Corporate reputation vs. extra product features

Shoppers are willing to pay extra for goods that not only have their desired features but also come from a company with a good corporate reputation. A new study put a price on a good corporate reputation. It explored the trade-off between a good reputation and additional product features.

The researchers, from the University of Technology Sydney (UTS), wrote about their study in the Journal of Marketing Management (citation below). The authors were Paul F. Burke, Edward Wei, and Grahame Dowling.

Their study revealed that consumers are willing to pay about 9% more for a good corporate reputation. In other words, when consumers perceive a company’s reputation as better than its competitors’ reputations. When the product of a company with a good corporate reputation has desirable extra features, consumers’ willingness to pay is even high.

Willingness to pay (WTP) is the most that a consumer will pay for a product.

Impact of corporate reputation on consumer choices

Co-author, Paul Burke, Associate Professor of Marketing, said:

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

“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.”

TV makers with a good reputation

The researchers focused on people who wanted to buy a new television. The TV makers in the study were Toshiba, Panasonic, and Sony.

Corporate reputation encompasses the following dimensions:

• How consumers feel about the company.
• The company’s social and environmental responsibility.
• The business’ financial performance.
• What its like to work in the company. In other words, its workplace environment.
• The innovativeness and quality of its products.
• Its leadership and vision.
• The company’s workforce.

Brand damage occurs, on the other hand, when businesses become embroiled in scandals and crises. Leadership failure, environmental destruction, and financial corruption, for example, damage brands.

In this study, the researchers asked participants to give an evaluation of the corporate reputation of each TV maker.

They then asked the participants separately to choose between TVs based on fairly standard features, and in addition by new features such as dynamic range control and backlight control. Size, price, and warranty, for example, are standard features.

Features with and without corporate reputation

The authors found that consumers were willing to pay more for a product with important features plus a good brand reputation. However, this was not the case for products with new features irrespective of reputation.

Consumers would pay more, for example, for a larger screen size. They were willing to pay $121 more for a 55″ screen over a 50″ inch one. They were willing to pay an extra 22% (to $147) “for a company that was one standard deviation higher on the corporate reputation measure.”

Prof. Burke said:

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

“Companies need to work hard to communicate that 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.”

Citation

“The relative impact of corporate reputation on consumer choice: beyond a halo effect,” Edward Wei, Paul F. Burke ORCID Icon, and Grahame Dowling. Journal of Marketing Management, 26 Nov 2018, Pages 1227-1257. DOI: https://doi.org/10.1080/0267257X.2018.1546765.