Amazon Is Beating Apple in This Statistic
According to a recent Harris Poll for 2013, Amazon has unseated Apple as the most trusted company in America. If your initial reaction is that this is a meaningless, fluff statistic, consider the poll's further finding that 60% of consumers consider a company's reputation before deciding to purchase a product or service. Particularly as the world becomes more and more digital, meaning that personal information is both exposed and collected online, people want to have some level of comfort that the information they share will be used for appropriate purposes.
By the numbers
Each year, Harris Interactive puts out The Harris Poll Reputation Quotient, which is "an assessment tool that captures perceptions of corporate reputations across industries, among multiple audiences, and is adaptable to countries outside the United States." The company measures perceptions of major corporations in six primary areas:
Products & Services
Financial Performance
Workplace Environment
Social Responsibility
Vision & Leadership
Emotional Appeal
Not only does the company make assessments about how consumers' views impact the purchase of companies' products and services, it also considers the impact these beliefs can have on a company's stock.
Whereas Apple held the top spot last year, its precipitous fall in the stock market has had a negative impact on the way the company is viewed. On the other hand, Amazon's numbers improved sufficiently to let the company take the top spot. Nearly every survey respondent who reported having discussed the company in the past year reported a positive discussion.
Apple's fall?
Harris Interactive executive vice president Robert Fronk was careful to explain that Apple had lost its top position more as a result of improvement by others, rather than from a significant decline in its own standing. The overall rating a company receives is ultimately more important than the specific rank among the most trusted companies. In this capacity, Apple has remained well in positive territory.
The more interesting part of the story from Apple's perspective is the shift in which factors are driving people's opinions. Apple used to be known for its position as a market leader in technological innovation and advance. This is no longer the case. Mr. Fronk explains: "Now, actually, financial performance is a dominant driver of their reputation and of course financial performance can be somewhat out of your control, as they're finding."
While the challenges of managing one's image as a function of the company's financial performance are interesting, the bigger takeaway is the fact that people now think of Apple as a creator of wealth more than as an innovator. This underscores the critical need for Cupertino to dazzle us once again with a new product that changes the world. The company has not lost credibility per se, but the shift is an important one that should inform upon your investment perspective.
Amazon delights
As an increasing portion of our lives moves to the Internet, more and more people are becoming acutely concerned with the security of their personal information; how that information is used becomes a cornerstone of how companies are perceived. Seventy percent of the people surveyed by Harris reported having concerns that the companies they deal with would invade their privacy. This was not an issue for Amazon, which scored very highly in customers' trust of its handling of private information.
With regard to Amazon, Mr. Fronk explains: "There's no doubt that having an array of products and services at the right price is valuable. But they take that advantage and actually use a lot of the information that they're able to define about their consumers and make recommendations back to them, help them lead a better life, and even delight them on occasion." The company is able to walk the fine line between nosy and indifferent, using the information it collects to enrich the user experience for its customers.
In addition to scoring highest in the trust department, Amazon did very well in both the products and services measurement and for emotional appeal. We all know certain companies that we just want to like, even when we are not sure why. Amazon scores as being one of those companies.
Investment impact
The respective implications for Apple and Amazon are very different, but each are vital to the future success of each company, and thus to the future performance of the stock. For Apple, the message is clearly that the company has remained a powerhouse in the minds of investors, but that it needs to remember how it got there and make some of the Apple magic happen in order to stay near the top. Financial performance is a much more transient reason to admire a company over the course of years -- as a certain software giant found out -- but regularly delivering the next hot new product is an undeniable advantage. Apple investors are well advised to require such a move or to classify the stock in a somewhat different way than a growth company.
The story for Amazon is more positive and centers on the goodwill that it has created for itself. The company has developed something of a reputation for promising financial results tomorrow and tomorrow and tomorrow. The fact that this had not had a hugely negative impact on the company reputation or trustworthiness is extremely important. Amazon has several potentially and current market-leading divisions -- cloud services, online retail, and even the Kindle series -- and it needs time to continue to execute. The amount of premium currently priced into the stock certainly shows the long term mind-set of shareholders. While this mind-set its great to see in today's investing environment, the company will need to execute perfectly over the long term in order to compensate shareholders for their faith.
Learn more about Amazon
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The article Amazon Is Beating Apple in This Statistic originally appeared on Fool.com.
Fool contributor Doug Ehrman has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and Apple. The Motley Fool owns shares of Amazon.com and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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