It seems like every week another company who you would think would know better, finds a new and creative way to undermine their business through unethical practices, unchecked rogue employees, or just finding they are seriously out of steps with the values of the rest of society. The latest mega-crises with VW using technology to hide the true emissions of their vehicles, competes in a crowded news space of other organisations underpaying staff, product recalls, systematic overcharging of customers, senior managers taking kick-back payments, locking customers into high debt loans, along with the almost daily discovery of large corporations paying what appears to be less tax than their staff. Brand reputation, that most precious of business assets that take years to establish, quickly disappears.
On the surface level many of these brand reputation issues could be lumped together as businesses behaving badly, breaches of trust, or more pointedly, behaving unethically. However, there are large differences in how markets react to news about a business’s wrongdoing which goes beyond the who and what of an issue. In some cases, the storm is mainly confined to the media and quickly dissipates once correct action is taken in other sales and business viability take a huge beating.
This article is not about why businesses do bad things. Even very ethically run businesses will at times find they have waded into the unethical territory through a series of decisions, events or a management system that has created a culture that made the issue possible, and in retrospect, inevitable. Having worked in businesses, and with clients, who have found themselves faced with an issue some, this article is about how to ensure that when making decisions that you have timely and accurate insights that help ensure you are able to put the right strategies are put in place. Without this information, your reputation issue could quickly escalate into a crisis of management as well as a brand reputation crises.
What Makes an Issue a Business Crises?
What makes a particular issue significant to management can be very different to what is considered significant to the market and regulators. Being close to a problem it is hard for other managers and you to accurately know the magnitude of the problem, and with staff and agencies often having different vested interests in a particular direction, the lines of communication become noisy. To get a clear reading on an issue, you need to understand both the size of the problem and what makes it problems. To help understand this you need to answer the following three questions:
- How central is the issue in relation to choice decision making?
- How well known is the issue?
- Where do decision-makers attribute the blame?
Centrality
Issues that go to the heart of why a consumer buys your product are more likely to impact your sales. While governance issues which tend not to directly impact your ability to deliver a product or its performance can become a factor in decision making if a large enough group of consumers judge the issue as serious. To understand the centrality of an issue you need to understand why people buy or support you and how the brand reputation issue affects their decisions.
For governance related issues both consumers and regulators are likely to gauge the seriousness of an issue and as a result its centrality in future decisions, by its breach magnitude. Below are three questions that can help you in understanding issue magnitude and potential interest from the media in covering the story.
- How many people are affected?
- What is the consequence for those affected?
- How long has it existed and for how long will it exist?
Questions on who is affected and its consequence is problematic and can have legal ramifications. Any measurement in this area needs to be rigorously tested, especially in regards to healthcare. The number of people affected by the reputation event, its consequence and how public your business help determine the level of awareness for the reputation issue.
Awareness
From within a business, it is hard to get a sense of how many people are aware of an issue. Even issues with limited awareness in the market can seem large. Social media can also make issues seem more universally known. Understanding awareness provides an indication of how much the issue is a concern to the public, independent of any sales effects.
Awareness of an issue for consumers can range from a general awareness that they had heard something about your business through to a detailed understanding of the issue. Generally, their understanding will lack the nuances you see in the situation.
Understanding the level of awareness in conjunction with buyer behaviour and the timing of awareness provides a direct way to estimate scenarios for short and medium-term business sales.
Attribution
Knowing where others attribute the blame can make a large difference in how they respond to an issue and how willing they are to return to the business once the issue is resolved. For example, in the Panadol and Tylenol extortion cases consumers came back to the brands very quickly and both the trade channel and regulators were helpful in getting the business back to normal.
Understanding issue attribution also helps to understand if consumers will believe you when you claim the issue is resolved.
Mapping Reputation Issue Events
Once you have an understanding of how important consumers see your brand reputation issue, their level of awareness and who they attribute the error to, by mapping the reputation issue you can get a stronger sense of where an issue my move to over the longer term. The map below shows how a number of different reputation issues could be mapped using the centrality, awareness and attribution framework and where they sit in each quadrant.
- High Centrality and Awareness. This is the pain zone where, unless you are protected in some way, you are likely to have a significant downturn in sales and support from stakeholders. Where consumers attribute the issue will help in the recovery stage and determine the long term impact. VW, Ribena and Malaysian Airlines are examples of this situation. VW seen as architects of its own predicament may feel the impact on its business for many years.
- High Centrality and Low Awareness. Awareness is likely to grow quickly unless the number of people affected and the consequence is small. You need to act quickly to fix the problem and to decide how to manage the communication agenda. David Jones in the wake of the web data hack in 2015 quickly communicated that no financial data was affected and prevented a similar breach. Moving the issue from high centrality to low and out of the news.
- Low Centrality and High Awareness. While some issues for large business can quickly gain media attention on issues of public interest rather than business impact, you need to understand the potential for a governance issue to become framed as important. Underpaying staff that are often overseas workers is not normally a key factor for people buying fuel or bread from a convenience store, however, the magnitude of the exploitation by the 7-Eleven retail franchise and its systematic approach made ethical treatment of employees an important issue for regulators, consumers and franchisees.
- Low Awareness and Centrality. While the issue may be important to resolve, this is not a brand reputation crises and is unlikely to escalate unless poorly handled.
How Do Your Measure and Track Brand Reputation Issues
Depending on the nature of the brand reputation issue you may need qualitative research to understand how consumers and stakeholders are interpreting the issue and reactions to planned communication. However, a clear reading of the market often requires a survey done in conjunction with other analytics like sales and social media. For a survey when measuring the impact of an issue on brand reputation question sequencing is important as is getting a clear reading on the type of impact before measuring awareness of the issue.
Below is a schematic outline of the types of approach we use.
- Market Screeners. Accurate issue measurement starts with measuring the issue among the right people to estimate business-level impact. Insights come from knowing the differences between customer groups so do not be overly tight in your definition.
- Buyer Behaviour. Measure actual purchasing behaviour as well as intentions followed by support measures like willingness to recommend. These are your dependent measures for later analysis on the size of impact and how it impacts your market.
- Brand and Corporate Image.
- Unprompted Issue Awareness.
- Prompted Issue Awareness.
- Attribution of issue.
- Decision Impact (Centrality). The impact of an issue on brand reputation should be measured directly by asking how important the issue is or was in the decision making, and indirectly by looking at awareness and buyer behaviour.
Undertaking research early is important in ensuring you have a clear understanding of the potential impact, and if the issue becomes widely known by your customers, the research will help to develop strategies that help rebuild your business and provide management an independent and customer-centric view on how your market is responding to the issue.
For links to the brand reputation issue examples used in this article.
- VW. The Conversation: How Volkswagen got caught cheating emissions tests by a clean air NGO
- Ribena. Sydney Morning Herald: Schoolgirls find there’s no C in Ribena
- Malaysian Airlines. Sydney Morning Herald: Malaysia Airlines admits it has ‘work to do’ to win back flying public’s trust
- 7-Eleven. Financial Review: 7-Eleven chair Russ Withers resigns from board, CEO Warren Wilmot stands down
- David Jones. ABC: David Jones computer system hacked and customers’ private details stolen