When a crisis is handled poorly, the public looks to the top to place blame. But today’s corporate leaders aren’t prepared for crisis response — and this is worrying the C-Suite.
According to a study from Aon, global businesses see “reputation damage” as their top risk management concern. The worry is not unfounded: Not only do crises have damaging, short-term effects on brand value, but they can also affect long-term sales and share prices. On average, 5% of shareholder value is lost the year following a crisis.
The digital age has also impacted how crises affect brands, and leadership is struggling to keep pace with the trends. Recent analysis shows that in 2018, when the use of social media was at its most prevalent, brands that handled a crisis well gained 20% in market capitalization. On the flip side, brands that handled their crisis poorly lost nearly 30% of their market capitalization.
Crisis response determines who emerges from the crisis intact.
How a brand responds to a crisis determines whether or not it emerges as a winner or a loser. Some brands increase their value and recover completely — others suffer a steep decline.
But not all crises are created equal and issues are unique to each brand they affect. So to paint a clearer picture of what exactly constitutes a “good” and “bad” crisis response take a look below:
- Loser: Over the years, a teenage fashion brand dealt with several crises and a fluctuating public opinion. Hyper-sexualized marketing materials and non-inclusive sizing frequently sparked public indignation around how the brand presented itself to its young demographic. In 2013, when probed with questions surrounding the topic, the then-CEO responded on the defensive, refusing to apologize for previous statements that said his store only wanted cool, good-looking people as customers. As a result of indifference, the brand didn’t experience a quarterly sales increase until 2018. And despite this small success, the brand still plans to close many of its stores.
- Winner: Due to supply chain issues resulting in a shortage of chicken in 2018, a fast food brand had to close 800 of its U.K. locations. The closings were temporary, but loyal fans of the chain were upset and disappointed. The brand knew it had to thank customers for their patience and address that it had messed up — taking the blame despite not technically being at fault. The brand took out a full-page advertisement to apologize for the closures, rearranging the letters in their logo to read “FCK.” The humorous, open and transparent apology resonated well with disappointed diners. In fact, because of the hubris displayed in its crisis response the brand suffered no lasting brand damage.
What brands can do to stay prepared for a crisis
Whether its unforseen supply chain issues or a CEO misstep, brands must be prepared to handle any type of crisis. A crisis management plan is critical in protecting brand value and quelling C-Suite concerns. It also allows you to respond to a crisis quickly, which is what digitally savvy consumers expect. Here are three easy steps to get started:
Step 1: Hypothesize. Consider all of the social harm and scenarios that could confront the brand. Remember to look at the crisis from all angles.
Step 2: Identify Stakeholders. Make a list of any and all individuals across the organization who need to be involved so issues are escalated to the right leader.
Step 3: Draft Responses. Lastly, have templated responses ready that speak to the various stakeholder groups for all of the crisis scenarios you’ve plotted.
Crisp can help you get started.
Even with a robust crisis plan, leaders can’t take action on a crisis if they don’t know about it. Which makes services like 24/7 crisis monitoring essential — a rapid response can determine if your brand emerges from the crisis as a winner or a loser. Companies who address the issue sooner fare much better than their counterparts who take longer to apologize.
From the examples above, it’s clear just how important it is for organizations to have social media safety to protect their brand value from crises of all types. Don’t let a single crisis derail the brand value you’ve built. Proactively take action before your brand takes a permanent hit. Contact Crisp to start protecting your brand value today.