Many executives talk about corporate reputation and brand as if they are one and the same. They are not, and confusing the two can lead to costly mistakes.
Many executives speak about corporate reputation and brand as if they are one and the same. They are not, and confusing the two can be costly — a lesson which companies like Nike Inc. and Wal-Mart Stores Inc. have learned the hard way. Focusing on reputation at the expense of brand can lead to product offerings that languish in the market. However, concentrating on brand and neglecting reputation can be equally dangerous, resulting in a lower stock price, difficulties in attracting top talent and even product boycotts.
Brand is a “customercentric” concept that focuses on what a product, service or company has promised to its customers and what that commitment means to them. Reputation is a “companycentric” concept that focuses on the credibility and respect that an organization has among a broad set of constituencies, including employees, investors, regulators, journalists and local communities — as well as customers. In other words, brand is about relevancy and differentiation (with respect to the customer), and reputation is about legitimacy of the organization (with respect to a wide range of stakeholder groups, including but not limited to customers).
For most companies, even an outstanding reputation almost never comprises any unique characteristics that an organization can own and be known for. In short, reputation is a necessary but not sufficient condition for excellence because companies also need strong brands, which are characterized by high customer loyalty, pricing power and the ability to drive growth. Ultimately what drives customer preference and revenue is the ability of a company to create relevant products, services and brands and communicate and deliver them in a way that customers want to buy. Thus, executives need to do more than just keep their company’s reputation on track. They need to differentiate their offerings in ways that win the hearts, minds and wallets of customers, and what helps make a company and its products special and preferred is its brand, not its reputation.