Numbers don’t lie, and the numbers in a new infographic are telling us what we’ve known all along: reputation management is essential to the livelihood of every brand. Plus, new research tells us that a reputation management crisis is always just around the corner.
We know that your brand’s reputation impacts how well you can attract customers. But for public corporations, the stakes are higher. Major incidents can affect share price by up to 30%, possibly more. Research tells us that most companies are at great risk of a reputation incident that will negatively impact their share price over the next five years. Is your brand prepared for a reputation crisis?
According to an infographic from Digital Firefly, your reputation lives forever, and management of your reputation should be a company’s top priority. The infographic shares several statistics that are highly relevant to reputation management, especially for brands:
- 80% of adults are “very” or “somewhat” more likely to consider buying products recommended by real-world friends and family.
- 70% of consumers consult reviews or ratings before purchasing.
- Consumer traffic to the top 10 review sites grew 158% on average last year.
- 97% of consumers who made a purchase based on an online review found the review to be accurate.
- 75% of people don’t believe that companies tell the truth in advertisements.
These numbers tell us that today’s consumer is using the Internet, and online reviews in particular, to make informed purchases. And when nearly every customer is consulting friends, family, and even complete strangers before deciding to hand over their money, reputation can make or break your business. The statistics should not be taken lightly, as research has shown reputation incidents can have a serious impact on a company’s market share, often in the millions.
This statistic in particular has really caught our attention:
- 83% of companies will face a crisis that will negatively impact their share price between 20% and 30% during the next five years.
That figure came from an Oxford Metrica Reputation Review Report examining the link between corporate reputation and financial performance. The report found that extreme events often have major value reactions.
In 2011, reputation crises including accounting irregularities, service disruptions, espionage, hacking, and industrial dispute caused companies worldwide to lose millions in value. Their research suggests that any company, and in reality nearly every company, is at risk for a similar situation.
In Oxford Metrica’s report, we see that there is an 80% chance of a company losing at least 20% of its value due to a reputation snafu in any single month over a five year period. That means for brands, it’s not a question of if your reputation will catch up to you, but when.
Oxford Metrica recommends creating a research-driven reputation strategy to minimize the risk of reputation-induced financial crisis, and maximize the probability of a swift recovery. They recommend that brands analyze the drivers of reputation for a company, develop a reputation recovery strategy, and monitor reputation equity. We agree with this recommendation, and suggest that brands take steps to build a positive reputation, while also monitoring and planning for incidents that require reputation intervention.
Prevention is the best medicine. Earning a good reputation with great products and even better customer service will go a long way, but preparation for a reputation crisis is essential even for the best of brands. How can you protect your brand?
- Know what drives your reputation. What do people love about your brand? Find out what your most important reputation factors are, and do what you must to protect them. If customer service is key, make sure that every member of your organization understands the customer service values that are important to your company. Quality products should be underlined with obsessively careful quality assurance.
- Monitor. Set up social and Google alerts to find out what’s being said about your brand. Following the conversation can help you can catch problems before they grow out of control.
- Plan your response. If a reputation crisis occurs, you’ll need to be ready to handle it well before trouble strikes. Create crisis response flowcharts to determine who in your organization will serve on the front lines during difficult times for your brand. Will you respond to complaints directly, or offer a press release? Will you delete embarrassing Facebook comments? Which employees can be tapped to answer phones that won’t stop ringing, or emails that just keep flooding in? Determine what your brand’s policies are for incidents that may occur during a reputation crisis.
If a reputation crisis is all but inevitable, are you ready to handle it? We know that nearly every company is at risk of a reputation incident that can seriously affect financial standing. Protect your brand by taking proactive steps to safeguard and recover your reputation today.