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August 23, 2007 The Value of Perception
We have all heard the phrase "image is everything," and in fact have seen the concept ring true. Over the years, advances in technology coupled with the increasing number of media outlets have seemed to make the world a much smaller place, making perception more important than ever. In today's market the mere mention of scandal can throw a company's stock in a downward spiral. While it is easy to see the impact negative perception can have on a financially sound company, it is much more difficult to measure the value of a positive public image.
For years a company's reputation, among investors, customers and the general public has traditionally been regarded as too intricate to measure with hard numbers or estimate with any precision, not to mention prove cause and affect. Recently it seems a more sophisticated understanding of the power of perception is taking hold among savvy corporations. According to a recent article in Business Week entitled "What Price Reputation," many corporations are finding that the way the outside world expects a company to behave and perform can be their most important asset and actually boost stock prices. Companies such as Factiva and Delahaye use powerful search engines to track databases of all print, broadcast, and Internet coverage to search for trends in price and perception. In fact, a company's reputation for being able to deliver growth, attract top talent, and avoid ethical mishaps can account for much of the 30.0 to 70.0 percent gap between the book value of most companies and their market capitalizations. While it still may be some time before we can really quantify the value of perception, these results beg the question of what really is important to a company, great earnings or a great reputation.
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