John Lewis Proves Less Can Be More in Growing Corporate Reputation

16/09/2011 3:10 pm

While most businesses would shudder at the reputational hit of announcing a 55% fall in half year operating profits, John Lewis appears to have pulled off the nifty trick of turning bad news into good.  In so doing it has illustrated perfectly the complex nature of corporate reputation.

Financial performance is certainly an important factor, but it is only one of a number of components that must be considered in order to measure reputation (and even so, the financial news for John Lewis wasn’t all bad – like-for-like sales actually increased 1% during the same period).

What possibly outweighs the reputational hit caused by the fall in profits are the reasons given for its cause.
The promise to ‘Never Knowingly Be Undersold’ has been at the heart of John Lewis for over 85 years.  At times when the retail sector enters a period of panic-discounting it can be rather inconvenient.

However, rather than choosing to find ways to avoid its commitment, John Lewis’  chairman Charlie Mayfield has been reinforcing its importance.  In an interview on the BBC he said, “absolutely it is costing us money, but it is really important we stick to it.”

His approach left some retail analysts scratching their heads.

Quoted in the The Telegraph Philip Dorgan, at Panmure Gordon, said: "I don't understand why so many people have this love affair with John Lewis. The numbers are just not that good. Most of its competitors are managing to keep their profits stable or increase them. It's all very well saying they are a private company and that it doesn't matter how much profit it makes. It does matter very much to the partners."

However, the “love affair” that Phillip Dorgan doesn’t understand has nothing to do with financial performance.  It relates to two other important elements of reputation, authenticity (the level to which stakeholders can believe what an organisation says) and consistency (which stakeholders must see demonstrated across all areas of an organisation’s operations).

At a time of financial uncertainty offering certainty of direction and behaviour can be more comforting than short-term profits.  Especially to its partners…especially when those partners are its employees.

As if to reinforce this point John Lewis has announced its biggest ever commitment to communicating its ‘never knowingly undersold’ message with a £23 million pre-Christmas marketing campaign.  This is a bold move by an organisation that truly understands the importance of reputation.