When it comes to business, almost nothing is more important than your efforts to protect your reputation. A single slip, and you might find your brand forever damaged. In today’s post, we discuss some epic fails when it comes to reputation management and suggest some steps the brand might have used to avoid damage to its reputation. Once the damage occurs, damage control is very difficult and may never return the brand to its former reputation.
So, check out these stories of what not to do.
Protect your reputation
In the past, before the Internet, protecting your reputation was much easier as the negative consequences of your decisions were much less likely to spread. Sure, a media outlet might find your dirty laundry and hang you on the pillory of public opinion but the chances of damage were remote unless you were a big brand with a national reputation or what you did was pretty egregious. Of course, those media accounts are still dangerous today. For instance, recent tests found so-called forever chemicals in several brands of bottled water prized for their purity over city water.
In the digital world, however, the threats to your reputation abound. No longer does your indiscretion or other poor decision stay hidden unless some media company brings it to light. Today, everyone with a social profile, the ability to rate or review your products online, or another online megaphone can wreak havoc on your reputation, possibly sinking your brand permanently.
According to one source, a brand can lose up to 22% of its revenue when a single negative link shows up on the first page of search results for the brand. Recovering from damage to your reputation isn’t easy, cheap, or even necessarily effective, as we’ll see below.
But, all is not lost. Learn your lesson from some of these failures to protect your reputation with the right policies, controls, and monitoring.
Failure to protect consumer health
These are among the most egregious failures a company can make.
Remember ChiChi’s restaurants?
The chain died a quick death in 2003 when several diners were killed or made very ill when they ate contaminated onions contained in a variety of dishes. Once boasting over 250 restaurants in the popular chain, competition stressed the restaurants so they were forced to close nearly 100 of them. But death came quickly when tainted green onions caused an outbreak of Hepatitis A in Pittsburgh that ultimately killed 4.
While you might argue that other factors contributed to the demise of the chain, and you’d be right, there was no recovery from the reputational damage from the contaminated food. Sure, the chain was likely innocent, having purchased the onions from a grocery wholesaler, the damage was done.
In contrast, recall the issue of tainted Tylenol. Again, the company wasn’t negligent in the bad product but the deaths might have spelled disaster for the firm. Instead, we teach this case to students everywhere because the company did exactly the right thing to reduce, even eliminate, the threat of reputational damage.
First, the company sprang into action before anyone even knew the cause of 7 deaths in 1982, except that it was linked to Tylenol. The company immediately issued a recall of all its products, removed them from the shelves, and allowed investigators unfettered access to their facilities. Eventually, the deaths were attributed to tampering in the store with cyanide, rather than any failure of the company. The company’s quick and complete response to the incident, as well as its transparency, allowed the company to quickly recover without any long-term damage to its reputation.
Later, federal legislation changed the way we all buy and consume over-the-counter medication to avoid a repeat of the tampering incident.
Failure to protect against consumer loss
Protecting consumers from financial loss is also critical if you want to protect your reputation. There are too many such failures to mention here but let me start with a personal story before we move on to some other worst public examples of this failure.
In November of last year, my car was hit in the parking lot by an employee driving a van owned by Edible Arrangements. It’s always annoying when someone hits your vehicle since you must take time out of your day to get an estimate for repairs, make arrangements for a rental while your car is in the shop, and all the hassle associated with dropping off and picking up at both ends. But, hey, we’ve all had that happen and it’s simply part of owning a car.
However, the company and its insurance company, Penn National Insurance, won’t pay for the damage, which just adds insult to injury. Photos clearly show their van backed into my car in a place that makes it impossible for me to have caused the accident (see below).
The really hard thing to imagine here is that rather than protecting its reputation, the companies refused to pay for the less than $3000 in damages and instead were willing to risk damage to the reputations of each brand.
You must protect your brand and, when the cost is so low, there’s really no excuse for the actions of the company.
An example of where a company failed to protect consumers when the cost was very low comes from the situation surrounding the Ford Pinto. These vehicles had a small defect that made them very vulnerable to fire when hit in a rear-end collision. Damning evidence emerged that the cost to fix the problem was minuscule ($11/car); a cost the company viewed as too much. Ford determined the better strategy was to simply ignore the flaw, a decision that caused great damage to the company’s reputation. In addition, the car was featured prominently in the book Unsafe at Any Speed and led to the emergence of Ralph Nader and a transformation in national politics that led to the creation of the Consumer Product Safety Administration.
I could choose any number of examples to show how you must protect your brand by always acting ethically. In one instance, a watch company captured the coveted 1st position in a Google search for watches due to the vast number of complaints against the brand for poor performance. Obviously, some users discovered that the links led to complaints against the company but the strategy brought even more users to the company website to make a purchase; showing just how little attention users pay to the full content on the link. Google fixed the problem in a later update to its search algorithm to return the company to its rightful place at the bottom of search results.
