Despite an improving economy and recent record highs in the stock market, nearly half i.e. 44% of financial services companies lost 5% or more business in the past 12 months due to ongoing reputation and customer satisfaction issues. Losses based on total sales of these companies are estimated at hundreds of millions of dollars. There was an average loss of 9% of business among all companies surveyed.
This is a major finding of the 2013 Makovsky Wall Street Reputation Study, designed to determine the state of reputation of the financial industry and identify best practices and emerging trends. This second annual study was conducted online by Echo Research in May 2013.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
"Almost five years later, the financial crisis has transformed into a reputation crisis for financial services firms and there is still a long road back to recovery," said Scott Tangney, Executive Vice President, Makovsky. "Sixty (60%) percent of marketing and communications executives in charge of restoring and building brands at financial service companies told us it could take up to another five years to restore their reputation to 2007 (pre-financial crisis) levels. Only about one quarter of financial services firms told us that their corporate reputation has already been completely restored to pre-financial crisis levels."
The 2013 Makovsky Study revealed a new set of strategies emerging at these companies to stem loss and rebuild reputation. "Financial services companies now see the number one reputation challenge for the next year to be differentiating themselves from competitors saddled with significant negative perception issues," said Tangney. "Marketing and communications executives are struggling with internal issues too, as they told us the biggest obstacle to a stronger reputation is their company’s lack of commitment to devoting the time and resources necessary to rebuilding it," Tangney pointed out.
The study also revealed the effectiveness of programs in place over the past year to change internal and external perceptions at financial services companies:
- 56% of financial services marketing and communications executives believe their company’s communications and marketing programs have only been somewhat effective in changing external and internal perceptions of their company.
- Only 18% of companies report programs to be very effective in improving perception.
- Top negative factors ruining reputation: 61% said negative public perception of the financial services industry and 52% said their company’s management of a crisis, compared to last year’s: liquidity and capital challenges and subprime mortgages.
"In one year we have seen a dramatic shift in what companies say is weighing down on their reputation and the ability to restore it. Today, public perception and management actions are key, whereas a year ago it was operational issues and market challenges impacting the standing of these companies," said Tangney.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataReputation: Most Important Factors
When asked what were the most important factors affecting corporate reputation for their company, the top responses were:
- Customer satisfaction (82% – very important);
- Financial performance and/or shareholder value (71%); and
- Strong brand (69%).
This represents a shift from last year’s study, where the top factors were strong brand, corporate governance and innovation, respectively.
Activities to Rebuild Reputation
Financial services marketing and communications executives report that investor relations and corporate advertising (43% and 42%, respectively) are the top activities they have implemented to address negative perceptions with external audiences, such as customers, investors and suppliers, and they were also rated the most effective, 93% and 92% respectively. Almost just as effective, but not widely used at financial services firms are CEO Programs and initiatives to work with regulators.
Most executives say new strategies to communicate directly with clients or customers are expected to have a positive impact on reputation. Use of social media is one way financial services professionals communicate with external audiences and the top benefits reported were increased awareness (18%) and more positive media coverage (17%). Surprisingly, almost as many (16%) reported that social media had no benefits.
"There is some evidence of the effectiveness of social media at financial services firms, especially as a channel to carry company messages and intellectual capital to external and internal audiences. Our study last year found that executives believe there was as much downside as there was upside when it comes to social media. That attitude remains as no benefit received a ranking higher than 18%," said Tangney.
What is Working in Employee Communications?
Most financial services companies (55%) have implemented more employee communication activities over the past 12 months to address negative perceptions and concerns of employees about their company. Employee recognition awards and manager communications training (39% and 34%, respectively) were also the other top internal initiatives implemented in the last year. When asked which were the most effective programs, besides increased employee communications (83%), other less widely used initiatives including special programs with influential employees (93%) and social media (81%) were cited.
