Corporate Reputations Erode Among Consumers: Survey

Bailouts, bonuses and bad business behavior all combined to erode the overall reputation of corporate America to its worst standing in 10 years, according to a new survey by Harris Interactive.

Technology remains the highest rated industry in the United States, the annual Reputation Quotient survey found, but its reputation declined along with six others, with the automotive industry reporting the greatest decrease ever.

The financial services industry now shares the lowest industry ranking with the tobacco industry, with just 11 percent of the public giving positive ratings to these two industries.  The Pharmaceutical industry was the only industry to register a significant positive change from 2007, according to the Harris Interactive RQ survey.

Despite this free-fall in Corporate America’s image among consumers, Johnson & Johnson , Google , Sony , Coca-Cola , Kraft , and amazon.com all received "excellent" scores.

“While the overall reputation of Corporate America has never been worse in the eyes of the general public, greater understanding of and credit for working diligently to build and maintain a good reputation has never been stronger,” says Robert Fronk, senior vice president of reputation strategy at Harris Interactive.  “The RQ study also validates that both corporate behavior and corporate communication play a major role in how a company is perceived.”

Johnson & Johnson claimed the top spot for the 8th time in the study’s 10 year history by placing in the top 5, in five out of the six reputation dimensions.  Sony had one of the biggest improvements in rank, climbing from 16th place in 2007, to 3rd place in this year’s ranking.  The only company with greater improvement in its actual RQ score was Wal-Mart , whose score increased by almost 5 points.

AIG, in its first appearance on the list, recorded one of the lowest scores in the study’s history, with Enron’s 2005 score being the last at this low level.  The three Detroit automakers recorded the three largest reputation declines this year, with General Motors suffering one of the biggest one year drops in the survey’s history, placing them 58th on the list of 60 companies rated.  This contrasts with Toyota’s number 10 ranking.

Along with the overall plunge in the perceptions of the Financial Services industry as a whole, seven individual financial services firms:  AIG , Washington Mutual , Citigroup , Merrill Lynch , Wachovia , JP Morgan Chase , and American Express , which were not on the list in 2007 joined the list of Most Visible Companies in 2008.  They joined repeat companies Wells Fargo and Bank of America Corporation .  All had scores reflective of companies with very poor reputations.

“Our study indicates just how hard it will be for many financial services firms to regain the trust of both the public at large and their customers,” suggests Harris’ Robert Fronk.  “These firms hold nearly all of the bottom spots on the lists of companies whose products are least likely to be purchased or recommended.  And unfortunately, these companies have extremely high familiarity and recall of corporate communications, but are not seen as being sincere, transparent, accurate, or consistent in their communications, all of which have a very high correlation with positive reputation.”

The Reputation Quotient surveys more than 25,000 American consumers in a two-step process, through online and telephone interviews, to first identify the 60 most visible companies and then to rank these companies based on their reputation in six different categories: Emotional Appeal, Products & Services, Social Responsibility, Vision & Leadership, Workplace Environment, and Financial Performance.

The top 10 companies on this year’s list in order of ranking include:

1. Johnson & Johnson
2. Google
3. Sony Corporation
4. The Coca-Cola Company
5. Kraft Foods
6. amazon.com
7. Microsoft Corporation
8. General Mills
9. 3M Company
10. Toyota Motor Corporation

For a full list of the top 60 companies and other findings visit: www.harrisinteractive.com/RQ

Additional Survey Findings

Demographic sub-group results can be telling for an individual company:

• Johnson & Johnson (1st overall), ranks number 1 among females, people aged 40 and older, people with a high school education or less, and those with a household income of $35K to less than $75K;
• Google (2nd overall), ranks number 1 among males, people ages 18-39, people with a college degree or higher, and those with a household income of less than $35K or more than $75K;
• Apple (14th overall), ranks 2nd among respondents with those with a graduate or higher degree;
• Disney (13th overall), ranks 4th among people ages 40-54 and 5th among people with a household income of less than $35K;
• Whole Foods (18th overall), ranked 2nd among people ages 40-54; and,
  Berkshire Hathaway (11th overall), ranks 5th among males, 5th among those with a college degree, and 3rd among people with a household income over $75K.

The majority of Americans believe that corporations are not adequately evolving to more sustainable business practices and will require regulation to do so:

• Nearly all (98%) believe it is important that corporations do evolve to more sustainable business practices;
• Over two-thirds (68%) believe American corporations are lagging behind companies in other countries;
• Only 16% of Americans believe that they will make these changes on their own; and,
  Most Americans (90%) give some consideration to sustainable business practices when purchasing a company’s products and services. 

“There is a serious struggle right now for American consumers as they weigh “value” in a product or service and “values” in what they want and expect from companies,” says Fronk from Harris Interactive.

Three quarters of the American public believe that the economic crisis has worsened their overall view of the reputation of companies:

• 77% feel that the country’s economic condition will stay the same or get worse in the next 6-12 months;
• amazon.com, Wal-Mart, and Berkshire Hathaway receive the highest positive ratings in regard to the economic crisis effect on perceptions of reputation and likelihood to purchase.

In addition to Wal-Mart and Sony, other big gainers in 2008 included AT&T, Unilever, Royal Dutch Shell, and Nike.  Each of these companies has confronted reputation issues in recent years and it would appear that their efforts to mitigate these issues and rebuild a positive reputation are beginning to bear results.

© 2009 CNBC.com