“Reputation management refers to the process of planning, structuring, and controlling an individual’s or company’s reputation and image (Additive, 2023).“
Reputation and image rely on how a target audience perceives and interprets someone or something. A positive reputation is vital for success, but desired and actual perceptions may differ. Reputation management aims to enhance and maintain a favorable image, not just through public communication, but by coordinating actions and communication. It involves various activities such as monitoring the available information about the person or company, shaping the narrative surrounding the target, and taking steps to remove or mitigate negative information and its effects (Eccles, Newquist, & Schatz, 2007).
In the last decade, due to the rising importance of social media and overall business exposure, the significance of managing one’s brand and name has increased rapidly. According to Eccles, Newquist, & Schatz (2007), “70% to 80% of market value comes from hard-to-assess intangible assets such as brand equity, intellectual capital, and goodwill.”
“Reputation is the way in which stakeholders that know little about an organization, decide whether to trust an organization (Stigler, 1962).”
Reputation is built on trust, which is gained over the years through engagement, integrity, and operations. Those are three key factors that will lead to a good and strong reputation. There are mainly three different forms of reputation: 1) functional reputation, which is the quality of products or services, 2) affective reputation, which is the feelings towards the individual or the organization and 3) social reputation, which is the perceived link to societal values and norms of the individual (Ingenhoff & Buhmann, 2016). The combination of these forms of reputation leads to an overall perception of an individual or organization. It is thus necessary to actively shape one’s engagement, integrity and operation to successfully build a positive reputation.
Building a reputation is something that should be done as early on as possible as it can be crucial in times of crisis. A strong reputation and a set of predefined crisis management measures are the two key factors that will shape the public perception of the involved parties.
The following article take a closer look at cryptocurrency businesses and how one can apply different type of reputation management to them. Finally, we provide some tips to improve reputation for companies active in those areas.
Crypto businesses vs Blockchain vs trust and transparency
In recent years, cryptocurrencies have grown in popularity and have become a mainstream topic. As more people adopt digital currency and invest in various platforms, the importance of maintaining a positive reputation cannot be overstated. This is especially important in the cryptocurrency industry, as the market is largely unregulated and subject to wild fluctuations (IMF, 2022). The fall of LUNA, Celsius, and FTX in 2022 only served to highlight the need for reputation management in the industry. Potential investors and users often pay attention to the reputation of a company or individual before deciding whether to trust them with their money. In this context, building and maintaining a strong reputation becomes crucial for the long-term success of a cryptocurrency business.
Despite the potential transparency benefits of blockchain technology, crypto companies have often faced criticism for their lack of transparency. This criticism, as highlighted by Deutsche Bank (2020), is a common issue faced by the industry. However, according to a paper from the European Parliament (Kritikos, 2018), blockchain technology offers a high degree of transparency.
So why is there such a discrepancy between the benefits of blockchain and the criticism of crypto companies? To understand this, it is important to clarify the relationship between crypto companies and blockchain technology, and why reputation management measures are essential in this context.
Blockchains are distributed ledgers or database shared among nodes in a computer network that store data electronically in digital format. They are most famously used in cryptocurrency systems, such as Bitcoin, to securely and decentralize transaction records. Unlike traditional databases, blockchains guarantee data fidelity and security without relying on trusted third parties, earning trust through their innovative design (Hayes, 2022).
By providing a means of tracking and verifying information, blockchain can ensure that data is not tampered with or misrepresented. Its high level of transparency allows for greater accountability than previously possible (Kritikos, 2018).
Cryptocurrencies are a digital or virtual currency that are secured using cryptography, making it difficult to counterfeit or double-spend. Cryptocurrencies use decentralized technology, such as blockchain, as a means of recording and verifying transactions. Unlike traditional fiat currencies, cryptocurrencies operate independently of central banks and governments (Hayes, 2022).
To put it in a nutshell, crypto companies are using the blockchain as a base to provide different products and currencies. Therefore, a vast majority of them should be trustworthy and transparent, leading to acceptance by customers. However, according to the Deutsche Bank (2020) this is not the case, and customer’s trust towards cryptocurrency companies is fragile. The following paragraphs give insights on what crypto companies can do to gain customer’s trust and gain reputation.
