Digital Reputation Management 101

“ Identity will be the most valuable commodity for citizens in the future, and it will exist primarily online.” — Eric Schmidt

Reputation is everything.

Many of the opportunities presented to us come based on our reputations.

Yet reputation is an intangible, ambiguous, and complex concept. It involves impressions, emotions, and perceptions encompassing the estimation in which a business, person, or thing is held by a specific group or the public at large.

Businesses grow and succeed through their reputations. A digital presence and online communication strategy are not just part of a company’s reputation, they form the firm’s foundation — the most critical component to its survival and growth.

But compared with traditional brand marketing, digital reputation management is a new frontier where applicable guidance and proven research are in limited supply.

Almost two decades ago, Mark Bunting and Roy Lipski proposed that online perception and opinion, regardless of its accuracy, have as great an effect on a company’s reputation as the company’s actions. These perceptions, quickly formed and shared across myriad traditional and digital platforms, create both reputational opportunities and challenges.

How much is a reputation worth?

Today, we interact with friends, family, and colleagues largely through text messages, email, and social media, where perception and reality are often confused. So both digital and in-person first impressions are critical.

Traditional financial education supplies a comprehensive framework for understanding the valuation of tangible assets, including the value of public and private companies. Portfolio managers and analysts make investment decisions after thorough research into a firm’s fundamentals. However, the subjective valuation of the firm’s intangibles — brand equity, relationship capital, patents, and, of course, reputation, among them — creates a larger challenge.

Burson-Marsteller, a leading global public relations and communications firm, found that 95% of the CEOs surveyed believe that corporate reputation plays an important or very important role in the achievement of business objectives. But, only 19% of these same executives had a formal system for measuring the value of that reputation.

Beyond recognizing that it does affect a firm’s value and long-term growth prospects, we don’t understand reputation all that well. When drawing conclusions on valuation, we often lump brand value and reputation in with other components that are inherently difficult to quantify — under the balance sheet’s goodwill line item.

Reputation is both a repository of shareholder value and a means for growing it.

“Decisions to buy or not buy from a company have increasingly less to do with place, packaging, or promotion and almost everything to do with how much your friends, family, and even strangers provide online assurance that the product or service is worth the cost.” —  Elaine Cheng, chief information officer, CFA Institute

Brands accounted for more than 30% of the S&P 500 stock market value, according to The Economist. That is the consensus among corporate CEOs. Sixty percent of chief executives surveyed by the World Economic Forum and public relations firm Fleishman-Hillard said they believed corporate brand and reputation represented more than 40% of their company’s market capitalization.

Read the full article here.

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