How To Measure Reputation

Transcription

1 Ludwig-Maximilians-Universität München Institute for Market-based Management Reputation Management Brief description (April 2011) Institute for Market-based Management (IMM) Kaulbachstraße 45/I D München phone Fax www 1 Corporate Reputation Management

2 Ludwig-Maximilians-Universität München Institute for Market-based Management 1. Reputation as a Management Objectivee 2 Corporate Reputation Management

3 A company s market value can hardly be derived from tangible assets S&P 500 ( ) HDax ( ) ** * * Sources: Ballow/Burgman/Roos/Molnar: A New Paradigm for Managing Shareholder Value, July 2004, p. 7 Lev: Intangibles: Management, Measurement, and Reporting, Brookings Institution Press, 2001 Lev: Remarks on the Measurement, Valuation, and Reporting of Intangible Assets. Economic Policy Review, Sept Thomson Reuters Datastream * ** HDAX contains stocks of 110 largest, publicly listed corporations in Germany (DAX, MDAX, TecDAX) 3 Corporate Reputation Management

4 the central intangible asset is a company s corporate reputation ti Reputation: general evaluation of a company by its various stakeholders. Incorporates both, cognitive and emotional components. An assessment of reputation is based on factual experiences as well as on perceptions relying on communicated messages. Products & Services Strategy & Innovation Manager & Employees Performance & Market pos. Reputation CSR & Fairness Corporate Communications Sources: Schwaiger/Cannon 2004, Sobol et al ; Fombrun 1996; Gray/Ballmer 1998; Hall 1992; De Quevedo 2001 ; Tucker/Melewar Corporate Reputation Management

5 Companies build competitive advantages and increase their market value by fostering reputation ti Media Reputation Media Customers Employees Investors Politicians Suppliers Trust in products Win war for talents Better access to Advantages in Lower and advertising Retention Higher purchase rates Price premium Willingness to apply Salary premium Better retention Higher productivity capital markets Lower credit costs Increased willingness to buy and hold shares and stocks negotiations Favorableness and support Reduced risk of litigation procurement costs Higher commitment Sources: Fombrun/van Riel 1998; Goldberg/Hartwick 1990; Lafferty/Goldsmith 1999; Caminiti 1992; Preece et al. 1995; Klein/Leffler 1981; Milgrom/Roberts 1986; Dowling 1986; Eidson/Master 2000; Nakra 2000, Brown 1997; Cordeiro/Sambharya 1997; Deephouse 1997; Fombrun 1996; McMillan/Joshi 1997; Roberts/Dowling 1997; Srivastava et al Corporate Reputation Management

6 Reputation drives financial performance Regression analysis using reputation and stock data show: Investments in reputation-building activities over a longer period show a positive impact on the shareholder value (market value) ( Investment t Effect ). The overall reputation depends on innovative and communicative capabilities as well as on finance based influence ( Performance Effect ). Sources: Eberl/Schwaiger 2005; Roberts/Dowling 2002; Schwalbach 2000; Hildebrandt/Schwalbach 2000 Investments Reputation Market value Reputation Investment Effect Performance Effect 6 Corporate Reputation Management

7 Reputation champions outperform the DAX-30 index Price index (basis = 100) 200 Risk: DAX = (daily basis) Top 25% Reputation DAX Difference in index points Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Corporate reputation data: Source: IMM Corporate Reputation Monitor 9 waves analyzed: , , , , , , , , Sample size ranges between 26 to 28 DAX firms During each wave a representative sample of the German general public was surveyed Stock market data: Source: Datastream Period: 30/12/ /3/2010 Dividends included Weighting schemes: DAX stocks are weighted by market value; reputation portfolio stocks are weighted equally (Note: similar results for market value weighting) Corporate Reputation Management

