A responsible corporate image is hard to build and easy to lose, and managers need to treat it as more than a short-term public relations issue.
What do Tylenol, Exxon and Johnson & Johnson have in common? The Tylenol fiasco, the Exxon Valedez spill and Johnson & Johnson’s enduring positive reputation all show that a responsible corporate image is hard to build and easy to lose. These three cases had long-term repercussions for the companies’ bottom lines—demonstrating the need for managers to treat corporate image as more than a short-term public relations issue.
How do companies build socially responsible images in the eyes of consumers? What is the impact of a positive image on the company? Is it worth investing time and money in fostering a socially responsible reputation? These are questions that Andrea Stanaland (Radford University) and colleagues sought to answer through an online questionnaire of 443 survey participants. Stanaland’s study revealed that two factors influence consumers’ opinions of a firm’s social responsibility. In particular:
Commitment to ethics statements creates a responsible reputation. Acting in accordance with ethics statements, as opposed to simply paying lip service, legitimizes a firm in the eyes of consumers. Ethics statements (i.e. values statement, corporate credo or code of ethics) create awareness of a firm’s ethics. They formally communicate and institutionalize firm values, but sticking to these values is what builds a responsible reputation.
Consumers expect financially successful companies to improve the welfare of society. Firms do this by engaging in more socially responsible activities. Consumers believe that firms with better financial performance are better equipped to act in a socially responsible manner.
The researchers discovered that the impact on consumers of fostering a responsible image is twofold: it decreases consumer perception of purchase risk and it increases consumer loyalty. A socially conscious image enhances a firm’s reputation and fosters consumer trust, both of which make consumers view the firm’s product as higher quality. And a positive reputation increases consumer trust, which in turn breeds loyalty. The power of such customer loyalty should not be underestimated: it leads to positive word of mouth and repeat purchasing. Customer loyalty is one hallmark of a successful company.
These findings demonstrate that building a responsible corporate image must be part of the strategic thrust of the firm, as it can generate several beneficial outcomes: namely, decreased perception of risk and increased customer loyalty, both of which tangibly benefit the bottom line.
Stanaland’s research focused on the impact of a responsible reputation on consumer perceptions and behaviour, but future research should examine a broader range of corporate stakeholders. Furthermore, this paper looked at the power of ethics statements of financial performance on image building; future researchers may want to study other factors such as fairness, transparency or honesty/integrity.
Stanaland, Andrea and Murphy, Patrick (2011). Consumer Perceptions of the Antecedents and Consequences of Corporate Social Responsibility. Journal of Business Ethics, 102, 47-55.