Reputation Gurus

With summer on the way, pretty much any day is a good day for frozen yogurt.  Today, fro-yo is making a big comeback as a new generation of companies reinvent the product for the 21^st Century by touting the benefits of probiotics and natural ingredients under intriguing brand names like Pinkberry, Red Mango and Starfruit. 

But as Pinkberry learned recently, one has to be careful about what one claims. As reported in the New York Times, a class-action lawsuit charged Pinkberry with deceptive advertising that inproperly claimed it was “all natural” and mis-classified the product as “frozen-yogurt.” Clearly, these claims were meant to distinguish the company from competitors. 

Pinkberry recently settled the case for $750,000 that will go to Los Angeles hunger and children’s charities and the promise that ingredients will be listed.  While people like the taste, the “all natural” claim suggests the product is better for you and has fewer calories.

It does make one wonder, though, if the stain of scandal will prompt consumers to second guess their purchase of premium products in a slowing economy. Will there be a meltdown in the frozen yogurt market? It may take time to see if this year’s fro-yo craze will stay hot after the weather gets cool. And if the new generation of yogurt chains have learned how to market frozen yogurt that can stand the test of time…and competition.

A recent New York Times/CBS News poll reports that 81 percent of Americans believe “things have pretty seriously gotten off on the wrong track” in the U.S. Hardly a day passes without terrible news about an individual company or whole industry. Bankruptcies. Bailouts. Buyouts. Observers might call this an economic crisis.

Though unreported, a common thread in the downturn has been that many American companies have compromised their reputations. As the graphic here shows, a corporate brand or reputation is the product of customer interactions on eight factors – ranging from financial performance to product quality.

This means companies need to pay attention to how they are perceived overall. Unfortunately, some executives spent the last few years defining their companies’ reputations on the strength of financial performance alone.

When a brand is narrowly defined, risk increases because stakeholders have fewer factors on which to judge the brand. Failure to deliver on a brand’s more focused promise means that stakeholders lose faith or trust in the brand. Companies that defined themselves primarily on the basis of financial performance disappointed when they failed to meet financial expectations.

The tendency during challenging economic times is to trim spending on all “non-crucial” activities. But, companies must be careful in assessing what is really crucial. I’d argue that the corporate reputation or brand is at least as important – and valuable – as a few quarters’ performance.