MANAGING REPUTATION AND BUILDING CREDIBILITY

INTRODUCTION

Corporate reputation is the cornerstone in corporate branding. It is of significant importance to all

organizations, regardless of being commercial, governmental, or not-for-profit organizations (Watson,

2007).

Corporate reputation is an aggregate evaluation made by stakeholders of how well a company is

meeting stakeholder’s expectations based on its past behaviors (Wartick, 1992). The value of a brand is

determined by both its tangible and intangible assets, and brand image and reputation forms a critical

part of the intangible assets (Wang, 2005).

Fill (2006) suggests that reputations are developed over time from the image, and it is more embedded

and stable; while image is more transient and can be instantaneous and reality superficial.

Watson (2007) argues that reputation does not occur by chance, it relates to leadership, management,

and organizational operations, the quality of products and services, relationships with stakeholders, and

communication activities and feedback mechanisms.

• First of all, reputation is a perceptual construct - customer evaluations of brands like Coca-Cola, and that

the associated market value (e.g. when customers Stakeholders actually purchase Coca-Cola) therefore

can be treated as a company’s intangible asset (brand equity or reputation) and be put on the balance

sheet.

• A second important element is that a reputation is formed by multiple stakeholder

• The third and final element of reputation that needs to be clarified is that it involves not just a general

impression but also an evaluation of the firm. Reputation can be defined as a subject’s collective

representation of past images of an organization (induced through either communication or past

experiences) that is established over time.

Nature of Reputation

Starting point of managing Reputation

Monitoring of press to see what they are saying about the organization.

First, they need to assemble enough facts—most important, perhaps, a rich understanding of key

stakeholders, including consumers—and not only the product preferences but also the political attitudes

of consumer groups.

Second, companies should focus on the actions that matter most to stakeholders, something that may

call for an exaggerated degree of transparency about corporate priorities or operations.

Third, they must try to influence stakeholders through techniques that go beyond traditional PR

approaches, with an emphasis on two-way dialogue.

Underlying these priorities is a willingness to participate in the public debate more actively than many

companies have in the past. Instead of allowing single-issue interest groups to control the conversation,

companies should insist on a more complete dialogue that raises awareness of the difficult trade-offs they

face.

Starting point of managing Reputation

If consumer research is required, companies must understand that an analysis of how different consumers

feel about them differs from typical segmentations. There might, for example, be a group of consumers

who care deeply about social issues and will weigh in aggressively on regulatory ones affecting a

company’s operations.

Others, such as swing voters, might be undecided about whether, or how, to become involved. Some

could be uninterested and unlikely to take action. Still others may be so anti- or pro-business that their

positions are set in stone

Financial performance

Managing shareholder value

Improved competitiveness

Relative ease of recruitment

Enhanced productivity/creativity

Importance of managing your Reputation

Influences of an organization’s reputation

External forces: environmental, financial, political, social,

industry-wide, legal, technological, community-based.

Relational: competitive and collaborative strategies,

resources, mergers/acquisitions, repositioning.

Internal forces: resources, political, strategy, structure,

behavior, communication climate.

First and foremost how the organization acts and responds in the first 24 hours of a crisis situation sets the

tone for the narrative.

Managing reputation

The First 24

An outmoded approach to

reputation management

Communicate widely and consistently

Show leadership

Actions speaks louder than words

Crisis story and company response.

Monitor the new media

An involved company must collect information about reputational

threats across the organization

Analyze that information in sophisticated ways

Address problems by taking action to mitigate them

First and foremost how the organization acts and responds in the first 24 hours of a crisis situation sets the

tone for the narrative.

Managing reputation

After all is said and done

Evaluate how well you handled the situation – what can you

learn?

Be clear on the situation as it now stands – is it likely to reoccur

or evolve? Update your plans accordingly.

Get back to business as usual as quickly as possible and talk

about all the positive things that are happening

Brands and Reputation

Positioning

Five main communication strategies that can be used to restore reputation in

face of crises:

1. Denial strategy – the organization attempts to remove any connection between the organization

and the crisis by claiming that there is no crisis and offers a simple denial that it did not perform the

act in question.

2. Evasion of responsibility – the organization attempts to reduce responsibility for the crisis by claiming

that it was either forced into the crisis by another culprit and its inability to prevent the crisis that

causes a mistake, or there were good intentions in its act.

3. Reducing the offensiveness of the crisis – the organization attempts to minimize perceived damage

caused by the crisis and reinforce the good traits of the organization by creating a more complete

context with which the organization should be evaluated.

