Crisis Management: Money, Brand and Reputation At Risk

Bad things happen in business. It is how management reacts to the fears and opinions of the press and public at times of crisis that makes or breaks a company or brand. Long ago but not forgotten brand crisis examples: Exxon Valdez oil spill in Prince William Sound 1989, Tylenol cyanide tampering of 1982 or Ford Pinto gas tank explosions and deaths of 1977 to name a few.

Crisis management is the process by which an organization deals with a disruptive and unexpected event that threatens to harm the organization, its stakeholders, or the general public. When a crisis occurs crisis communication which is part of public relations is necessary. It is not merely a reactionary measure but should also consist of preventative actions. Effective crisis management has the potential to greatly reduce the amount of damage the organization or brand receives as a result of an incident, and may even prevent an incident from ever developing into a crisis.

The first and foremost step is to admit responsibility. A crisis that is not managed well can and does wipe out decades of hard work, brand reputation and goodwill as quickly as a matter of hours. To ignore or play the blame game only makes a bad situation worse as exemplified in the above examples of the 70's and 80's.

Today we live in an instant information society thanks to social media. One report of food poisoning that goes viral can cause a restaurant to go out of business within days if not not dealt with in a fast and accurate manner. To avoid this type of bad publicity a social media monitor team should be established to monitor, post and react to social media activity throughout the crisis. With proper planning combined with quick and appropriate actions, a problem can be nipped in the bud and does not need to escalate into a crisis. An example of how fast a bad experience can spread is the 2009 post of Canadian musician David Carroll of the Sons of Maxwell band. His $3,500 Taylor guitar was broken during a trip on United Airlines. The YouTube video and song that chronicled the event in 2008 produced 150,000 views in just one day and hit 5 million within 30 days! Considering that it is five times more expensive to win a new customer as to keep a current customer, satisfaction and public relations needs to be addressed in a prompt and appropriate manner.

At what point does a problem become a crisis? Problems and bad situations rarely take care of themselves. Thinking that the bad press and upset customers are just going to die off or forget about the problem is unrealistic. Some companies, managers and leaders think that if they keep quite about a problem, others will not know it exists. Denial only increases fear and lowers respect for the company and people involved. People often imagine the worse. This is such a tricky situation because over reacting to a situation and bringing attention to a matter needlessly can be just as harmful as no reaction at all. So what is the best course of action? The first step is to monitor the situation and evaluate at what level the damage exists. The situation has to be looked at by both the loss to the company and the customer because without customers you don't have a company.

1. How much money has this problem cost my customer? How much has it cost the company in dollars and goodwill?
2. How long has the problem existed? Is it a one time occurrence that has not gone away or a continuing problem that is escalating?
3. How much trust was lost?
4. How much respect and goodwill has been damaged?
5. Was there physical loss involved?

If your customers are leaving in large numbers you have escalated into a crisis situation. If bad press has damaged your brand, company image or reputation you are in a crisis situation.

Applying common sense is not so common. From a marketing standpoint the old adage in sales: 1 out of 10 sales calls equals a yes, today is 1 out of 20 or more. If you have to work harder to get and keep customers why ignore them in a crisis? Proper public relations and corrective marketing can make all the difference in these types of situations. Acknowledging your customers investment of time, money and energy goes a long way toward maintaining good customer relations. Determine what your customers expect as a solution not what you want to provide. Is their request unreasonable. Is it financially feasible?

Some examples of poor customer relations: 1. "They got a refund on their credit card that is enough." Is that what they asked for? Is that company policy? If that is not what the customer asked for but got instead you may have now escalated the situation. Was an explanation made why their request was not met? What if they don't check their bank or credit card balances daily and are still expecting the product? 2. They got a email stating the product they ordered months ago is no longer available. If you pay for a product you have a reasonable expectation to receive it in a timely manner in good condition. To do otherwise is a violation of customer good faith. How costly is that?

George Washington University study # 201-3(CostofQ) www.2gwu.edu relays: Average business doesn't hear from 96% of unhappy customers. For every one complaint received, there are 24 people with unvoiced problems, six of which are serious. 90% who are dissatisfied will not buy again or come back. Of those who complain, 50-70% will do business again if complaint is resolved. 95% will return if resolved quickly. Average customer with a complaint tells 9 to 10 people, 13% tell more than 20 people.

Once the crisis is over do not expect business as usual. The old adage an elephant never forgets often rings true with customers. If you go to a restaurant and have a bad meal how likely are you to go back? It is how the management reacts in this situation that determines the outcome. Perhaps, a free meal is offered, a free desert or an apology is given. Is that enough to make you come back or does the taste of bad food stay with you? If so, for how long?

The take away: Take the time to address unhappy customers and do everything in your power to remedy the situation. It's not only worth keeping their business but also avoiding any negative word of mouth, social media or other exposures.