Ipsos Corporate Reputation

How reputation and trust affect purchase decisions and marketing efficiency

HOW DOES REPUTATION INFLUENCE PURCHASE DECISIONS?

Reputation is a key consideration in purchase decisions.

The vast majority (87%) of consumers around the world say that they take the reputation of the company into account when purchasing a product or service.

There are regional differences in intensity. Consumers in Latin America and the Middle East/Africa are the most likely to say they are “very likely” to take reputation into account.

Consumers in Europe feel less strongly about taking reputation into account (just 24% “very likely”), but still a vast majority (79%) say they take reputation into account to some extent.

HOW REPUTATION AND TRUST AFFECT MARKETING EFFICIENCY

Building a good reputation generates greater marketing efficiency for companies. When you trust someone, you are more likely to believe what you hear and act on what you’re told. Companies that are trusted gain marketing efficiencies in two ways:

  • consumers are more likely to see and believe advertising from companies that they trust AND
  • consumers are more likely to act on this advertising by purchasing goods and services while being willing to spend a premium.

Around the world, trust has an enormous impact on advertising and product use. In advertising, ad believability is impacted much more than ad memorability – so even though people who distrust a company remember the ad, they are much less likely to believe it. The most significant impact on believability comes when people move into active distrust – only 39% believe advertising for companies that they “distrust a little”. This drops to just 18% for companies who are “distrusted a great deal.” People who are “neutral” toward a company on trust, are still likely to believe the ads they see (73%). 

Product/service use overall is less impacted by trust. In fact, people who are neutral are the least likely to have ever used a company’s products or services – reflecting the role that experience plays in driving corporate trust.

Two metrics that are dramatically impacted by trust are feeling good about using a product/service, and being willing to pay a premium for it. Feeling good about using a product/service has a linear relationship with trust – as trust increases, so does the percentage of buyers’ who report feeling good about it. Being willing to pay a premium, however, has the most impact on the most trusted side of the scale, and falls dramatically among those who have a “neutral” or lower trust rating.

Advertising believability suffers most from active distrust, while willingness to pay a premium benefits the most from active trust. People who are neutral toward a company are willing to believe the ads, but they are unwilling to pay a premium. This suggests that companies that avoid distrust will be able to maintain their marketing efficiency, while those that actively build trust are more likely to reap the profits of premium pricing.

The impact of trust on belief in advertising

The impact of trust on advertising believability spans all regions and industries

Across regions, the steepest decline in advertising believability occurs when people move from “neutral” to “distrust a little.” The decline is greatest in APAC and Europe, but exists in every region.

Among the industry averages, the same inflection point is apparent and holds across industries. Automotive, pharma, and technology advertising are a bit more resilient in the face of distrust.

Maintaining trust, and avoiding active distrust, is important across all companies, everywhere in the world.

Ad believability and trust at the company level

Companies need to understand trust at the individual level.

The impact of trust on advertising believability is not as apparent at the aggregate level as it is at the individual level.

Companies with low aggregate levels of trust still have relatively high advertising believability. However, the level of believability becomes much more variable as trust decreases - all of the companies with high net trust have very high advertising believability while those with lower net trust show much greater ranges of believability.

The fact that this effect is somewhat hidden at the aggregate level means that companies need to understand trust at the individual level and be able to target those who distrust the company.

Would you spend more for a product made by a company you trust?

There is a direct relationship between trust and willingness to pay a premium. Companies with high trust can generally command a premium whereas those with low trust need to offer a discount. The impact of trust on willingness to pay remains consistent across regions and industries.

Across industries and regions, the greatest decline in willingness to pay a premium happens between people who trust a company “a little” and those who are “neutral.” The ability to charge a premium depends on actively building trust, rather than just avoiding distrust.

The willingness to pay a premium is lowest in Europe, but we see the same impact of trust on willingness to pay a premium.

Trust explains 78% of the variance in willingness to pay a premium.

The impact of trust on willingness to pay a premium is more apparent at the aggregate level.

At the aggregate level, trust explains 78% of the variance in willingness to pay a premium. This effect will be magnified when examining individual country results (rather than the global average), and when analyzing at the individual company level.

Methodology: The latest wave of the Ipsos Global Reputation Monitor, conducted in September 2017, measured attitudes of more than 23,000 consumers from 31 countries toward 66 companies across nine industries.

