation has also been revealed as an important choice factor that students consider when deciding on which university to attend (Briggs, 2006; Raposo & Alves, 2007; Weise, 2008). Tertiary educational institutions provide an education which is classified as a service (Weise, 2008:2). Due to the intangible nature of services, this makes it difficult for prospective students to evaluate and make judgments about the university (Weise, 2008:2). This is why it is important for tertiary institutions to manage their communication programs effectively and ensure that they communicate to the right audience in the most effective manner. Recent studies have questioned whether the widely applied six elements of corporate reputation namely emotional appeal, products and services, financial performance, vision and leadership, workplace environment and social responsibility (Fombrun & Gardberg, 2000:14) - is applicable to service firms. This study applied these and other possible factors to measure which elements impact learners choice of university and whether these factors are applicable to universities as service organisations. The primary contribution of this study was in combining different disciplines measures of what impacts a universities reputation for learners. It also questioned the applicability and success of applying traditional corporate reputation measures to service firms. Firstly, the paper address relevant literature on universities as service organisations and corporate reputation where after the methodology, findings and conclusions are discussed. The University as a Service Organisation Service industries and companies include those industries and companies typically classified within the service sector whose core product is a service (Ziethaml, Bitner & Gremler, 2006:5). In other words, these companies sell services as their core offering. The total services sector comprises a wide range of service industries, one of which is Educational services (Ziethaml et al., 2006:5). 1

3 Page 3 of 8 ANZMAC 2009 Services can be divided into four distinct categories namely: service industries and companies, services as products, customer service and derived service (Ziethaml, Bitner & Gremler, 2006:5). For the purpose of this study there will be focused on the University of Stellenbosch as a service company. There is a need for higher education institutions to better understand their market s needs and wants (Vrontis, Thrassou & Melanthiou, 2007:979). Vrontis et al. (2007:979) states that this is because of the commercialization of higher education institutions and the fact organisations now place far greater emphasis on marketing as means of business development. For higher education institutions to understand their markets needs and wants it is necessary to segment their markets correctly and target the right segments. It is also important to understand the causes and effects of customer behaviour within individual segments and the motives that underlie this behaviour (Vrontis et al., 2007:979). Factors Impacting University Reputation and Student Choice Vidaver-Cohen (2007:280) states that a good reputation is considered to be one of the most valuable intangible assets an organisation can possess. It reduces stakeholder uncertainty about future organisational performances, strengthens competitive advantage, contributes to public confidence and creates value by maximizing an organisation s ability to receive a premium for products or services (Vidaver-Cohen, 2007:280). Consequently, the corporate reputation of universities should be focused on to ensure the sustainability and competitiveness of the university. Few studies, however, have applied typical corporate reputation measurement instruments to universities as service organisations. Measuring Corporate Reputation Four of the models used to measure corporate reputation include Fortune s Most Admired Companies List (MAC), the Reputation Quotient (RQ), the Corporate Personality Scale and the Stakeholder Performance and Relationship Improvement Tool (SPIRIT) (Hillenbrand & Money, 2007:262). Hillenbrand and Money (2007:263) point out that the models differ from one another according to their underlying approach, the stakeholders they survey and what they measure. Thus, although there are numerous models to measure corporate reputation, it is important to consider when it is appropriate to use what measure. However, the Reputation Quotient of Harris and Fombrun is most often applied. The Corporate Reputation Quotient (RQ) is a comprehensive measuring method of corporate reputation. Harris and Fombrum, who developed this scale, defined corporate reputation as a collective assessment of a company s ability to provide valued outcomes to a representative group of stakeholders (Fombrum et al, 2000:243, in Walsh & Beatty, 2007:131). Six dimensions were identified that are likely to affect stakeholders behaviour and company profits (Walsh & Beatty, 2007:131). These six dimensions are emotional appeal, products and services, vision and leadership, workplace environment, financial performance and social responsibility (Valuebasedmanagement.net, 2008). More recently a reputation measurement instrument was developed by Walsh and Beatty (2007:130) to measure corporate reputation in service organisations named the Customer Based Reputation (CBR) measuring instrument. According to Walsh and Beatty (2007:131) the Fombrum s (RQ) scale was created to be used across different company types, while the CBR scale focuses on customer and service firms only. Because of the wide acceptance of the RQ scale Walsh and Beatty (2007) chose to use the RQ items in their scale development work 2