8 A lack of reputation can be fatal June 28, 2007: Fire in the transformer building in a nuclear power plant in Germany, malfunction of the power grid shutdown of both reactors July 16, 2007: Head of the nuclear energy division and Head of Corporate Communications have to resign July 27, 2007: commission of independent experts is installed by Vattenfall (among them the former BMW s Head of Corporate Communications (budget: 7,5 Mio. $) The shutdown of the plants has burdened the profit by $ 85 Mio. (Vattenfall Europe, interim report Nov. 2007). Source: Spiegel 8 Corporate Reputation Management

9 The other end of the scale: Nestlé 9 Corporate Reputation Management

10 Ludwig-Maximilians-Universität München Institute for Market-based Management 2. Our Approach of Corporate Reputation Management 10 Corporate Reputation Management

11 Our reputation model is based on a multinational study and has been adopted d by several blue chip companies Source: Schwaiger, M. (2004): Components and Parameters of Corporate Reputation ti an Empirical i Study, in: Schmalenbach Business Review, Vol. 56, S Corporate Reputation Management

12 Reputation is not a goal in itself. It has to be linked to important t outcomes and enable their management! Check implementation. Media response o.k.? Effectiveness and efficiency as expected? Controlling Measuring Measure reputation ti and outcomes within your strategic group. Locate your position compared to benchmarks Acting Outcome (e.g. Loyalty, Engagement, Willingness to invest etc.) Feed drivers! Improve TQM, Performance, set up CSR strategy. Create facts and drive perception (Corp. Comm.) Explaining Calculate impact of quality, performance, CSR, attractiveness etc. via Reputation on outcome (driver analysis) : Tool Setup (Measuring, Integration of Studies) ca. 4 Month Driver analyses per stakeholder group ca. 2 Month then steady state Rule of thumb: Month 12 Corporate Reputation Management

13 First Step: Measuring reputation Design of the study General public: CATI Opinion i leader: CAPI Recruiment Market: Online Likeability Identify more with Likeable company Miss more than other companies Data collection: TNS Infratest Reputation About / 300 / 2000 interviews, companies Recognized world-wide Companies selected for evaluation have to be known at least by name Competence Top competitor in its market Performs at a premium level 13 Corporate Reputation Management

14 Measurement results: Reputation Portfolio and Target Group Monitor 65% Likeability 60% 55% 50% 45% 40% 35% 30% 25% 20% 15% Deutsche Lufthansa Audi Beiersdorf VW Linde Adidas-Salomon Deutsche Post Henkel Deutsche Bahn Siemens Bayer Microsoft DaimlerChrysler Schering Schenker BMW Group Deutsche Börse IBM TUI MAN HUK Coburg L'Oreal Deutsche Telekom Commerzbank Fresenius Metro Aral Hewlett-Packard Allianz Boeing Porsche BASF AXA Germanwings Mü Rück Continental Shell Dresdner Bank Infineon Deutsche Bank ThyssenKrupp Kühne und Nagel RWE E.ON EADS Toyota SAP HypoVereinsbank Altana Uil Unilever BP Accenture Mc Donalds Burger King Target Group Monitor: Reputation of a company in all surveyed stakeholder groups General Public 10% 50% 55% 60% 65% 70% 75% 80% 85% 90% Competence NGOs/NPOs 69,28% Journalists 75,39% 59,38% Reputation Monitor: Perception of Likeability and Competence of one selected stakeholder group (currently: ~60 companies) Academics 64,39% CEOs etc. 73,20% 69,53% 71,29% Politicians Analysts 14 Corporate Reputation Management

15 Second Step: Analyzing reputation drivers 4di dimensions i cover the main stakeholder groups Corporate Performance (capital market perspective) Recognized world-wide Competence TOP competitor Quality of Products & Services (customer perspective) Performance at a premium level Identify more with Corporate Social Responsibility (opinion leader perspective) p Likeability Likeable company Miss more than other companies Attractiveness (employee perspective) 15 Corporate Reputation Management

16 Second Step: Explaining reputation For every dimension i drivers are deposited d High quality of products/services Good value for money Good services Customer concerns are held in high regard Reliable partner Rather innovator than imitator Competence Corporate Performance (capital market perspective) Recognized world-wide TOP competitor Well managed Economically stable Manageable risks Growth potential Clear vision about the future Quality of Products & Services (customer perspective) Highly qualified employees Could see myself working for this company Likeable physical appearance Likeability Attractivenessti (employee perspective) Performance at a premium level Identify more with Likeable company Miss more than other companies Corporate Social Responsibility (opinion leader perspective) Forthright information Fair attitude towards competitors Social responsibility Environmental engagement Is not only concerned about the profit Corporate Citizenship 16 Corporate Reputation Management

17 Linking reputation to customer retention proofs a significant effect of likeability (ex.: power suppliers market) Identify more with,80 Responsibility,22 79%,87,80 Likeable company Miss more than other companies Attractiveness,31 Likeability,73 69%,83 Long term committed,40 Commitment,88,85 Choose again Quality,50,68 Competence 91%,13 (n.s.),68,80 Recognized world-wide Recommendation Performance,88 Top competitor in its market Performs at a premium level Source: Schwaiger/Zinnbauer (2003): Unternehmensreputation: Treiber der Kundenbindung auch bei mittelständischen EVUs, in: Zeitschrift für Energiewirtschaft, 27. Jahrgang (2003), No. 4, S Corporate Reputation Management

18 and in the bank market Identify more with Quality & Honesty ++ Likeable company Miss more than other companies ++ Likeability,86 79% Commitment Long term committed Choose again Responsibility ++,09 (n.s.) Recommendation Performance + Competence Recognized world-wide Top competitor in its market Performs at a premium level Source: Zinnbauer/Bakay/Schwaiger (2004): Hohe Reputation stärkt bei Banken und Sparkassen die Kundenbindung, in: Betriebswirtschaftliche Blätter, Heft 06/2004, S Corporate Reputation Management

19 PLS analysis allows calculating a driver ranking Rank (Impact on loyalty) Position comp. to benchmark Driver Factor 1 (20.12%) ++ Rather innovator than imitator Quality 2 (16.74%) - Well managed Performance 3 (12.70%) o Customer centricity Quality 4 (6.68%) + Physical appearance Attractiveness 5 (6.22%) -- Sincere information CSR 6 19 Corporate Reputation Management

20 Third Step: Derive recommended actions from driver rankings and competitive positions xyz 0,1 re elative po osition of 0, , ,010 0,000 0,010 0,020 0,030 0,040 0,050 0,060 0,070-0,1-0,1-0, For example: indicator 7: well managed Indicator has high h influence on customer loyalty (via reputation) and is less developed than for the other benchmarks. This driver has to be worked on. -0, ,3 influence on customer loyalty Dimension 1 = impact on outcome Dimension 2 = position in the strategic benchmark group 2006 Strategist of the year 20 Corporate Reputation Management

21 analyze risks, develop strategic communication guidelines and implement them creatively Unfortunately: That does not always work bad performance legal issues board member deviance identify risks product flops environmental scandal communication disaster t 21 Corporate Reputation Management

22 Fourth Step: Controlling Measures pretest media resonance analysis - posttest Likeablility 5% 4% Airport Lounge 3% Formel 1 2% 1% Stiftungs-Lst. 0% -5% -4% -3% -2% -1% 0% 1% 2% 3% 4% -1% TSV % -3% -4% Oper Competence 22 Corporate Reputation Management

23 Ludwig-Maximilians-Universität München Institute for Market-based Management 3. Reputation ti Management as a Steering Tool 23 Corporate Reputation Management

24 The Concept 1. Consolidating: Getting a common linchpin for all studies, capturing all relevant aspects of corporate reputation 6 endogenous indicators for reputation 3 for likeability 3 for competence 2. Measuring & Managing Determine Goals and potential drivers, identify levers of reputation in each relevant stakeholder group 3. Operations & Communications derive suitable operative programs and communication measures 4. (Control) Tool for measuring the effectiveness of single activities regarding corporate reputation Communication in the financial sector Communication to consumers Corporate Reputation Communication to employees/ recruitment market Communication to opinion leaders 24 Corporate Reputation Management