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The AI Paradox: Businesses must not overlook their responsibility to reputation as investment in this technology grows

Digital technologies, from social media to Artificial Intelligence (AI), have undoubtedly altered peoples’ lives – some for the better, some for the worse. We’ve seen the rise of intelligent assistants like Siri and Alexa, grown reliant on communication platforms to keep in touch with friends and family, and have witnessed the positive impact of wearable technology in healthcare.

According to a 2017 PwC report[1], AI technology could deliver a 10% increase in the UK’s GDP by 2030, provided that different types of AI technologies are invested in. To nurture this potential, in early March the government outlined a plan to position the UK as the global leader of artificial intelligence[2]. The plan incorporates investing in R&D, helping people develop skills for the new age of AI, and supporting sectors in boosting their use of AI and data analytics technologies. The hope is to create resilience among the UK’s workforce as the use of AI becomes widespread across sectors and helps boost the economy.

The indication that AI is the future is evident among business leaders too. In a recent study by Ipsos, the authoritative Captains of Industry, three in five stated they have already invested in digital technologies such as machine learning and artificial intelligence. Another third plan to invest in the next five years, as businesses prepare for the utilisation of AI technologies, align with government priorities, and foster the potential for economic growth – especially in a post-pandemic world

However, while the benefits that could be reaped from digital technologies are limitless, it doesn’t come without its challenges. In an Ipsos poll published by the World Economic Forum, four in ten adults across the world said they are worried about the use of artificial intelligence, and nearly half of adults globally agree that the use of AI by companies should be regulated more strictly than it currently is[3]. In another poll, less than one in five adults in the UK believe their job will be automated in the next 10 years, and almost four in five feel confident they already have the skills to carry on with their current employment in the future – contrasting senior leaders’ perspective of digital technologies potential.

While government and businesses are working toward unlocking AI’s potential, efforts will need to be put in place to convince employees of AI’s positive societal impact, the need for upskilling, and the benefits it could bring to jobs in the UK. Uplifting the reputation of AI and automation will need to be at the forefront of the government’s transformational strategy – especially as trust in the sector[4] hit an all-time low in 2020, according to the Edelman Trust Barometer.

Companies such as Microsoft have already taken some steps toward convincing the public in their efforts toward responsible technology by publishing six ethical principles to guide the development and use of artificial intelligence[5], with focus on working closely with employees and teams across the company to enable this effort. The government is also taking steps on this by launching an independent Centre for Data Ethics and Innovation that will advise on the ethical use of data, ranging from evaluating its social and economic impacts through to its fair and responsible application across businesses.

These efforts are a step in the right direction. Digital technologies are notorious for their fast evolution, with policies and regulations coming too late to resolve issues that have already left a negative mark on society and employment. Governments, businesses, and industry experts will need to work coherently and transparently when implementing AI, and work toward foreseeing issues with its implementation before they happen.

Building trust with the public will be key, alongside convincing the UK workforce of the benefits for upskilling, with a focus on fully communicating how utilising digital technologies would affect society and employment, both positively and negatively. Turning the UK into a global AI leader will be a challenging endeavour, but as long as we remember that having the capability to create technology is not all it takes for its success, realising all of its social and economic benefits are very much within our grasp.

Article links

[1] https://www.pwc.co.uk/economic-services/assets/ai-uk-report-v2.pdf

[2] https://www.gov.uk/government/news/new-strategy-to-unleash-the-transformational-power-of-artificial-intelligence

[3] https://www.ipsos.com/en-us/wef-artificial-intelligence-press-release

[4] https://www.linkedin.com/news/story/were-losing-our-trust-in-tech-5042340/

[5] https://www.microsoft.com/en-us/ai/responsible-ai?activetab=pivot1:primaryr6

For more information please contact:

Nadya Valkova
Research Manager, Corporate Reputation

Nadya.Valkova@Ipsos.com

What drives judgement of an organisation’s reputation?

An important focus for Ipsos Corporate Reputation is to help our clients understand what drives their reputation, in other words, what are the issues stakeholders think about when they make judgments about companies and organisations. In this article we will show what are the key aspects organisations should be mindful of according to MPs and business journalists who we regularly interview.

What exactly drives reputation will vary from one organisation to another – there isn’t a single, off-the-shelf answer to this. Feeding into an organisation’s reputation will be elements of what it does (for example, product quality and innovation), what it stands for (such as business acumen, ethics, corporate social responsibility and ESG performance), expectations and perceptions of the sector it’s in, expectations of business and industry, and other wider context issues. Furthermore, an organisation’s delivery against its corporate promise needs to match or exceed the expectations it creates.