4 ANZMAC 2009 Page 4 of 8 in order to more fully develop their CBR scale (Walsh & Beatty, 2007:132). They eventually ended up with a five dimension scale that included customer orientation, good employer, reliable and financially strong company, product and service quality and social and environmental responsibility. These five factors as well as Emotional Appeal proposed by Harris and Fombrun were used to measure university reputation in this study. Universities, as other organisations, need to focus on communicating these six factors to key stakeholders in its environment. One of the key stakeholders of the university is the prospective students that considers to study there. However, when looking at the various items that make up these elements one can question the applicability of how these elements impact learners choice of university (i.e. whether they will consume the organisation s service). Consequently, studies focusing on various elements relating to education, including learner choice, have proposed other key influencing factors. Other Choice Factors A great amount of factors can possibly influence learner choice of university. Raposo and Alves (2007:3) summarise all the various factors proposed by different authors that might influence this choice, but recommend that the following factors be measured. Table 1: Factors influencing learner choice of university 1. Institution Overall Reputation Modernity of facilities and equipments Quality of education University reputation Teachers reputation Level of university promotion Existence of social life in the university Existence of sports and leisure activities 2. Educational Offer Diversity of courses Existence of actualised courses Courses with good Professional perspectives Courses with reputation in the market Existence of help in search of the first Job Amount of Job proposal to students 3. Previous Knowledge about the Institution Already knows the institution Already seen university promotion 4. Individual Factors Probability of entry Geographic location Costs of studying here Near family Friends and relatives studying here 5. Influence of Others Parents recommendation Secondary school teachers recommendation Friends recommendation 3

5 Page 5 of 8 ANZMAC 2009 SOURCE: Raposo and Alves, 2007:3 The dimension Institution Overall Reputation was then adapted in this study to Other External Influences and four items were added to this dimension. These items were identified by Cosser and Du Toit (2002), specifically for the South African context and include Has a language policy that suits me. ; Offers campus safety and security. ; Offers on campus housing/residence. and Offers financial assistance. Methodology A census was conducted on Grade 12 learners, planning to go to university, in four schools in the Helderberg area in the Western Cape, South Africa. The schools were randomly selected from a population framework provided by the University of Stellenbosch s Centre for Prospective Students top feeder list. As the schools and university s consent was provided a 100% response rate was obtained and 313 learners completed a self-completion questionnaire. Findings A 7-point Semantic Differential scale was used to measure the various constructs and their respective scale items. Thereafter, summated scales were calculated for each construct as well as an overall reputation scale (consisting of the six elements proposed by the RQ and CBR models). The descriptive statistics of these summated scales are provided in Table 2. An exploratory factor analysis and reliability assessments (using Cronbach Alpha) were conducted on each construct to investigate the reliability of these scales. Table 2: Descriptive statistics and reliability assessment for the individual constructs Descriptive Statistics N Mean Std. Deviation Cronbach Alpha Customer Orientation Good Employer Reliable and Financially Strong Product Quality and Service Social and Environmental Responsibility Emotional Appeal Educational Offer Overall Reputation ( factors) Institution's Overall Reputation (Raposo & Alves, 2007) Other External Factors Individual Factors Influence of Others On average, learners indicated that they strongly agreed that the reputation elements proposed by the CBR and RQ models influenced their choice of university. The overall reputation 4

