Report: Reputation commands a price premium

Companies with a good ​reputation​ can command a premium for its products, says UTS

Corporate branding is more important than ever, as companies with a good reputation can command a minimum 9 per cent premium for products, a new study has shown.

The study, The relative impact of corporate reputation on consumer choice: beyond a halo effect, recently released by the University of Technology Sydney (UTS), found consumers are willing to pay more for products that not only have the features they want but also are delivered by businesses with a good reputation.

Associate Professor of Marketing at UTS Business School, Paul Burke, one of the report co-authors, said companies evaluated by consumers as better than competitors in terms of corporate reputation command about a 9 per cent premium for its products, and an even higher premium when there are desirable extra features. 

“The impact of corporate reputation on consumer choices is substantial compared to the competitive advantage offered by varying product features,” Burke said. 

“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."

The research, with co-authors Professor Grahame Dowling and Dr Edward Wei, focused on consumers in the market for televisions. The televisions were made by Sony, Panasonic or Toshiba.

The study found holding a better reputation than direct competitors increases the overall utility of a product, and reduces price sensitivity. Reputation effects partially depending on how much the consumer knows about the company associated with the product they are considering.

Not surprisingly then, companies with poorer reputations are less likely to have their products chosen by consumers, and are also likely to lose ground on several other product feature.

However, the report also found consumers have a limit to how much they are willing to pay for some product features even when the most reputable company is offering the feature. As a result, those with poorer reputations were advised not to compete against competitors with better reputations based on price. Instead, they need to work on corporate branding activities, as well as finding ways in which to offer more attractive products for consumers.

Corporate reputation encompasses a range of dimensions including how people feel about the company, the quality and innovativeness of its products, its workplace environment and workforce, its vision and leadership, financial performance and social and environmental responsibility. 

Conversely, brand damage occurs when companies become embroiled in scandals and crises such as financial corruption, leadership failure or environmental destruction. 

In the UTS study, participants were first asked to give an evaluation of the corporate reputation of each of the TV makers. Separately, the were asked to choose between televisions based on fairly standard features such as warranty, price or size, and in addition by novel features such as backlight control or dynamic range control. 

The research showed consumers were willing to pay extra for a product with important features and a good brand reputation, but less willing to pay a premium for products with novel features regardless of reputation. 

“Corporate reputation is not something that can be readily controlled by marketing managers, but it is definitely something that should command their attention,” Burke said. 

“Companies need to work hard to communicate 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."

Follow CMO on Twitter: @CMOAustralia, take part in the CMO conversation on LinkedIn: CMO ANZ, join us on Facebook: https://www.facebook.com/CMOAustralia, or check us out on Google+:google.com/+CmoAu  

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.
Show Comments

Latest Videos

Launch marketing council Episode 5: Retailer and supplier

In our fifth and final episode, we delve into the relationship between retailer and supplier and how it drives and influences launch marketing strategies and success. To do that, we’re joined by Campbell Davies, group general manager of Associated Retailers Limited, and Kristin Viccars, marketing director A/NZ, Apex Tool Group. Also featured are Five by Five Global managing director, Matt Lawton, and CMO’s Nadia Cameron.

More Videos

The best part: optimizing your site for SEO enables you to generate high traffic, and hence free B2B lead generation. This is done throug...

Sergiu Alexei

The top 6 content challenges facing B2B firms

Read more

Nowadays, when everything is being done online, it is good to know that someone is trying to make an improvement. As a company, you are o...

Marcus

10 lessons Telstra has learnt through its T22 transformation

Read more

Check out tiny twig for comfy and soft organic baby clothes.

Morgan mendoza

Binge and The Iconic launch Inactivewear clothing line

Read more

NetSuite started out as a cloud-based provider of Enterprise Resource Planning software or as NetSuite solution provider, which companies...

talalyousaf

NetSuite to acquire Bronto's digital marketing platform for US$200m

Read more

Thanks for sharing this post, its really good information I get through this blog.CDPO Online Exam Training

Infosectrain01

3 ways Booking.com is improving its B2B marketing game

Read more

Blog Posts

Getting privacy right in a first-party data world

With continued advances in marketing technology, data privacy continues to play catchup in terms of regulation, safety and use. The laws that do exist are open to interpretation and potential misuse and that has led to consumer mistrust and increasing calls for a stronger regulatory framework to protect personal information.

Furqan Wasif

Head of biddable media, Tug

​Beyond greenwashing: Why brands need to get their house in order first

Environmental, Social and (Corporate) Governance is a hot topic for brands right now. But before you start thinking about doing good, Craig Flanders says you best sort out the basics.

Craig Flanders

CEO, Spinach

​The value of collaboration: how to keep it together

Through the ages, from the fields to the factories to the office towers and now to our kitchen tables, collaboration has played a pivotal role in how we live and work. Together. We find partners, live as families, socialise in groups and work as teams. Ultimately, we rely on these collaborative structures to survive and thrive.

Rich Curtis

CEO, FutureBrand A/NZ

Sign in