Reputation is somewhat of a finnicky feature to this date. As nowdays the best rank is Hostile or unfriendly as you don’t get targeted by any NPC’s and can shop at towns. There isn’t much incentive to go towards the extremes. So I suggest rewards.
The Higher ( or lower for Evil reps) your reputation goes you get discounts at shops and merchants and can sell items for more.
Occasionally you might recieve gifts consisting of crowns and items from fellow bandits or the Magic Council.
For Example:
“Haha you’re the one that killed all those Magic Council members? Those weaklings got what they deserved. Here have some crowns for your troubles.”
“The Magic Council has seen your actions about Magius. And we would like to gift to you XXXX crowns as a reward for reducing crimes and arresting Evil doers.”
If you have a certain amount of rep, enemies react differently. And NPC’s that have the same rep might comment on you.
For example:
Hey! Would you look at that it’s the local hero around here, (Insert name here). Let’s see if you can take us down.
Why if it isn’t (Insert name here), you’re are hereby under arrest!
Hey, isn’t that ( Insert name here)? I heard they took down an entire bandit fort by themselves.
So you’re the person that killed all the bounty hunters. Haha you earned my respect.