The goodwill reservoir refers to the benefits and security you get from building a positive image and reputation amongst stakeholders.
By building a strong image and reputation, as well as a resilient network early on, the company generates a certain amount of goodwill or recognition amongst stakeholders. This amount is what we call a goodwill reservoir. The positive recognition built up early on will be of relevance and come in handy when a crisis hits. A built-up goodwill will help to mitigate damage and even avoid certain crisis completely.
Building a goodwill reservoir requires a long-term, strategic approach that focuses on creating positive experiences and interactions with customers, employees, suppliers, regulators, and the public.
Crypto specific reputation
Going back to the previously mentioned forms of reputation, how would they apply to crypto companies and how can they create and build their own Goodwill Reservoir?
Functional reputation is crucial for cryptocurrency companies, as it reflects the ability of the company to deliver on its promises, build trust with its customers, and differentiate itself from competitors. Functional reputation can be established through a secure and reliable platform that provides users with a seamless experience. This includes offering fast and reliable transaction processing, implementing robust security protocols to protect users’ funds and information, and providing excellent customer support. Additionally, offering innovative and useful products and services can enhance a company’s functional reputation. By developing new tools, features, or integrations that add value for users, cryptocurrency companies can demonstrate their commitment to innovation and continuously improving their offerings.
Affective reputation is built on how customers feel about a cryptocurrency brand and their personal connection to it. To build affective reputation, businesses must focus on building a strong brand identity that aligns with their target customers’ values and beliefs. This could include promoting transparency, decentralization, and financial freedom. By communicating these values through messaging, imagery, and brand voice, a company can establish an emotional connection with its customers, building brand loyalty and positive sentiment. Further, it is important for cryptocurrency businesses to actively engage with their customers on social media and other channels, responding to comments and feedback and demonstrating their commitment to building a community around their brand.
While affective reputation can be more difficult to control than functional and social reputation, companies can establish a positive affective reputation by demonstrating their commitment to values that resonate with their customers.
Social reputation is influenced by public perception, media coverage, and customer feedback, and is especially important in the cryptocurrency industry where news and public sentiment can impact the market and user behavior. To build a strong social reputation, cryptocurrency companies must prioritize building strong relationships with key stakeholders, including media outlets, regulatory bodies, and the wider community. This can be accomplished by proactive public relations and engagement, including media outreach, social media management, and events and sponsorships. Additionally, it is important for cryptocurrency businesses to maintain transparency and honesty in their communication with stakeholders, including disclosing potential risks and challenges and addressing issues quickly and effectively. By demonstrating a commitment to building trust and transparency, cryptocurrency companies can build a positive social reputation and establish themselves as leaders in the industry.
Overall, building a strong reputation in the cryptocurrency industry requires a multi-faceted approach that prioritizes delivering high-quality products and services, engaging with customers and stakeholders, and promoting transparency and ethical business practices. By focusing on these areas and investing in reputation management, public affairs and relations measures, cryptocurrency businesses can establish themselves as trusted and credible players in the market, which is critical for long-term success and growth.
In summary, Reputation management is important in any industry, but it is crucial for crypto companies as it helps to establish crucial trust with customers, build positive relationships with stakeholders, and shape the narrative around the brand in a rapidly evolving industry.
Maximilian Skupien In collaboration with Thomas Borer
Deutsche Bank, 2020. Blockchain and corporates. Transparency is the New Marketing
Additive. (2023, 02 21). Retrieved from https://www.additive.eu/en/glossary/reputation-management.html
Eccles, R. G., Newquist, S. C., & Schatz, R. (2007). Reputation and Its Risks. Harvard Business Review.
Hayes, A. (2022, 09 27). investopedia. Retrieved from https://www.investopedia.com/terms/b/blockchain.asp#toc-bitcoin-vs-blockchain
Ingenhoff, Diana & Buhmann, Alexander. (2016). Advancing PR measurement and evaluation: Demonstrating the properties and assessment of variance-based structural equation models using an example study on corporate reputation. Public Relations Review. 42.10.1016/j.pubrev.2015.11.010.
Stigler, G. (1962). Information in the Labor Market. Journal of Political Economy, 70, 94-105. https://doi.org/10.1086/258727