There’s been a lot of discussion about reputation and reputation management in social media. It’s one of our most effective keywords in SEO/SEM and it’s a fairly recent phenomenon. However I think there is a far more important metric related to reputation, something I’m dubbing ‘Reputation Equity’. Reputation equity is the value of your reputation in the marketplace.
For those struggling to define the ROI for social media monitoring and marketing, the concept of reputation equity might be useful in showing more closely how managing your reputation can directly produce measurable affects on your company’s value. If we look at market caps, for example, that measurement of the total current value of all company stock at today’s price, we see some anomalies. Dell’s market cap today is about $33 billion while Apple’s is $110 billion. Dell has a lot more market share but the market sees Apple as nearly four times as large! A lot of this is profitability but a good share is reputation.
So aren’t we talking about brands here? Yes and no. A brand may be highly recognized but it can also become generic as it gains widespread acceptance. I’d argue that Dell, while just recognizable as Apple, is much more generic. Apple has a powerful reputation driven by an amazingly loyal group of owners and users, a group that is very active whether they are criticizing or praising the company. Dell, on the other hand, has loyal buyers but they’re otherwise not emotionally engaged with the company and it’s products. How many Dell- specific blogs are out there vs. the hundreds or thousands of Apple-focused sites?
Dell is pursuing an aggressive social media strategy but they’re hampered by this reputational issue: Boring and corporate. Apple does little or no engagement because they don’t have to: Their reputation for innovative design and usability has built an eco-system that does it for them. Most companies don’t have that option, however Seth Godin would tell you that cultivating a fanatical following might be the most powerful marketing tool available. Reputation Management is a big piece of that.
If the goal of management in most companies is increasing value to shareholders, then enhancing reputation should be an easily justifiable investment. A great reputation can help a company get through issues like those reported with recent iPhones. A boring or negative reputation can make even a minor glitch be magnified and drive value down. Social media, in both cases, is becoming a driving force in reputation management and for building reputation equity.