"Executives often underestimate the damage that can be done through word of mouth," says Mike Joubert, Managing Director of Levis South Africa. "Brands suffer immensely from very small things that change the way a consumer looks at your brand."
In a heavily competitive business environment with increasing commoditization of goods and services, it's the brand image of a company that sets it apart from its peers. It's what helps companies outperform on stock markets in good times and aids recovery from brand-damaging situations.
Yet, many executives do nothing more than shrug their shoulders when something goes wrong. Even if it's a rumour about their company that's totally unfounded, the damaging effect to a company's brand can be the same as that of a real crisis.
Brand perception is what drives customers to a brand and is, ultimately, the main driver of profitability. Yet, many companies believe their own marketing spin - that they have a product or service that differentiates them from the herd. The reality is that consumers see no difference and can switch brand allegiance in a heartbeat.
So what should a company do in a brand-threatening situation?
Peter Olyott, Executive Director of Risk Services at Alexander Forbes, says, "Not enough companies anticipate reputational risk as part of the brand-planning process. It's important to identify key spokespeople who have an intimate knowledge of the company and have been media-trained. They should know their roles in brand-crisis communication and practice the procedure. Companies should also get external advice from people who can think outside the box. Just look at September 11 - no one could have anticipated that.
"Companies need early-warning systems that signal when something is going wrong. These systems are usually feedback from customer interface so companies need to have communication channels set up to get a speedy message out there."
Joubert agrees: 'When a crisis hits, the facts need to be stated to the public as quickly and as categorically as possible.'
No-one might have been able to anticipate September 11, but Rudi Giuliani, mayor of New York, had the kind of management process in place that could cope with the immediate fall-out of the catastrophe. He also made sure that he was visible as soon and as much as possible to reassure the people.
As he tells it himself in 'Leadership', his autobiography: "As shocking as the crash was, we had actually planned for just such catastrophe. My administration had built a state-of-the-art command centre, from which we handled the emergencies that inevitably befall a city like New York, such as the West Nile virus, blackouts, heat waves, hurricanes, snowstorms, and Y2K (the year 2000)...."
The mayor was already at the command centre when the second plane hit, and Giuliani devised priorities, one of them being finding a way to communicate with the people in the city. Even as he gave orders to relocate their command centre, and as he and his group were fleeing the clouds of dust of the falling towers, the mayor held his 'walking press conferences' and at 11 am, just over two hours after the first hit, he was speaking on the phone to the television channel New York 1 on the telephone saying: "My heart goes out to all of you. I've never seen anything like this... It's a horrible, horrible situation, and all I can tell you is that every recource we have is attempting to rescue as many people as possible..."
CEO's have to show the same kind of preparedness and personal involvement when crunch time comes for their brand.
Last year Pick 'n Pay and ABSA were involved in potentially brand-damaging situations that highlight the stark differences in how companies respond in difficult periods.
Pick 'n Pay fell victim to an extortion attempt by someone who claimed to have poisoned cans of food. Their response was to act quickly in a responsible and open manner by telling the truth.
The company took out full-page adverts in newspapers across the country with a message from the company's CEO, Sean Summers, explaining the situation. After an initial setback, such was the public sympathy that the company's share price actually appreciated over this time.
Summers says, "It wasn't just our immediate response to the threat that made an impact, it was the fact that we could go to our brand piggybank that we had built up over decades. We have accumulated huge reputational capital through our corporate social investments that improve people's lives."
In the case of ABSA, where several clients had money stolen through fraudulent access to its online accounts, the company eventually brought out TV adverts with a young model explaining how secure ABSA banking was. It can be argued that clients would really have appreciated it if a senior company spokesperson had informed them - and quickly.
Charles Proudfoot, Managing Director of the Reputation Institute of South Africa, says that a good reputation will protect a company's market value during a crisis. "Companies that have built up their brand image by good corporate citizenship will recover much more quickly and could even benefit from a threat to their brand value."
Joubert notes, too, that the first line of defence and offence in a brand-damaging situation is the mindset of company's employees. "Solid internal communication and ensuring the brand values live in the office is vital.
