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 Reputation Council Report 2018: Full Report

Welcome to the latest briefing from the Ipsos Reputation Council.

This – our thirteenth sitting – has been the biggest and most international yet, involving 154 senior communicators from 20 countries.

As Paul Polman, CEO of Unilever, once said: “reputation has a habit of arriving on foot and departing on horseback”. In the past year, a welter of high-profile reputation scandals affecting businesses, their leaders and even whole industry sectors has, once again, focused our minds on the risks and rewards of this powerful but potentially volatile asset.

Some of these scandals have posed a genuine threat to companies’ continued survival or licence to operate. Others have fizzled out. In this edition, we examine how Reputation Council members distinguish between issues which might blow up into a genuine reputation crisis, and others that are just day-to-day turbulence. What indicators or early warning systems can communicators draw on, to help them build resilience?

The technology sector has been wrestling with some unprecedented reputation issues recently. Concerns around privacy, data leaks, advertising practices, AI and automation have come together to create the phenomenon of ‘techlash’. We talk to Council members about the implications for their own businesses and the lessons that communicators can learn from the way in which the technology sector is responding to techlash.

We’re also beginning to see greater scrutiny of the role that CEOs should play in external communications, against a backdrop of issues such as pay ratio reporting, gender inequality, shrinking CEO tenures and the ‘celebrity leader’. In this edition, we explore Council members’ playbook for CEO-led communications, and look at how the CCO can ensure that these communications build, rather than destroy, reputation value.

The opportunities and challenges that come with communicating in a global context is a theme we’ve examined in past editions. In this sitting, we ask Council members how they strike the right balance between global and local messaging and narratives, and how they keep a finger on the pulse of their reputation (or reputations) around the world.

Lastly, we’ve introduced some new, ‘quickfire’ sections, in which we analyse Council members’ views on a number of contentious, topical talking points, such as the death of CSR, the distraction posed by social media, the need to pick a side in a polarising society, and whether consumers will overlook poor corporate behaviour if the price is right

I hope you enjoy this edition of the Reputation Council report. Please do get in touch if you’d like to find out more about any of the issues covered or discuss how they might affect your own business.

Milorad Ajder
Global Service Line Leader
Corporate Reputation
milorad.ajder@ipsos.com

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Global Perspectives on Sector Reputations

Which industries are facing the greatest reputation challenges at the moment?

NORTH AMERICA

Media: 44%

Tech: 44%

Pharma: 31%

Despite lingering reputational issues still plaguing the financial services sector, the recent assault on media and tech means that these two industries are seen to be facing the greatest reputational challenges in North America. Each of these industries is named by 44% of Council members.

Beyond these two industries, pharmaceuticals now holds the third position in terms of reputational challenges at 31%. Cost and value continue to drive the conversation, and with the US government putting more of a spotlight on drug costs, these reputational challenges are likely to continue.

"[Media has] got a constant drumbeat of ‘fake news’, how do you overcome that?"
"These are self-inflicted wounds [in the tech industry] – companies are not thinking through the implications of their actions on their customers."
LATIN AMERICA

Construction: 50%

Energy: 41%

Mining: 34%

In Latin America, construction rises to the top as the industry facing the greatest reputational challenges this year (50%). A number of corruption charges have embroiled not only specific companies throughout the region but also politicians and civil servants.

Energy (41%) and mining (34%) round out the top three most challenged industries, predominantly due to environmental concerns and a perception that they bring limited benefits to the local markets.

"There is a public perception that mining pollutes, does not produce profits for the country, and is a group of companies that do not add local value but add value to those who extract the material and take it away."
EUROPE

Finance: 44%

Energy: 43%

Finance remains one of the industries facing the greatest reputational challenge in Europe (mentioned by 44% of Council members). In the words of one Council member, “this crisis has not been solved yet, given that the image reconstruction process appears to be very slow.”

Additional challenges for the financial services sector include cyber security concerns and emerging FinTech players challenging the traditional financial companies.

Energy also continues to face reputational challenges, cited by 43% of Council members in Europe. Issues continue to focus on environmental concerns, climate change, sustainability and consumer costs.

"When energy companies don’t immediately pass on price savings from a barrel of oil to a consumer or to a client, then the negative repercussions are there immediately."
ASIA PACIFIC

Finance: 88%

Energy: 71%

Media: 71%

Consistent with last year, the financial services industry continues to suffer reputational challenges in APAC, though mentions are higher this year at 88% (up from 73% in the last wave). Council members continue to cite the lingering effects of the financial crisis.

The energy sector is also mentioned more frequently than last year (71%), and while affordability and sustainability are still key reasons, government policy is now referenced far more frequently by Council members.

This year, media is also mentioned by 65% of Council members in APAC, with many attributing this to a changing media landscape as well as the resounding cry of ‘fake news’.

"The energy policy is a mess. Can’t separate from political environment."
"The Trump phenomenon and the constant hammering of ‘fake news’."

In full: how Reputation Council members around the world perceived each sector's reputation

Methodology: 154 interviews conducted with Reputation Council members between 25th June and 12th November 2018. Base: All Reputation Council members – Global (145), North America (16), Europe (80), Latin America (32), APAC (17).

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