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Reputation And Its Role In Contracts & Procurement

February 5, 2008

I have written extensively about reputation and the role of the ‘commitment management’ community in supporting and enhancing their company’s image. This is achieved through ensuring the promises we make are kept; by making commitments that align with marketing statements; and by focus on ‘ease of doing business’ and honest, open communications. All these things relate strongly to contract terms and practices, as well as being enabled through strong supply chain integration and management.

And I have highlighted how the current business environment might drive us to extremely conservative risk positions that make us unattractive and uncompetitive in global markets (see, for example, Five Factors For Managing In An Uncertain World: Part III – Risk)

An article produced by ITSMA (IT Services Marketing Association) highlights this critical shift in today’s markets and suggests that ‘reputation’ is now perhaps the key differentiator. It makes worthwhile reading and I agree with its sentiments – but it also reveals the fundamental disconnect between Marketing and other key areas of business operations.  Although one of the ‘5 Steps For Influencing Reputation’ addresses internal alignment, not once does the article point out the fundamental need to ensure that commitments match capabilities.

While this may seem obvious – and is perhaps the reason it is not mentioned – research shows that it is in fact the key source of failure. Far too often, marketing statements do not reflect organizational reality; and transactional sales activity then drives ‘customizations’ that are even further adrift from embeded performance capabilities.

Reputation is linked to trust and trust is linked to demonstrated performance. But trust also depends on consistency. Smart buyers can smell a rat very quickly, so if your marketing promise is undermined by risk averse terms and conditions, or if your service delivery is typified by confrontational disputes, or if your internal governance and controls are clearly inadequate, your ‘reputation’ rapidly withers.

Many organizations struggle with this issue of alignment between promises and capabilities. That is why IACCM has focused its Capability Maturity Model on an assessment of strategic alignment between commercial capability and market positioning. Most organizations struggle with reliable execution. And one key reason for this is that the value propositions developed by Marketing (and product management) are often not carried through into the ‘contract promise’. This failure at basic business assurance inevitably trnslates to breakages at the transactional and relationship level.

The article is worth reading; but it illustrates that is time for us to start beating on the executive doors and pointing out that reputation risk is not driven by marketing promises – it is managed through properly assured business capabilities. It is time that Marketing, Contracts, Legal and Procurement formed an alliance to ensure they truly are aligned in their development and protection of Corporate Reputation.

Read “The Missing Link of Differentiation: Reputation” by clicking here.

One Comment
  1. Hi Mike,

    Great points. Marketing messages should be grounded in the company’s operational capabilities and its ability to fulfill promises. However, I have to disagree with you on one assertion, that “not once does the article point out the fundamental need to ensure that commitments match capabilities.”

    As I say in the article, for services providers, differentiation comes through the services experience. That experience should convey a sense of consistency and reliability. Customers need to feel comfortable that once they have investigated the benefits of a brand and invested their trust in it, those benefits will continue and will not require continual reaffirmation. Therefore, differentiation requires internal alignment around not just messaging but also operational issues such as internal processes, quality control, and customer satisfaction.

    Indeed, differentiation is not about finding the one thing that competitors are not saying to customers and saying it. Differentiation is meaningful to customers only if it is based on something that matters to them. That means researching the issues that are relevant to them and focusing differentiation efforts in those areas. Our 2007 survey of more than 300 executive-level buyers of B2B services found that their number one purchasing priority was “follows through on promises and commitments.”

    Thanks for casting a laser focus upon this important issue.

    Chris Koch
    Associate Director of Research and Thought Leadership
    Lexington Office Park
    420 Bedford Street, Suite 110
    Lexington, MA 02420
    Phone: +1-781-862-8500 x15
    Fax: +1-781-674-1366
    ITSMA – Research/Consulting/Training/Community for B2B Marketers

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