In other cases, companies behave unethically because it helps their bottom line and they think the company will never pay the price because it can hide its unethical actions. That’s the story behind the opioid crisis and multiple lawsuits against manufacturers for unethical marketing efforts. In many cases, juries found in favor of the plaintiffs; finding the company (or companies) failed to disclose the potential addictive properties of their products.
Here are some other recent examples:
- With over $1 billion in fines and massive damage to its reputation, Wells Fargo struggles to survive its unethical practice of opening accounts for customers without permission
- Facebook and Cambridge Analytica faced a backlash for unethically sharing personal information on 87 million and influenced the 2016 US presidential election using the data. Cambridge Analytics failed as a result while Facebook faced the largest drop in market cap in history.
- Uber faced a number of ethical challenges from sexual harassment suits to discrimination against people of color, to a host of other ethical failures
Theranos was in the news a lot over the last few weeks as its founder, Elizabeth Holmes, once the darling of investors everywhere, was convicted for her role in lying about the performance of their product. Investors lost everything, Holmes is likely to go to jail, and the company folded.
In your efforts to protect your reputation, take the pulse of the culture to avoid appearing tone-deaf. Here’s a Tweet from Acer that seemed somewhat innocent until the backlash against obvious sexism in the ad emerged [the ad showed an attractive woman from behind and commented on the attractive rear end (meaning their computer]. Or, consider this Tweet from Chrysler about Detroit that landed flat.
Protect your reputation or else
Reputation damage, as we saw above, can lower profits to the point of failure or tank your stock price (or both). A bigger danger comes from unwanted attention to your brand or even your entire industry from government regulators and legislators. For instance, Facebook and all social media companies appeared over the last months in front of congressional committees aiming to protect consumer privacy on their platforms. In the case of Tylenol and Ford, new restrictions impacted the way the entire industry operated. Hence, the damage comes not only through losing the faith and trust of consumers but through their ability to force action from public officials to enhance protections.
Protect your reputation with the right policies and procedures
It’s not that hard to protect your reputation. You must stop actions that produce negative impact as your first line of defense.
- Establish policies and procedures that ensure you protect your reputation. For instance, your manual should clearly state your policies on hiring and promotion based on skills and abilities rather than gender or ethnicity.
- Monitor performance to ensure your employees act ethically according to your policy manual. A periodic audit also helps ensure compliance in addition to standard monitoring, such as requiring a report associated with each hire to ensure no discrimination impacted choice.
- Ensure your reward structure matches your policies. For instance, in the case of Wells Fargo, employees acted unethically because the reward structure rewarded that behavior. Not all, but many employees behave in the manner dictated by their compensation structure.
- Monitor input quality from vendors. It’s not enough to buy from ethical vendors. You must monitor them to ensure they deliver the quality you need. For instance, Starbucks stakes its reputation on providing fair trade coffee at all its stores. To ensure compliance, they send agents into the field to monitor growers. That might have saved ChiChi from killing people with the green onions obtained from a vendor.
- Show your values in all your actions.
Next, establish a procedure to quickly implement a solution when you face damage to your reputation.
- Listen. The faster you detect a potential threat to your reputation, the faster you can respond, and the less damage you suffer. You can even diffuse the situation before negative attitudes spread. For instance, a student complained about airline change fees in advance of a snowstorm predicted to shut down the airport at her destination. The airline heard her complaint, fixed the problem, and the damage evaporated when subsequent Tweets praised the airline.
- Like Tylenol’s fast recall, know how to respond to events that might threaten your reputation. Plan for recovery and practice your plan.
- Never argue over a bad review. Instead, apologize, attempt to resolve the problem, then share with your community the fix put in place to ensure against future failures. A fast solution goes a long way toward diffusing any criticism. Transparency works wonders to reduce the damage caused.
- Develop a culture of ethics and social responsibility from the top. Train new employees on acceptable practices and reinforce your ethical commitment with periodic refreshers. Work to rehabilitate employees who fail to uphold your high ideals and quickly remove those who don’t share your commitment to being ethical and socially responsible after training.
- Respond quickly when someone suffers damage through no fault of your own rather than pass the buck to those responsible. For instance, when other customers create an environment of discrimination, get rid of them. No amount of money they might spend with you compensates for the poor reputation they create with their actions.
Almost nothing is more important than efforts to protect your reputation. These examples of failures to protect the reputation of a brand offer insights I hope you can use to strengthen your own efforts at reputation management. Also, read my advice for ways to protect your reputation now and after you face an issue.
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