According to AON’s 2017 Global Risk Management Survey, reputation risk and brand damage remain senior executives number one concern. Between 2000 and 2018 the impact – both negative and positive, on shareholder value of a reputational crisis has doubled. Companies that managed crises poorly in 2000 on average lost 15% of shareholder value over the next 12 months. By 2018 that had doubled to 30%. Companies that managed crises well had a 10% increase in shareholder value in 2000 but in 2018, that had risen to 20%. The primary driver? Social media.
Social media is now commonly used by most companies as a key part of their marketing strategy. They recognize that social media is about engaging and building relationships with consumers. When an incident or product recall happens however, they go silent.
There is no more important time for companies to be engaging with consumers than when they have questions and concerns about the company and its products. There is perhaps no other industry more sensitive to online commentary than the hospitality industry. A study in 2016 showed that a company’s response to negative commentary had the largest impact on consumers view of the hotel and failure to respond at all was the most costly.
Incidents and product recalls are defining moments for companies in terms of their relationships with consumers. Social media provides an opportunity to engage consumers and answer questions and address concerns with accurate information. Failure to respond allows misinformation, rumor and speculation to circulate and a crisis becomes inevitable.