Tuesday, June 29, 2010

Reputation, reputation, reputation

cadbury There’s been a lot of talk about Cadbury’s slide down the rankings of NZ’s most-trusted brands, from being judged the most trusted company in the country lat year down to a meagre 36th out of 133rd this year (if those rankings themselves can be trusted, being based on a survey of only 500 people).

For its part, Cadbury has resolved to earn back the public trust it has lost in the past year.

But you might be wondering, why on earth would companies care what people say about them?  Especially when so many of the left’s luminaries insist that companies, especially multinational companies in headlong pursuit of profits, are essentially an irresponsible law unto themselves?

The answer is as simple as the nose on your face, really.  It’s because a seller’s reputation is the key to their long-term profits.

If companies have their own long-term interests at heart then, as all good companies should, then maintaining their reputation with their customers is essential. This is why good companies spend so much time and energy protecting their brand, and lesser companies do not. It’s because in the final analysis it’s not multinational corporations who decide the long-term direction of production, it’s consumers.

_Quote Neither the entrepreneurs nor the farmers nor the capitalists determine what has to be produced [explains Ludwig Von Mises]. The consumers do that. If a businessman does not strictly obey the orders of the public as they are conveyed to him by the structure of market prices, he suffers losses, he goes bankrupt, and is thus removed from his eminent position at the helm. Other men who did better in satisfying the demand of the consumers replace him.
    “The consumers patronize those shops in which they can buy what they want at the cheapest price. Their buying and their abstention from buying decides who should own and run the plants and the farms. They make poor people rich and rich people poor. They determine precisely what should be produced, in what quality, and in what quantities. They are merciless bosses, full of whims and fancies, changeable and unpredictable. For them nothing counts other than their own satisfaction. They do not care a whit for past merit and vested interests. If something is offered to them that they like better or that is cheaper, they desert their old purveyors. In their capacity as buyers and consumers they are hard-hearted and callous, without consideration for other people.”

The consumer is king, and she is a hard task-master—and it is the very profit system that those leftist luminaries denounce that is the key to ensuring a company’s responsibility. Because if long-term profits are important to a company, then keeping their customers happy must be paramount.

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