4. Corrective strategy – the organization implements steps to solve the problem and prevent a repeat

of the crisis by taking corrective actions;

5. Mortification -

Tell it truthfullyForgetfulness can be forgives, lies will not

Demonstrate empathy

Tell it fully Have the facts

Anticipate questions

Never no comment

Tell it accurately, quickly Rush to gather accurate information

Do not let issues linger

Communicate regularly

The first 24 Tell it yourself

Acknowledge responsibility

Control the agendas

Enforce message discipline

Proportionate response

Response Principles

How do we build credibility

o By maintaining credibility – develop expertise

o Control dialogue, establish sound relationships with the media

in advance –Employees and customers are important

advocates

o Reputation recovery Is strategic and ongoing – develop

expertise

o Accept responsibility for your role

o Help those immediately impacted

o Take long term corrective action

o Address systematic problems

o Re build bridges with stakeholders

o Communicate clearly, openly and transparently

o Create a PR campaign

o Develop an advertising campaign

o Media outreach

o Community relations

o Implement government affairs program

o Restore confidence

o Conduct research to measure company perception

CASE STUDY

Process in Action: Coca-Cola – Reputation damaged by delay

[Case study based on Wakefield, R. I. (2000). ‘World Class Public Relations: A Model for Effective Public relations in the

Multinational,’ Journal of Communication Management 5(1), 59–71.]

In 1999, around 200 people in Belgium and France complained of illness after drinking Coca-Cola products. Soon

after, it was claimed that this had had two causes – defective carbon dioxide in a Belgian bottle plant and cans

tainted by a fungicide at a French unit. As a result of these allegations, governments of seven northern and western

European countries issued bans or partial bans on Coca-Cola products.

Coca-Cola responded at local, national and European level with response teams to counter allegations and restore

customer and staff confidence. Its chief executive, Douglas Ivester, came from the US to meet Belgian government

officials and to express apologies. Other actions were put in place with company-wide communications to staff and

by corporate advertisements in key European markets.

Although Coca-Cola was not slow to attend the situation and – unlike Perrier when faced with claims of benzene taint

in its bottled waters – did not mount a long period of denial, it was criticized. Sales suffered with a drop of 6 per cent in

Europe and there was a stock price fall of 28 per cent. As one newspaper in Coca-Cola’s hometown, Atlanta,

commented, ‘As the hours fly by, the precious Coca- Cola brand in threatened, with one country and then another

registering levels of concern about the beverages’ (Roughton and Unger, 1999).

As Wakefield asks, ‘What went wrong with Coke?’ (2000, p. 61). Essentially, ‘its efforts were too late and insufficient’. The

CEO’s first comments came four days after the first allegations were made, and he did not travel to Europe until a

week after the crisis started. As PR commentator Paul Holmes noted at the time, ‘waiting several days to issue a

response from corporate headquarters . . . raised serious questions about the company’s sensitivity to customer safety

concerns’.

Wakefield also comments that Coca-Cola failed to anticipate the issues and show significant understanding of the

European public health environment in which public concerns over food safety had been heightened by dioxin

scares, the BSE scandal and other agricultural threats. ‘Aside from ignoring the immediate context, Coca-Cola also

failed to properly gauge some long-term issues related to differences between conducting business globally versus

the US domestic market’, he concludes (2000, p. 62).

The accumulated reputation of more than a century stood for little because Coca-Cola did not recognize the gravity

of the issue as it broke and then tried to manage it from thousands of miles away. The cost was very high, both

financially and in lost trust with customers and staff.

Aug.28th, 2009 A fatal crash of a Lexus car in USA due to the gas pedal was stuck was highly

publicized that brought “unintended acceleration” problems of Toyota cars to the light with increasing

investigations by NHTSA in USA

Toyota attributed the problem in the Lexus to the incompatible floor mat, but their explanation couldn’t convince

NHTSA and public in USA

Late of Sep. 2009 Toyota issued a public safety advisory suggesting owners of specific model about the ill-fitting floor mat issues

in North America.

Sep. 29th, 2009 1st large Recall for potential accelerator pedal entrapment problems (ill-fitting floor mat), U.S. market, 4.2

million vehicles

Nov.25th, 2009 2nd large Recall for sticking accelerator pedal problems, U.S. market, 2.3 million

Vehicles covering 8 models.

Jan. 21st, 2010 Toyota Temporarily suspends production and sales of selected vehicles in the U.S. market

Jan,26th, 2010 3rd large Recall for potential accelerator pedal issues, European markets; 1.8 million vehicles.

Summary of Toyota Crisis and How they managed their reputation

Jan,29th, 2010 Toyota began issuing apologies and breaking silence with response to the crisis under the tense pressures from

public media and governments in America.

Late Jan. 2010 Toyota’s CEO Akio Toyoda made public apology for the recalls and announced global quality task force for focus

on quality issues.

Feb.5th, 2010 4th Recall for antilock brake system (ABS) software problems on 2010 model-year

Toyota Prius and Lexus HS 250, Japan and U.S. markets

Feb. 09th, 2010 5th Recall for inspecting the front drive shaft on 2010 model year Tacoma 4WD

trucks, U.S. market

Feb. 12th, 2010 Three times testimonies to the Congressional Hearing in USA.

Late Feb. to Mar.2010 Toyota agree to pay $16.4 million civil penalty imposed by NHTSA in USA related to Toyota’s recall for slow-to-

return and sticky accelerator pedals, but Toyota denies NHTSA's allegation that it violated the Safety Act or its

implementing regulations.

If you lose money for the firm, I will be very understanding...

If you lose reputation for the firm, I will be ruthless.“

Warren Buffet, renowned businessman and philanthropist