Impact of Corporate Image on Customer Loyalty and Business Profitability

Corporate image is the organization’s reputation and impression left on company’s public. Necessarily, every organization has an image whether it works on it or not. In many cases, a small act by an employee can leave a positive or negative impression, thus help or hurt the organization.

A new study led by a group of researchers from Covenant University, Nigeria, investigated the impact of corporate image on customer loyalty and profitability.

The study which is published in a Journal of South African Business Research explained that "corporate image is formed based on the stakeholders’ perceptions of specific company actions as well as associated industry and nation issues…organizations sustain their corporate image by building strong and supportive relationships with all of their constituents- i.e. customers, suppliers, investors, community, government, etc."

The corporate image has a great impact on stakeholders’ behavior that’s why organizations try to manage their image. The study stated that organizations "manage their image for many reasons among which are:

• Enhancement of the corporate competitive advantage thus leading to higher profitability.
• Promoting favorable relationship with the community in the environment they operate, else it may experience difficulty in recruitment, selection and maintaining the employee morale.
• Influencing investors and financial institutions.
• Establishing a corporate goodwill for the organisation.
• Creating good identity for the employees thereby leading to their satisfaction.
• Stimulating sales, thus influencing customer loyalty.
• Promoting good relationship with the government, opinion leaders and various interest groups.

Employees are representatives of the company, and their satisfaction is important so as they reflect a good image. Researchers investigated how the employee satisfaction could affect the corporate image of an organization especially in a service business. They found that "the impact of employee satisfaction on profitability appears to be much stronger than other variables." Researchers explained that "employee satisfaction is a function of an effective and good corporate image is accepted."

Researchers also noticed that "employee satisfaction had a positive and strong impact on organizational profitability." When the employee is satisfied, he would offer great services. In turn, great services have "a direct link with customer satisfaction. And when customers are satisfied, their patronage and loyalty increases, therefore profitability also increases" as mentioned by researchers.

The paper explained also the relationship between employee and customer satisfaction and how this is reflected on the company’s image. It is stated that "motivated employees stay with the company longer and get to know their customers better, thus leading to better service, greater customer satisfaction, improved relationship and enhancement of the corporate competitive advantage."

Researchers also discussed the relationship between service offering and profitability. As it is known in business "customer is king" so how he’s treated is surely affecting how he reacts to the organization. Researchers stated that "increase or decrease in organizational profit could be attributed to the level of customer loyalty."

Physical environment as another variable that intervenes in corporate image is physical environment. The research stated that "impact of physical environment on profitability was also significant, which suggests that both internal and external physical work environment needs to be conducive, well ventilated; attractive, appealing, and free of hazards in order to get the best from the employees."

The organization’s corporate image is something important to do well in business. As stated by the study "a strong corporate image increases customers’ confidence in products and services, in advertising claims and in the buying decision".

Hence, maintaining a good reputation is vital for organizations. Researchers said that "Organizations showing strong image have better access to capital markets, which decreases capital costs and lowers procurement rates, meaning that an organization’s profitability grows with a better image, all things being equal."