Reputation transfer refers to the phenomenon where the reputation, credibility, or goodwill associated with one entity (such as a person, brand, or organization) is extended to or influences another related entity. This transfer can occur between individuals, businesses, or products and can be either positive or negative.
What is reputation transfer?
Through the natural course of corporate development, most businesses arrive at a point when they want to expand. When a company carefully cultivates its reputation, they have a powerful tool to support these efforts. Be it expansion in the marketplace or the development of new products or brands, this is known as reputational transfer. It's the concept that the positive actions of the past will transfer over to a company's new endeavors. Based on a past track record, the public and consumers will often conclude that the same level of quality and professionalism will continue in the future.
Using its existing positive reputation, a business could decide to "transfer" that good reputation to another endeavor, partner, or organization.
For example, the company could develop a new product line they believe current and new customers would purchase. They can also use their reputation to support expansion into wider marketplaces, such as a new domestic brick-and-mortar operation in a neighboring region or even a move into the global marketplace through online sales.
Expanding into a new brand or product
One of the most common transfers of reputation is when a company decides to offer new products or brands. Because of their past success and the build-up of a positive reputation with their customers, the strategy is laid out in a way to create interest for current stakeholders to purchase new products while also opening the business up to new customers.
Quality must transfer as well
However, companies must ensure that the same level of quality carries over to new offerings or reputational transfer can easily backfire. Companies must put time and effort into ensuring any new product will carry the same level of quality while also reminding customers about successes from the past. You will often see products that mention "from the makers of," which is a useful tool to transfer their positive reputation to new brands.
When transfers fail
However, new product launches don't all go well. Sometimes when they fail, they can be seen as cash grabs or the business just trying to capitalize on the goodwill of the past. A good example is how vehicle companies will come out with "lifestyle brands," to expand their bottom line and often to monetize what should simply be publicity items. Some of these do succeed, but for every Porsche driver that wants a silk jacket emblazoned with the logo of their favorite sports car is a Harley Davidson perfume that failed to sell.
For every Porsche driver that wants a silk jacket emblazoned with the logo of their favorite sports car is a Harley Davidson perfume that failed to sell.
Major beverage companies use reputation transfer often. Companies such as Coca-Cola and Pepsi often spin off new drinks and flavors, using the reputation transfer of their customers' love for their offerings. However, even in the world of high-end product testing and focus groups, it doesn't always work, as in the case of Crystal Pepsi.
The Crystal Pepsi example
Launched in 1992, the soda was meant to ride the trendy wave of clear drinks of the day. Pepsi already had a massive market share and was one of the best-known beverage brands in the world, with a sky-high positive reputation. However, this didn't translate to the new drink and the product was seen as a monumental marketing failure, only lasting for about a year. Even with an ad campaign featuring Van Halen, one of the biggest rock bands of the time, pitching the drink, it was doomed to failure. The transfer of reputation just didn't take, and it became a public joke for a time.
Even with massive corporations that can absorb the cost, such as Pepsi, failures do take a toll on the bottom line. Their reputation as tastemakers is enough for customers to give the new beverage a try, but even then, it's not always enough to make it work.
Using technology and quality for reputational transfer
Another way companies can successfully transfer reputations has been masterfully demonstrated by Dyson. While known mostly as a vacuum cleaner company, the Dyson brand has a massive positive reputation and has positioned itself as a leader in developing technology. So when they expand that reputation into products such as hair dryers, this is seen as a transfer of the high-quality brand and technology. Customers know that they are going to encounter quality products and engineering.
Apple is another prime example of technologically transferring reputation. Known for its quality products, development, and integration techniques, even those who don't use them admit the company has an excellent reputation. When Apple rolls out new offerings, it is seen as an event noticed by customers and non-customers alike. Apple has taken this to new heights by being known for high-quality technology as a lifestyle, and it often sees its reputation transfer to new offerings successfully.
