The exponential growth and reach of social media have given consumer brands new platforms to engage with existing clients as well as to expand their client base. It can, sometimes in conjunction with partnerships with influencers, enable brands to target specific consumer groups and re-shape the image of products and brands. However, social media has also amplified the potential negative effects that statements or events can have on a company’s reputation, both in terms of frequency as well as severity.
Several widely reported cases have recently centred around influencers negatively impacting the image and/or sales of sponsors and endorsers. For example, in Autumn 2022 a large German sportswear manufacturer officially ended a highly lucrative partnership with Ye and pulled Yeezy products from its shelves after he made a series of widely criticized antisemitic remarks. In another case, sales of a US beer brand dropped almost 25% YoY and resulted in it losing the top spot in the US beer market. This was caused by a backlash from conservatives over a social media promotion with the transgender influencer Dylan Mulvaney.
When looking to reposition a brand to attract a wider customer base, businesses often associate products with different values that an influencer allegedly incorporates, which can upset existing customers. In addition, social media users, will create their own narrative and comment on brands and products, which may also negatively impact a brand’s reputation.
Social media campaigns can also backfire such as in the case of a large US fast food chain. The tweet "Women belong in the kitchen.” on International Women's Day was meant to be humorous. It was followed by a second one putting it in context: “If they want to, of course. Yet only 20% of chefs are women. We're on a mission to change the gender ratio.” However, the first tweet caused an outrage before the follow-up tweet could be acknowledged. The fast-food giant’s social media team spent the rest of the day issuing explanations and apologies, and finally removed the tweet.
While businesses cannot fully control the online narrative, they can reduce the likelihood and extent of negative events as well as their financial impact.
Social media strategy
As part of the wider strategy, establishing a clear social media policy is an effective way to reduce the risk of an adverse social media event. This should be part of a company’s business code of conduct and tell employees how they should represent themselves and the brand on social media. It includes guidelines to protect the brand’s security, privacy, and legal interests. Influencer partnerships, admin control and access, monitoring and reporting fake accounts, etc. - these would all fall under a social media strategy.
Workplace diversity
Diversity in the workplace leads to many benefits - both from an internal and external perspective. It can for example reduce the risk of adverse reputational events by enabling the representation of different views, helping to avoid wrong or controversial decisions. Representation from human resources on a board level can further ensure that organisations have the people expertise they need to create positive cultures, and to effectively deal with serious incidents with external repercussions if they occur. Transparency is key: being upfront about problems and assuming responsibility where needed helps reduce negative repercussions and regain trust following an event.
Horizon scanning
Monitoring the social media landscape for potential threats to a company’s reputation has become a standard risk management tool for consumer brands. This can be done manually, but there are also tools that can help identifying any potential threats. A wide range of areas needs to be considered. The viability of a business can depend on regulators or legislators. These can be swayed by swiftly evolving activist pressure and public opinion. Other market participants can also be successful in their lobbying efforts. Lockton includes Polecat in our insurance proposition. The platform allows the user to manage, influence and optimise their corporate reputation by understanding diverse stakeholder and investor expectations, priority topics and material concerns.
Crisis plan
Although a social media plan and horizon scanning reduce the risk of reputational damage, they cannot fully prevent them. To be able to reduce the reputational and financial impacts in case of an event, businesses should develop a crisis management plan and test it regularly. Consultancy firms can help tailor them to suit the specific needs of a company.
Such a plan will help to address the issue that has caused reputational harm and the communication strategy for investors, the media, company employees— and anyone with a relevant interest. It will explaining how the company is tackling the issue and how it will prevent similar issues from occurring in the future. