How “Reputational Capital” Can Affect Your Company’s Bottom Line

Profits and a good reputation go hand in hand. Though both influence the other, it stands to reason that a company with a good reputation will likely enjoy higher profits. When a company puts time, effort and resources into its reputation, the reward is usually higher customer confidence — which means higher sales and profits.

Companies that actively protect their reputations often realize a substantial return on their investment. In fact, many companies are discovering that “return on investment” and “reputation on investment” are “ROIs” worth equal consideration.

Corporate reputational capital as an asset

Your company’s reputation capital is an intangible asset every bit as valuable as tangible assets like real estate and equipment. Investing in intangible assets like business plans, intellectual property and reputation can produce measurable results for your business. Protecting your company’s Internet reputation can produce effective results for a relatively minimal financial investment.

Company reputation and brand loyalty

Brand loyalty is one of a company’s most important assets. In order to create brand loyalty, a company has to convince consumers that its products and services are valuable, and that the company itself is trustworthy.

It can be argued that trust often plays a larger role in cultivating brand loyalty than product quality does. After all, if a potential customer doesn’t trust a company, s/he is unlikely to try the product or service in the first place. High-quality products alone don’t guarantee success. In fact, it’s far more likely that your company competes against your competition’s reputation more than its products. When companies invest in their reputation capital, they’re actually investing in their brand loyalty.

Reputational capital as a key to business development

When a company has a good reputation, it’s more attractive to both consumers and investors. Just as consumers do, investors value reputable companies more than disreputable ones. A company that has invested in its reputation capital can better influence stakeholder decisions. Financial institutions, suppliers and the media also pay close attention to a company’s reputation. Further, a company that has a good reputation will also be able to attract and retain the best employees.

Developing a positive corporate reputation

Because reputation is based largely upon perception, it’s important to do everything possible to demonstrate that your company can be trusted. Developing a corporate communications plan and a consistent public relations message are important, as is making sure that corporate officers and directors adhere to a code of conduct.

Maintain good communication with your customers and cultivate a healthy work environment for your employees. Use your business and brand names carefully: They are the public face of your company. Indeed, many people feel that brand reputation management is key to a good overall business marketing plan.

Maintaining a positive corporate reputational capital

It can take time to build good corporate reputational capital — but only a moment to bring it down. A single scandal, or even the suspicion of corporate impropriety, can harm your company’s reputation overnight.

Smart companies should always have a good crisis response strategy in place, but it’s even smarter to conduct your business so that such strategies aren’t needed. Keeping close tabs on what others are saying about your company, especially on the Web, is vitally important.

A good Internet reputation management plan should be part of any company’s overall reputation management strategy. Negative information on forums, blogs, social networking sites and other websites can damage the reputation you’ve worked so hard to build. In such cases, tapping the expertise of a reputation management service can be a good way to invest in your company’s reputation capital.