6 ANZMAC 2009 Page 6 of 8 factors, educational offer and other external factors proposed by Raposo and Alves (2007) also strongly influenced learner choice where individual factors and the influence of others had a less stronger appeal to the prospective students. The reliability of the six reputation elements were relatively high compared to the reliability of the other influencing factors scales. It is evident that there is still room for improvement in the measurement of these constructs. Factor Analysis Principle component analysis firstly revealed that the six reputation elements proposed by the RQ and CBR do contribute to the overall reputation of the university and the reliability of this overall scale was high (Cronbach Alpha = 0.876). Another factor analysis was then conducted on all the elements contributing to learner choice of university where Table 3 contains the Rotated Component Matrix of this analysis. Table 3: Rotated Component Matrix of factors influencing learner choice of university Component 1 2 Reliable and Financially Strong Good Employer Product Quality and Service Customer Orientation Social and Environmental Responsibility Educational Offer Emotional Appeal Influence of Others Individual Factors Institution's Overall Reputation Other External Factors Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. a. Rotation converged in 3 iterations. Two factors loaded when all constructs were considered. Initially, the study proposed that factors influencing learner choice could be divided into reputation factors and other influencing factors, but educational offer was grouped with the reputation factors. Therefore, a factor traditionally not associated with reputation was found to contribute to the overall reputation of the university. Another summated scale was then calculated that included all six reputation elements as well as educational offer. The reliability of this scale increased to a Cronbach Alpha value of Conclusion and Discussion The findings of the study do not imply that educational offer should be included in studies measuring the reputation of service firms; it does, however, suggest that the core product or service offered by the organisation should be included in the measurement of corporate reputation. In other words, even though consumers do care about the emotional appeal, social responsibility et cetera of the service organisation, these organisations should not forsake communicating their core service as this greatly influences the corporate reputation of that 5

7 Page 7 of 8 ANZMAC 2009 firm. 1 Consequently, a one-size-fits-all approach to measuring the corporate reputation of firms may not be the best approach. Rather, the generic and tested guidelines should be combined with context specific elements relating to the core service offered by the organisation. The findings also show that universities should focus on communicating their customer orientation, reliability and financial stability, product quality and service, social and environmental responsibility, emotional appeal and the fact they are good employers to prospective students and learners. Students indicated that these factors do impact their choice of university. However, many students indicated that they either do not know or are not aware of many of the scale items measured under these constructs. In other words, they have not been communicated to the prospective students effectively even though they have been found to impact learners choice of university. Future research could focus on improving the scales that measure the corporate reputation of service firms in general as well as universities specifically. Few studies have combined corporate reputation measures with educational studies measures of corporate reputation and scope exists for comparative studies across disciplines and geographic boundaries. 1 This idea was first suggested by Professor Christo Boshoff from the University of Stellenbosch, top marketing services researcher and academic, that also questioned the applicability of current reputation measures to service firms. 6

8 ANZMAC 2009 Page 8 of 8 List of References Briggs, S An exploratory study of the factors influencing undergraduate student choice: The case of higher education in Scotland. Studies in higher education, 31 (6): Cosser, M. & du Toit, J From school to higher education: Factors affecting the choices of grade 12 learners. South Africa, Cape Town: HSRC Publishers. Fombrun, C.J & Gardberg, N Who top s in corporate reputation? Corporate reputation review, 3 (1): Hillenbrand, C. & Money, K Corporate Responsibility and Corporate Reputation: Two Seperate Concepts or Two Sides of the Same Coin. Corporate Reputation Review, 10(4): Vidaver-Cohen, D Reputation beyond the Rankings: A Conceptual Framework for Business Scool Research. Corporate reputation Review, 10(4): Vrontis, D., Thrassou, A. & Melanthiou, Y A contemporary higher education studentchoice model for developed countries. Journal of Business Research, 60: Walsh, G. & Beatty, S.E Customer- based corporate reputation of a service firm: scale development and validation. Journal of the academy of marketing science, 35: Weise, M A higher education marketing perspective on choice factors and information sources considered by South African first year university students. PhD: Marketing management. Pretoria: University of Pretoria. Raposo, M. & Alves, H A model of university choice: an exploratory approach. Munich personal RePec archive. [Online]. Available: [10 March 2009]. Zeithaml, V.A., Bitner, M.J. & Gremler, D.D Services Marketing: Integrating Customer Focus Across the Firm. 4th ed. New York: McGraw-Hill. 7