At a time when viral tweets and “alternative facts” are all too familiar, brand reputation is more vulnerable than ever. Look at how much heat the Galaxy Note 7 brought to Samsung after its botched recall. Or the stunning cost of the Volkswagen emissions scandal. Reputation can turn on a social media post; after Delta Airlines’ second computer outage in six months, the president tweeted about the chaos, contributing to a drop in Delta’s share price.
A lightning strike of negative PR is bad enough for a large global corporation, with its cadre of PR agencies. But for a startup or small business, it can be fatal. According to a study by the World Economic Forum, on average more than twenty-five percent of a company’s market value is directly attributable to its brand reputation.
Many brand reputation threats are beyond the control of the companies they impact. Retailers are particularly vulnerable because of their large and decentralized workforce. How do you screen for a rogue employee who tampers with food or insults a customer with a racist epithet? Then there are externally driven events like a weather emergency or even a terrorist strike, where a company’s response in the first few hours can make all the difference. According to a Deloitte/Forbes Insights study of 300 global brands, corporations are dedicating more resources to risk management. Fifty-seven percent of those queried say they’re spending more time and attention to risk.
But more often than not, a threat to one’s reputation comes from within. It’s a simmering situation that’s been swept under the rug. Or, it’s a creeping cultural problem that becomes malignant over time, like the performance incentives that drove Wells Fargo employees to open customer accounts without their knowledge.
How to Anticipate Brand Reputation Threats
The majority of brand reputation threats can be anticipated, if you know what to look for. Here are the top reputation risks that should be noted by marketing and communications officers at every organization.
The Security Breach
A security breach can have an enormous PR ripple effect, undermining relations with customers, partners, and employees, not to mention the general public. Target’s 2013 data hack ultimately cost it $242 million. Some experts say that figure is low as a percentage of total sales, but how to measure the erosion of customer trust? Lesser security breaches, like the hijacking of a social media account, can also be damaging. And look no further than the Sony hack of 2014 or the Democratic National Committee email leaks last summer to understand the consequences of private information becoming public.
It’s no wonder that corporations are scrambling to protect their security infrastructure. There’s not much for marketing and communications teams to do to foil such threats beyond urging their companies to adopt the most up-to-date preventive measures. But given the shifting technology landscape, a data breach or other security threat should be at the top of everyone’s crisis communications playbook. It’s not only possible, but likely.
It’s the way a breach is handled that makes all the difference. To minimize the reputation impact of a breach, every business should have a cross-functional plan for timely crisis management. A typical task force would include the CTO, CMO, CCO, and involve a designated media spokesperson who is well qualified and prepared to update stakeholders, including press and social media. Prompt notification and transparent communications to all affected audiences are crucial.
A Complaint that Goes Viral
Remember back in 2009 when musician Dave Carroll made a music video lamenting his broken guitar, thanks to United Airlines? Today’s irate customer is likely more sophisticated if less creative. When British Airways lost Hasan Syed’s luggage, he not only took to Twitter to complain but also spent over $1000 on promoted tweets to amplify his complaint. It worked: Syed’s tweets caught the attention of mass media and BA apologized.
As public relations and customer relations increasingly overlap, the goals of both should be aligned. And customer service reps should be incentivized not by volume of complaints handled but by the number they actually resolve to the satisfaction of those customers. Ideally, they are empowered to quickly resolve ordinary complaints by waiving a minor penalty or finance charge when it makes sense. For truly sophisticated companies, customer relations managers can be armed with talking points that help build a relationship and strengthen the brand reputation rather than letting a situation simmer.
The good news is that “viral” customer service works both ways. Take the recent incident where a Tesla driver mentioned to Elon Musk that many owners were using the spots reserved for charging vehicles as parking spots, staying long past the time when the cars were charged. Musk immediately acknowledged the problem, and, six days later, it was fixed. Easy for a guy with Elon Musk’s profile, you might say, but many companies are realizing how to turn PR lemons into reputation lemonade. When a woman waiting in line at Kohl’s made a Snapchat video reenacting a lengthy wait in line at Kohl’s, complete with cute animal filters, the store might have ignored it or even been defensive. Instead, Kohl’s responded in kind. The key is to answer promptly, avoid defensiveness, and inject humor where appropriate.
A Toxic or Repressive Company Culture
It’s not the crime, it’s the cover-up, as the saying goes. No matter what the brand reputation threat, a transparent culture can minimize it and a toxic one will inevitably make it worse. Experts call it “risk connectivity,” which is a fancy way of saying one threat will expose or compound others.
Look at the case of secretive biotech startup Theranos, which was a high-flyer until doctored research and bad quality-control checks were exposed in a series of investigative articles by The Wall Street Journal. Several months later, we learned that the unraveling actually started with a well-connected employee who turned whistle blower after management belittled his complaints and later threatened him. A similar undoing was triggered at Fox News after anchor Gretchen Carlson’s celebrated sexual harassment suit. When other women came forward with similar claims, Fox had to confront its own internal failures and Roger Ailes was forced out.
How a given company treats an employee who reports malfeasance―or any complaints that threaten corporate brand reputation―is at the heart of its culture. An organization that has institutionalized ethical behavior and openness will be better equipped than most to identify reputation threats before they escalate. A pervasive culture of transparency and openness, on the other hand, enables resiliency for organizations when things do go wrong. Which they inevitably, invariably, will.