The business value of a strong reputation has been well known for many years, but insights into this have really taken off as more and more web services provide us with a clear and transparent way to rate the products and services we buy.  Traditionally, research into this has focused on the company we’re directly interacting with, but a recent study from the University of Technology Sydney (UTS) suggests that the reputation of the company delivering the product can also be hugely important.

The researchers wanted to explore the trade-off between the value of the product itself, and that of any extra product features.  It found that there is a 9% premium customers are willing to pay for products from companies with a high reputation, with that going even higher when the product also comes with nice add-ons.

“The impact of corporate reputation on consumer choices is substantial compared to the competitive advantage offered by varying product features,” the authors say. “Marketing managers need to be concerned about corporate reputation not only because it builds loyalty and trust but also because product features appear more valuable, so consumers are willing to pay more.”

Valuable reputations

The research focused on the television market, with products sold by Sony, Toshiba and Panasonic.  Participants were asked to provide an evaluation of the reputation of each of the three companies, before then being asked to choose between various televisions, all with fairly standard features, and a second television that had some novel features, such as dynamic range control.

The data found that people were willing to pay extra for products with both the novel features and from a company with a strong brand reputation, but less likely to pay extra for novel features from a company with a poor reputation.

In hard currency terms, this meant that consumers were happy to pay $121 extra for a TV that had a 55″ screen over one that only had a 50″ screen, but this would rise a further 22% if the company had a reputation score one standard deviation higher.

“Corporate reputation is not something that can be readily controlled by marketing managers, but it is definitely something that should command their attention,” the researchers explain.  “Companies need to work hard to communicate that they are environmentally and socially responsible, support good causes, have a positive work environment, and excellent leadership and financial performance, and do their best to mitigate brand damage.”