There will be many tangible benefits that an organisation gets from building reputation value. It will, for example, help ensure your point of view is heard in policy making and regulation, make stakeholders more receptive to communications, build resilience to draw upon during times of crisis, and strengthen your employer brand.

Factors shaping reputation will vary from company to company, as reputation isn’t formed in a vacuum. It is shaped by perceptions of the sector, by the ongoing socioeconomic climate and policy agenda, as well as the behaviour, performance and communications effectiveness of a company. However, MPs and journalists have told us which issues they tend to consider when they from opinions about companies and organisations, which we’ll discuss here.

The most common consideration for business journalists when judging an organisation tends to be its financial performance. Often, this is seen to be a hygiene factor which an organisation needs before it can start to credibly engage with other issues. As one national business journalist states;

“If you haven't got that [financial performance] you can't do anything else. If you're not a viable business nothing else really matters. You can be as nice as you like to everyone else but if you're going to go bust, there's no point.”

Other common considerations today among business journalists include quality of management, treatment of customers, treatment of employees, and how it engages with journalists.

Journalists tell us that there are three key benefits for an organisation from engaging well with them; it allows journalists to get an organisation’s message across in the pieces they write, it could position an organisation in a more favourable light, and it helps journalist to report more accurately and less one-sided. As a regional business journalist explains;

“You're never going to stop bad headlines if things go badly but engagement on a number of specific issues such as remuneration, climate change, you know if I have a full understanding of a company's policy and why it's doing something, I'm much less likely to shot from the hip. If I have a full understanding of that company's strategy and why something has happened, I'm probably going to have a more holistic, a fuller appreciation of what that is rather than just writing "This is a bloody disaster"”

Indeed, between 2015 and 2017 we saw that engagement with journalists rose in importance as an important factor (see illustration below), and it has maintained its importance ever since. It’s also interesting to note how treatment of employees has become an increasingly important factor for journalists; as Covid-19 lockdown restrictions start to ease and companies announce their plans for their employees (a return to office working or a continuation of remote, flexible or hybrid working), companies need to be mindful of how their demands of employees might be perceived and how this might impact on their reputations.

Meanwhile, the factors that MPs most commonly consider when judging organisations are treatment of employees, track record, financial performance, social responsibility and environmental responsibility.

When asked to rate each aspect in terms of importance, treatment of employees has over time continuously been rated as an important attribute by MPs, while social and environmental responsibility is becoming increasingly important:

However, which aspects are of most importance does to some extent depend on which side of the House an MP sits on.

For Conservative MPs, a company’s track record and financial performance are the key considerations – and financial performance is far more commonly mentioned by Conservative MPs than Labour MPs. As one Conservative Backbencher states;

“Longevity is important, successful track record in either financial terms or stuff they sell or market. The reality is you don't really know about their CSR. The brand reputation is hugely important.”

Meanwhile, the key aspect for Labour MPs is treatment of employees (a far greater consideration among Labour MPs than Conservatives), followed by social responsibility. As one Labour Shadow Minister sates, the way a company treats their employees can be seen to be a reflection of the wider ethos of a company;

“First and foremost, in terms of the management and the whole ethos, the way they treat their employees… how employees are treated is very important to me, are they on proper contracts, are they paid properly, do they have security of employment, do they have things like pensions.”

In line with the views of Labour MPs, our most recent wave of the Reputation Council showed that corporate communicators commonly view employees as a stakeholder group which is increasingly influential on company reputations (legislators, such as MPs, are also seen to be increasingly influential by corporate communicators). Employees are no longer an afterthought for corporate communicators and are increasingly treated “much more seriously as a sophisticated stakeholder audience” and a trusted and credible source of information about a company.

Once organisations understand how key stakeholders form their opinions of them and their competitors, and how they perform against these criteria, they can then put plans in place to target communications more effectively – as well as identifying how (and if) an organisation needs to ‘course correct’ to deliver against stakeholder expectations. In terms of planning a communications strategy, further insight on how best to engage with MPs can be found in our recent post: Creating relevant and engaging comms with MPs for effective corporate planning.

Ipsos MORI can help you better understand what drives opinions about your organisation among various stakeholder groups, and the steps you need to take to bolster the way you are perceived to perform on those key attributes. We provide tailored advice through bespoke research and/or through our syndicated stakeholder surveys among legislators, journalists, business leaders and investors.

Want to know more about our MPs and Business Journalists syndicated surveys (or our wider bespoke surveys)? Get in touch with Ipsos MORI….

For more information please contact:

Guto Hunkin
Associate Director, Corporate Reputation

Guto.Hunkin@Ipsos.com