Expanding into new territory
Once companies reach a certain level of sales, it is only natural for them to want to move into new markets, often in new countries. This can be tricky but exponentially lucrative if they get it right. While the basics of business may be the same on paper, a company needs to find ways to transfer its reputation into a new territory which can come with some very unique subtleties in the local culture.One of the most important things a company can understand when making this move is why it has a good reputation on its home turf. Analysts suggest using evidence to tangibly prove that a brand has a good track record when making the expansion. It can also be important to show potential new customers that the initial reputation was earned legitimately. This could consist of awards, reviews, or even surveys. If the home territory is heavily regulated, companies can demonstrate the good business practices they will bring to the new market.
A company needs to also consider that what may have been a good reputation before might be seen differently in a new territory. A country might have different ways of doing business or implementing regulations. Often companies find this is an issue when they move into the European Union, which can have very intricate and nuanced laws and rules overseeing the way business is done.
Walmart Japan example
Walmart, for example, has had difficulty transferring its reputation to Japan. The massive company found that while in the United States, their reputation for low prices and deals was viewed as a positive thing, in Japan, it was seen as the potential for low quality. Walmart also discovered a "deal hunting" attitude in Japan, making one-stop shopping less popular than in the United States.
This is why it can be vital for companies to do their due diligence before moving into new territory. Even the greatest track record can mean nothing if a business doesn't understand the nuances of a new marketplace and how to properly transfer its valuable positive reputation.
Selling off the company
For many companies, there comes a time when they decide to sell off part or the entire business. When this choice is made, a positive reputation can be an important asset in the sale.
However, there are times when the reputation is more about the pieces versus the overall reputation. The company might be purchased more for the physical assets in order to be absorbed into a larger company. Often seen in telecom or tech companies, Meta (Facebook) has done this with numerous smaller businesses. Another example is when Twitter purchased the short-form video company Vine for $30 million in 2012, a purchase which led to the acquisition quickly being shut down and the tech absorbed into the larger social media platform.
Amazon / Metro-Goldwyn Mayer
However, there are times when reputation is not only part of the deal but a very high-profile motivator. One interesting recent case was when Amazon purchased Metro-Goldwyn-Mayer in 2021. While Amazon was already a fledgling movie studio, purchasing the revered home to classics such as The Wizard of Oz and the James Bond franchise gave Amazon the transfer of prestige that came from MGM's reputation. They acquired not only the studio library but tapped into countless film buffs' nostalgic love of the movies MGM owned and had created for generations. In a way, Amazon emotionally connected with millions of new stakeholders through reputational transfer.
Following the purchase, Amazon founder Jeff Bezos explained his decision by saying he bought MGM because of its “vast, deep catalog of much beloved intellectual property.” Industry insiders saw this as not only a way for Amazon to deepen its offerings but also an act that brought them to the table as a major Hollywood player through reputation transfer.
The big takeaway
Reputation can be grown and then leveraged through reputation transfer to new endeavors and entities. When a company develops a positive reputation, it's vital to realize it is an asset. A company needs to protect it and be extremely careful not to squander its reputation. A company should parlay its hard work and carefully cultivated customer trust in a way that is going to help expand and move forward, whether it's through growth or moving into bigger and better marketplaces or expanding product lines.
Businesses can learn valuable lessons from companies who just tried to do a cash grab. Authenticity is always key, and customers will respond. Make sure your expansion is a natural progression of your brand and company. That's how you keep your reputation growing, and you won't stumble into the pitfalls that even the largest companies have occasionally fallen into.
- Building a solid positive reputation is important for day-to-day operations and profits, but it also creates the opportunity for growth and reputational transfer.
- A company can transfer its positive reputation into a new product line or brand.
- A company can use its positive reputation to expand into new territories, regionally and globally.
- If selling the business is a goal, a positive reputation can be valuable as an asset in the transaction. Often the positive reputation of a company's technology is of high value.
- Be authentic when you use reputation transfer. Don't go for the quick buck or risk losing the reputation you may have spent years building.
- Do your research when considering transferring a positive reputation into a new territory. The rules or practices may be different, and having examples of how you gained that reputation can be vital.