How much is a good reputation worth for your business financially? According to the Reputation Institute, potential customers are 60% influenced by their perceptions of your company, and only 40% by their perceptions of your products or services. So, your business’s reputation capital is built mostly on customers’ perceptions, and they can change rapidly.
Shortages, demand and reputation
So, what are we really talking about here? Toilet paper. We all saw first-hand the bulk buying of toilet paper in stores across Canada just prior to the current COVID-19 measures being put in place. There was no need for this bulk buying as there was plenty of toilet paper available for normal consumption rates . What changed was availability on the shelves, and some store owners and online vendors chose to take advantage of this situation and raise prices, in a practice known as “gouging”.
Gouging and the law
In Ontario, gouging is illegal under “Bill 102, Anti-Price-Gouging Act, 2001”, which states:
“1. (1) In a situation of crisis, no person whose business includes the retail sale of products or services shall, in the area affected by the situation, sell a necessary product or service to another person at a price higher than the price charged immediately before the crisis began.
(2) Subsection (1) does not apply if the price increase corresponds to an increase in the seller’s cost of providing the necessary product or service.”
Gouging and customer relations
Sadly, the Bill hasn’t stopped some trying to cash in on shortages by charging vastly inflated prices. The Retail Council of Canada (RCC) has roundly condemned such practices, with Diane J. Brisebois, President & CEO stating:
“As retailers, we have a direct relationship with our customers. Price gouging on essential products during times of crisis is a violation of that relationship…. We pledge to continue to support Canadian families by ensuring access to reasonably priced goods, when and where they are needed.”
The RCC is not alone in seeing how such practices can affect the public perception of both suppliers and branded goods. The mighty 3M Co has filed a lawsuit against a New Jersey based firm for offering 3M’s N95 respirators at over 600% increase on their list price to officials in virus-stricken New York.
Keeping an eye out for gouging
The Canadian watchdog the Competition Bureau is keeping a careful watch on the issue:
“I would like to assure Canadians that the Competition Bureau remains vigilant against potentially harmful anti-competitive conduct by those who may seek to take advantage of consumers and businesses during these extraordinary circumstances.”
CB Commissioner Matthew Boswell
Ontario Premier Doug Ford has also pledged to act:
“These people are going to be held accountable on social media. And when we get over it — because we’ll get over this — they’ll be held accountable by the people of Ontario … the government will hold them accountable as well.”
Gouging and customer relations
So, how might that impact on your own small business? The answer is that customers may perceive ANY steep increase in pricing on essential or short-supply goods as potential gouging. Transparent and timely communications with customers can stop that in its tracks by explaining why prices have increased, such as the wholesaler raising prices, the extra cost of sourcing items from further afield, or using potentially more expensive goods over previously cheaper-made imports. Such transparency makes it clear to your client or customer the basis behind any increase, alongside reassurances that this is only a temporary move (if indeed it is).
Elephants can remember
Like elephants, customers and clients will remember those who pushed pricing beyond an ethical boundary. Yes, they may have bought the last bottles of hand sanitizer from a store at double the normal price, say, but they won’t return again.
Instead, customers will remember the small local businesses that went out of their way to help other, perhaps with local deliveries for those in isolation. They will remember the larger businesses who protected workers, who switched production to help with shortages of medical supplies, or who kept on staff to ensure they had jobs. They’ll remember the cafe or restaurants who switched to tasty takeaways, and businesses who came up with innovative solutions to help combat COVID-19.
How is reputation capital calculated?
Reputation capital is the value of your company based on its reputation rather that its market value. The Reputation Quotient measures a company’s ability to meet the expectations of their stakeholders in six key areas:
- Emotional appeal
- Products and services
- Vision and leadership
- Workplace environment
- Financial performance
- Social responsibility
Your reputation capital usually equates to an average of 38% of the market capitalisation for your company.
Reputation and sentiment
As an article in business2community.com says:
“Your corporate reputation hinges on the sentiment your consumers feel about your brand.”
This sentiment is particularly important for local companies. How your company is perceived in the local community will be based largely on what your business does within that community.
Company reputation and the bottom line
There’s also sound financial reasons for (ethically) building your company or brand reputation:
“A positive corporate reputation will result in increased revenue and stock prices, decreased churn rate, increased customer lifetime value, and even better job candidates and employees. The bottom line is clear: your corporate reputation defines the value of your company.”
Be there and be fair
In short, when this virus pandemic comes to an end, you’ll want your business to have retained as much of your existing reputation capital as possible. The time to build it is now, even if your business is closed. Keep visible, be helpful, be ethical and be kind. In Woodstock, as across Canada, we’re all in this together.