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The Science of Status
 

Napa grapes or no-name grapes: There is news on the science of status and what it means to businesses.
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In business, status matters -- and researchers are beginning to quantify just how much. Studies show that companies held in high esteem are able to maintain a significant lead over their rivals. The nation's leading expert on status in the marketplace is Joel Podolny, a professor of both sociology and business at Harvard who has looked at status in several industries, most notably the California wine business. Wineries in high-status regions like Napa command higher prices than other domestic competitors, Podolny learned, even if those rivals use grapes of equal quality. And because buying good grapes and experimenting with different blends doesn't pay off, low-status wineries cut back on spending -- further reinforcing Napa's dominance.

The same trends exist in biotech, according to University of Chicago professor Toby Stuart. His research showed that the key factor behind a start-up getting funding was not the strength of the idea, but the status of the people attached to the venture. "Without a connection to a top scientist, you have very little chance," he says.

Oprah's show had "a massive impact" on 1-800-Got-Junk? The number of franchise candidates has gone from 100 to 500.

Indeed, associating with a high-status individual or organization is a tried-and-true method of raising one's own stature. Trash hauler Brian Scudamore attained higher status in his business by getting on Oprah. The founder and CEO of 1-800-Got-Junk?, a Canadian-based company with 64 franchises in North America, sent producers ideas for garbage-themed segments. In April, Scudamore appeared on the show, helping an obsessive woman de-junk her apartment. Oprah's imprimatur "had a massive impact" on business, Scudamore says. The day after the segment aired, Got-Junk received 3,000 more phone calls than usual. But the bump exceeded mere publicity. The company was suddenly seen as outclassing its peers. Months later, the number of franchise candidates he is talking to has skyrocketed from 100 to 500.

Now for the bad news. The pursuit of status can be pricey. Tao Miller was thrilled when his Hawaii-based cosmetics company Body and Soul landed an exclusive deal with Barneys, the posh department store. Problem was, Miller paid through the nose for store displays and staffing while reaching only a small audience. Two and a half years later, he ended the relationship. "Prominent people and organizations can demand a lot from a company," Stuart observes. And even once status is attained, it can be tricky to manage. Your customer service reps can become snooty. Innovation can wither. Worst of all, employees can become yes men. At high-status companies, Podolny explains, people are often "afraid to be critical."

Last updated: Sep 1, 2003




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