Friday, 1 May 2015

A history of corporate reputation as seen by the system

It’s possible to approach the concept of corporate reputation from two angles: the first as a consumer, the second as a producer. Rarely can an individual occupy both angles simultaneously.

A consumer isn’t allowed to enunciate exactly what they want, largely because, as Apple founder Steve Jobs once said, it’s not the job of the consumer to know what they want. The consumer is told what they should want to buy from corporations. And, more importantly, the consumer is being told how to want. 

Artificial demand was created in the consumer when reputation was discovered as a necessary component to sell essentially the same product to greater numbers of people. Well-known packages of meaning, known as signs, are now used to sell us those products. Businesses must attempt to formalise strategies to take control of the way products are bought –otherwise the whims of the market will too strongly influence consumer decisions. The problem is how to achieve this. 

Crucially, no business is an island, and the system for creating reputation in the 21st century benefits from a concerted effort over that last 50 years to construct an average ideal consumer who wants to buy from a business with good reputation. According to Reputation Institute founder Dr Charles Fombrun, a good reputation enhances profitability because it attracts customers to products, investors to securities and employees to its jobs. A good reputation is told to the consumer. They must be led to the conclusion that this product, not that product, represents something outside of its immediate utility.

So who or what is doing all this telling? Originally, it was the people with the megaphones – the producers. The notion of “customer” implies a conversation is occurring. It implies that an individual could decide not to buy a product to fulfill their needs and urges. But that’s not the reality. From a production viewpoint, a customer implies agency and the ability to choose but a “consumer” implies the removal of individual agency. Customers don’t exist anymore, only consumers. 

Commerce and doing business used to be relatively simple. If a person ran out of bread, they could find a shop that sold more bread. Reaching into their pockets, they could grasp just enough currency to transfer the bread into the bread-desiring person’s possession and walk away. In other words, need could be ameliorated by financial transactions. 

The reputation of a producer mattered to the consumer only to the extent that the product or service was appropriately utilitarian, sufficiently robust and affordable. As companies began leveraging different cultural signs to better portray their “good” reputation, it encouraged a new phenomenon. Increasing social pressures on consumers changed the emphasis from “can this product do the job affordably”, to “what does this product say about me?” 

Companies that noticed this trend managed to keep up by offering consumers products to satisfy individualistic needs and reinforce the consumer’s chosen personal identities (for example, environmental, techy, frugal, girly etc). If people were going to be told how to want, businesses needed to encourage individuals to choose an identity. 

Rather than attempt a futile effort to conform to “the masses,” individuals were encouraged in the US after World War II, and later in other Western countries, to attempt to discover this “true” identity. But since few people knew how to create a truly unique identity, most people choose from society’s long list of pre-packaged identities.

Businesses understood that, if a person were to conform to society’s identity, it would make market competition extremely difficult. The concept of reputation was transformed to encourage a growing individualisation in society. Instead of pushing against this tide, corporations decided to turn around and swim with it. The more individualised the consumer, the easier it is to sell. 

The key was in shaping a corporation’s product or service into whatever form was necessary to reinforce a consumer’s chosen identity. If the consumer believed they cared about the environment, a product would be created that was “eco-friendly.” If they cared about health, a company would create a product with “healthy” ingredients. Caring about human rights could encourage a company to remove palm oil from chocolate.

How does a company know the consumer is the type of person who shops at Foodstuffs? Because the consumer is standing in the shop and not standing in a Progressive Enterprises shop. Foodstuffs spends millions of dollars to construct a reputational identity to attract the consumer to its supermarkets. How do you know if you’re one of these consumers? Well, if you’re seeing the corporate’s reputation efforts, then it’s for you.

Essentially, corporations figured out a way to sell the consumer’s chosen identity back to them. Whatever the individual wanted, they got – for a price. What the individual thought they wanted was what they were told to want, and how to want, by the corporations. Consumers are sold back the same identity corporations encouraged the consumer to construct in the first place. The feedback loop for greater consumption was thus complete.

This systemic construction worked because the singular goal of corporations is to sell more products to greater numbers of people. But corporations understood the need to mask this mercantilist goal by convincing the consumer that their purchase represented the values of “good” or “trustworthy” or “fair.” Prioritising reputation as a way to grasp market share became essential from this process.

If products met the identity needs of a consumer, then by extension the corporation could be considered reputable. The downside is that, if the chosen identities of enough consumers aren’t being reinforced by the signals of a product, the corporation will lose market share and collapse. Maintenance of reputation became the top priority.

After decades of consumers being told how to want, corporations discovered that consumers preferred to pretend they were buying symbols that displayed to other people their chosen identities even though they were only buying a product. The idea that a product “represents who I am” now drives the purchasing decisions of the average consumer. The base utility of a product was trumped by the commercialisation of ethics.

This has proven to be a remarkably effective strategy: convincing people they were unique, yet part of a crowd; giving people products but selling people ethics. It is one of the most efficient methods ever created to sell goods to people. To understand why these little packages of meaning have been so effective for selling and creating reputation requires knowing how semiotics operates in human culture.

