Mind the cap - why financial performance does not guarantee reputation strength
June 30, 2014
It is a cliché of modern business that corporate reputation is important. But does it correlate to financial performance, how do we measure it, and does it provide a real competitive advantage?
To answer these questions, we carried out some global research on public perceptions of the Global Top 100 Companies by Market Capitalisation as defined by PwC Capital Markets.
This is mainly because peoples’ decisions are increasingly informed by their view of the company behind the products and services they buy. Not to mention where they choose to work.
So we set out to test a simple hypothesis: that financial performance alone does not guarantee corporate brand strength; and that organizations with a specific balance of positive perceptions will have a future competitive advantage.
In particular, we wanted to see how far the Top 100 balance perceptions between what they stand for – their purpose – and how far they deliver on it – the resulting experience. The stronger that balance of perceptions, the more likely an organization will be a ‘future brand’ – and more future proof as a result.
Firstly, the results show that whilst the top 100 companies are undoubtedly to be admired for their financial strength, only 22 of them qualify as ‘future brands’ in the opinion of an informed public.
Why does this matter?
Because when people rate a company highly in both areas, they are more likely to want to buy from, pay more and work for that company. This gives them an advantage now and in the future that is not dependent on their financial strength, but could be a driver of it tomorrow.
Secondly, we found that the Top 100 ranking changes when you filter it by public perception – in some cases almost reversing the order – and that this value-perception gap is different by sector. Indicating that there might be a gap that companies can close, to either increase their capitalization against perception strength, or vice versa.
Thirdly, and paradoxically, it seems that brand awareness is not enough to drive strong perceptions. For example, several household-name organizations that share their corporate name with their most famous product are outperformed in strength of perception by companies with significantly lower awareness.
So we think it is important to broaden our understanding of value to include how far a company is seen to address broader emotional and societal needs and wants – from fostering trust to driving innovation and being indispensable to our lives – and re-order the top 100 by those measures as an alternative indicator or ‘Index’ of future success. This is not least because they are the drivers of choice influencing more conventional measures of commercial performance – from sales to price premium and employer of choice. But also because when we look at global opinion around which of the top 100 companies are most likely to be ‘moving forward’ in three years, half of them are not even in the current top 20 by market capitalization.
The question is, does your organisation have a gap, and what levers can you pull to close it for future success?
Click here to download the 2014 Top 100 Companies by Market Capitalization
Click here to download the FutureBrand Index