Do you know that companies spend unthinkable amounts of money to drive public perception, to manage their reputation? Have you wondered why is that the case? Is there really so much competitive risk in business?
Managing reputation is critical to a company’s survival. You don’t have to look much further than your daily experience to see the truth in it. If you order food online, say from Swiggy, and the order doesn’t match your expectations, Swiggy is more than willing to help you in this regard. It refunds you straight away, or offers coupons on your next purchase, apologizing the entire time. You must wonder then, why does Swiggy care so much about my perception of its delivery service. Well, here is why. Swiggy cannot risk losing its reputation in your eyes. Also, it has a neck-to-neck competitor in Zomato which can lure you away.
In this blog, we will explore why it is necessary to manage reputation in business. We will also look into what constitutes a competitive risk in business. You will also be made familiar with strategies that can be used to manage reputation and competitive risk in business.
Importance of Reputation Management:
As we have seen above, reputation is critical to the way a business venture succeeds or fails. Having a scar on its reputation can be fatal to a business. Following are some of the reasons why it is essential to manage good reputation:
Trust and Credibility:
Having a good reputation in the market helps in building trust and maintaining credibility among customers, investors and employees.
Customers are more likely to stick with a brand that has maintained a good reputation, and has not betrayed the expectations of the customer.
Companies that have great reputations can attract the best talent that is available on the market, thus boosting the working potential of the workforce. Also, the greater talent you have, the better your reputation becomes.
There are times when a crisis can shake a company, either because of internal matters or because of some major fluctuation in the market. At such times, companies that have been able to maintain a good reputation are better equipped to deal with it, without losing public support.
Competitive risks can take the shape of the following types:
This is one of the more common types of competitive risk. If you have seen the show Silicon Valley, the company Pied Piper founded by Richard, the protagonist of the show, is constantly at a competitive risk with other companies who manage to imitate Pied Piper’s product, and try to beat them to the market. This can greatly dilute the unique value proposition of a company.
This is also one of the more common ways a company faces competitive risk. There are companies who sell a similar product, though it might be inferior in quality, at discounted prices to lure away the customers of another company. This pricing pressure can take a heavy toll on the customer base, especially if there is a lack of loyalty.
There are times when a competitor is able to innovate on a product you are also providing. This lag in innovation can very rapidly make a company outdated in this ever-evolving global market.
A competitor can also attempt to tarnish a company’s reputation by spreading misinformation about a company or exploiting some compromising information and exploding it into the public consciousness. As we have already looked at the significance of maintaining a good reputation, you can understand that this can become fatal to a company’s business.
Strategies to Manage Reputation and Competitive Risk:
Following are some of the strategies that could be used to manage reputation and avoid competitive risk in business:
Proactive Brand Building:
It is critical to constantly engage with the market with regard to your brand’s values, its distinction with competitors and its promise. Keep on reinforcing them through your actions so as to build a robust brand that can weather competitive risks.
Your company must be investing continuously on innovation or you will always be chasing your competitors, with your company being at risk. Try to establish a culture which values experimentation and is open to new ideas, however absurd they may seem.
Robust Engagement with Stakeholders and Customers:
Make sure that your stakeholders are always at the same page with your company. Always be on good communication terms with them, and remain open to feedback. Leverage the powerful tools of social media and surveys to constantly engage with your customer base and stakeholders in an authentic manner.
Try to instill the values and the vision of your company into your employees. Invest in their development and empower them with a sense of purpose. This would greatly help in building a good reputation of your company as they will then actively try to shape its reputation.
Ethical Business Practices:
Make sure you uphold ethical business practices and never involve yourself with unethical policies just for the sake of profit. Upholding it will attract customers who value integrity and who will probably remain loyal to you through times of crises. It will also prevent reputational damage.
Learn with DT Evolve:
As we have seen in this blog, encouraging innovation and creative thinking within a company culture can help in the management of competitive risk. It also helps in building and maintaining reputation. If you want to improve your creative thinking skills, DT Evolve has a course for you. In this course, you will learn how to use different parts of your brain for problem-solving (practical creativity). Your creative ability is akin to a muscle and it must be exercised in order to maintain its strength. You will also learn how to use mind mapping to come up with more innovative ideas, in meetings or at work, to help you improve your creative processes.
Here’s a link to the course, Creative Thinking: Learn to Innovate.
In this blog, we took a deep dive into the concept of reputation management and competitive risk in business. We talked about the importance of reputation management by highlighting the positives that come out of having a good reputation. These included customer loyalty, talent attraction, crisis resilience and so on. We also looked into the types of competitive risks which can result from pricing pressure, product imitation, innovation gap and reputational risks. Finally we talked about strategies that could be used to manage reputation and competitive risk in business.
Frequently Asked Questions (FAQs)
Managing reputation is crucial because it fosters customer loyalty, builds trust and credibility, attracts talent and makes the business more resilient in times of crisis.
Businesses that continually innovate their products and services, and are able to adapt to the changing market are more robust when dealing with competitive risks. Innovation must therefore be among the top priorities of a business.
Competitive risk refers to threats posed by rival companies, changes in market trends, and new technologies that can harm business ventures. It is essential to manage these risks or else they can be fatal to a company’s long term viability.
Some of the best strategies include continuous innovation, proactive brand building, employee empowerment, ethical business practices and a robust engagement with stakeholders and customers.
Businesses must always be on the lookout for market trends, able to anticipate changes in customer preferences, and keep a keen eye on their competitors in order to identify and assess competitive risks in time.
In order to properly manage the reputation of a brand or company, it is crucial that they have people of integrity, commitment and ethical excellence in leadership positions. Strong leaders set the tone for how the company will face challenges and manage a good reputation.