25 Summarizing: What are the benefits of reputation ti management for a firm? Beneficial aspects + Transparent management and steering concept with proven impact on corporate performance + Compatible tool allows linking communications measures and using existing market research studies + Instrument to control actions in every section available with respect to effectiveness and (long-term) efficiency + The resulting impacts of the drivers allow the identification of a hierarchy of the messages prioritization of goals Increased market value and crisis i prevention 25 Corporate Reputation Management

26 Ludwig-Maximilians-Universität München Institute for Market-based Management 4. CVs + Project Examples 26 Corporate Reputation Management

27 IMM Team University Professor of Management Ludwig-Maximilians-Universität Munich Responsibilities: Chair of the IMM, Dean ( ), Dean of Studies ( and since 2005), Head of the working group for the international study programme European Master in Management, Member of the executive committee of the German Academic Association for Business Research (VHB), member of the board of the Munich Experimental Laboratory for Economic and Social Sciences (MELESSA) Curriculum vitae: Academic studies of Business Administration/Economics at Universität Augsburg with majors in Marketing and Operations Research, Ph.D. (Dr. rer. pol.) in 1992, post-doctoral thesis (Habilitation) in 1997 Fields of Research: Market-based Management, Market and Trends Research, Communications Management, Corporate Reputation, Competitive Advantage Consulting Experience: Numerous projects with German Blue-Chip-Companies p (concerning topics such as Customer Satisfaction and Customer Loyalty, Employee Motivation, Corporate Communications and Marketing Strategy) 27 Corporate Reputation Management

28 IMM Team Prof. Dr. Marko Sarstedt, MBR Assistant Professor for Quantitative Methods in Marketing and Management Academic studies of Business Administration at Universität Passau, Helsinki School of Economics and Business Administration and Ludwig-Maximilians- Universität München; Majors: Empirical Research and Corporate Planning, Information, Organization and Management, Statistics Ph.D. (Dr. oec. publ.) from the Institute for Marked-based Management (IMM) / Ludwig-Maximilians-Universität München Junior Professor at the Ludwig-Maximilians-Universität München Fields of Research: Heterogeneity in Structural Equation Modeling (mainly PLS Path Modeling), Effects of Cultural Sponsorship, Reputation, Success Factors in Marketing, Data Quality and Scale Development Consulting Experience: Telco, Engineering 28 Corporate Reputation Management

29 IMM Team Dipl.-Kfm. Felix Kessel Research and Teaching Assistant Academic studies of Business Administration at Ludwig-Maximilians- Universität München; Majors: Market-based Management, Human Ressource Management, Computer Sciences Field of Research: Green Marketing, Sustainability, Corporate Social Responsibility Consulting Experience: Engineering g Dipl.-Hdl. Markus Kick Research and Teaching Assistant Academic studies of Human Resource Education & Management at Ludwig- Maximilians-Universität München; Mayors: Market-based Management, Statistics Field of Research: Reputation, Brand Impact on Health Insurance Choice Decisions 29 Corporate Reputation Management

30 IMM Team Dipl.-Kffr. Martina Littich, M.A. Research and Teaching Assistant Academic studies of Communication Science and Business Administration at Ludwig-Maximilians-Universität München and Universidad San Pablo CEU in Madrid; Majors: Applied Communication Research, Advertising i Psychology; Market-based Management, Marketing Field of Research: Effects of Communication on Reputation/Stock Returns, Health Marketing Consulting Experience: Engineering Dipl.-Kffr. Elena Michel Research and Teaching Assistant Academic studies of Business Administration at Ludwig-Maximilians- Universität München and Università di Bologna; Majors: Market-based Management, Marketing, Advertising Psychology Field of Research: Return on Marketing, Corporate Reputation and Stock Returns Risk, Corporate Reputation and Analyst Stock Recommendation Consulting Experience: Automotive 30 Corporate Reputation Management