The powers of semiotics
In essence, semiotics is the study of signs. 

A sign is something which can be interpreted by humans as having a meaning connected with something other than itself. So, in the context of corporate reputation, a company with a “good” reputation in China, for instance, would generally associate with an image of a dragon. In China, a dragon is widely understood to be a sign of power and a good repute. 

In New Zealand, a common signal of a good reputation is to associate with the All Blacks or clean and green images. Whatever meaning or cultural capital these famous people possess is expected to represent onto the brand and also the company by simple association. Swiss linguist Ferdinand de Saussure pioneered the analytical study of structuralism and semiotics. Structuralism is the study of human language, culture and society as structures. It claims the elemental components of a structure are related to each other. 

In structural linguistics, it’s the interaction of those elements which produces meaning. For Mr de Saussure, this happens in two ways. First, meaning is produced on the creation of signs as two-sided entities, similar to a leaf of paper that cannot be separated. Second, meaning is produced by the interaction of these two sides. Essentially, a sign has two aspects, one sensible and the other intelligible: the signifier and the signified. 

A signifier, for Mr de Saussure, is a sensory perception (a spoken word is something we can hear; a written word is something we can see). And the signified is a concept or meaning associated with the sensory perception, a mental concept. A sign, to be a sign, needs both aspects. It needs something we sense and something we think. Semiotics diverges from linguistics by generalising the classification of a sign to include all the ways humans perceive the world. Practically, semiotics is the procedure which forms the meaning drawn from human comprehension of the world.

Mr de Saussure broke with previous approaches to linguistics. Those approaches had tracked the evolution of sounds and words across time. He instead focused on how language worked, not on how it developed. Language can be viewed as if in a single moment. It can be seen as a structure or system, a set of elements situated in relation to each other. 

It is important to note that, according to Mr de Saussure, the final choice of sign is wholly arbitrary. In other words, the sign has no necessary connection to the meaning, so for the Chinese to choose a dragon as representing good reputation is simply a choice. A word is only a signifier. It must be combined in the brain with the thing itself, to form a meaning-imbued "sign". Thoughts do need language but, even if we can imagine words “inside our head,” we are always conjuring their signifiers. 

This reflects the fundamentals of Western thinking about language. Plato introduced the idea in his Cratylus, the Stoics formalised the concept, and it has since passed into modern linguistics via early Christian thinkers. St Augustine described a sign as something which, in addition to the substance absorbed by the senses, calls to mind of itself some other thing. Mr de Saussure emphasises that signifier and signified are inextricably connected. He insists that each requires the other – they cannot exist apart. 

If Mr de Saussure is correct, we can’t be lured into the notion that concepts or meanings exist independently of signifiers, even if that is what a company dearly wishes for consumers to attempt when comprehending corporate reputation.

How reputation became imperative
The view from how the consumer comprehends a good corporate reputation and how the concept became an imperative is a useful place to start. But it’s not the only explanation. 

If Mr Jobs were correct – and the entire economic system pivots on the accuracy of his statement – then a corporation’s top priority of attaining a good reputation isn’t an accident. As described above, this market demand for a better corporate reputation didn’t initially come from the consumer.

No single company, such as Coca Cola or IBM, invented the concept of corporate reputation as a competitive tool. The entire business system operates this way, like an anthill. Considering the way the market works and the nature of competition, after a few companies decided to emphasise reputation and attracted greater market share, the rest followed. Whether the decisions were unconscious or conscious is largely unimportant; the competitive demand was too great to refuse to join.

Telling the consumer about a company’s good reputation sent the early spoils to established brands. But as thousands of new companies emerged over the decades, the concept of reputation was chosen as a market differentiation. The difficulty was that none of the newer brands actually had reputation in the minds of consumers. And the companies attain reputation, without existing for decades. There needed to be another way to convince consumers to buy their products.

Two problems emerged in the new competitive environment. The first was this lack of legitimacy and public recognition. To deal with this, advertising and marketing was created. Today, establishing public legitimacy and developing a good reputation is available for any company with a budget. They Just pick up the phone and dial a public relations or marketing agency. 

The second problem was in manufacturing a method to convince consumers that choosing a company with a good reputation is more important than the utility of the product. Businesses developed new ways to show the consumer how they should desire. But having a well-known product is a fragile position. Basic human psychology and the academic study of semiotics needed to be used to create ideas of reputation where it didn’t exist before.

Concepts such as “trust,” “fairness,” “success” and “responsibility” and others were chosen by corporations to be applied to a new business or product. Both the emergence of a consumer culture, and the artificially magnified importance of a good reputation boosted business to new heights. 

This arms race for better reputation has created a consumer system in which words, concepts and ethics bolster the selling of goods or services. It has also created a system in which consumers are told which of these words, concepts and ethics they should care about. The advice comes not from philosophers or through quiet contemplation but told from corporations.

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