31 IMM Team Dipl. -Kfm. Sascha Raithel, MBR Research and Teaching Assistant Academic studies of Business Administration at Universität Augburg; Majors: Data Analysis and Statistics, Information Management and Market Research, Business Informatics Fields of Research: Marketing Performance Measurement, Marketing- Finance-Interface, Corporate Reputation Consulting Experience: Insurance, IT Dipl.-Kfm. Matthias Schloderer, MBR Research and Teaching Assistant Academic studies of Business Research at Ludwig-Maximilians-Universität München and Technische Universität München; Majors: Marketing, Empirical Research and Planning, Market/Advertising Psychology Fields of Research: Corporate Reputation (Corporate Reputation Monitor in the Opinion Leader Market, NPO Reputation, War for Talent), PLS Path Modeling, Effects of Cultural Sponsorship, Customer and Student Satisfaction Consulting Experience: Insurance, Telco, Aviation, Defense, Engineering 31 Corporate Reputation Management

32 IMM Team Dipl.-Hdl. Kathrin Stingl, MBR Research and Teaching Assistant Academic studies of Human Resource Education & Management at Ludwig- Maximilians-Universität München Fields of Research: Marketing in Higher Education, Student t Expectations ti and Satisfaction Consulting Experience: Insurance Dipl.-Kffr. Petra Wilczynski, MBR Research and Teaching Assistant Academic studies of Business Administration at Ludwig-Maximilians- Universität München; Majors: Market-based Management, International Markets, Advertising Psychology Fields of Research: Corporate Reputation, Measurment Theory and Quantitative Methods Consulting Experience: Insurance 32 Corporate Reputation Management

33 IMM Team Dipl. oec. Lorenz Zimmermann Research and Teaching Assistant Academic studies of Business Administration/Economics at Universität Hohenheim and University of Connecticut; Majors: Marketing, Managerial Accounting, Applied Social Research, Statistics Consulting Experience: Insurance, Automotive, Telco 33 Corporate Reputation Management

34 Project example 1: Situationti Problem Support provided Exemplary results Client is market leader in Germany, suffers from severe customer churn, CEO under pressure in media Media response mostly negative Comprehensive analysis of customers, employees, financial community and opinion leader markets in Germany (driver analysis) additional studies not desired, integration in existing ones Identification of claims that show positive impact on reputation in all stakeholder groups Feed drivers that distinguish client from competitors As opposed to competitors, innovation is not a main driver, but good management is. Draw benefits from physical appearance (better evaluated than competitors appearance), refrain from specific sponsoring activities Understanding customer needs far more important than friendliness in service fields 34 Corporate Reputation Management

35 Project example 2: Situationti Problem Support provided Exemplary results Oligopoly market, client is one out of two global players and dtechnology leader Media response mostly negative, CSR activities on trial Effective reputation management in Germany and France Check whether global or regional (communications-)strategy seems more effective Custom-made Study (GER/F): CAP-interviews (TNS) with journalists, analysts, top managers and politicians Derive implications for operations and corporate communications Advantages in perceived innovativeness and market leadership claims should be exploited by means of communications (skimming; no additional investments) Increase reliability, which is perceived below benchmarks (investment program) CSR activities show minor impact (savings possible!) 35 Corporate Reputation Management

36 Project example 3: Situation ti Problem Support provided Client is regional energy supplier Commitment t and trust t are important t in all stakeholder groups, but difficult to manage Identify drivers of reputation as antecedent of trust focusing on customer loyalty and derive suitable measures Development of a loyalty model (SEM) Identification of loyalty drivers based on a regional CATI sample Exemplary results Reputation model explains 70% of loyalty variance Only likeability component has significant impact CSR activities are effective and are perceived better than those of the benchmarks Lack of competence (compared to benchmarks) should be eliminated with respect to other stakeholder groups 36 Corporate Reputation Management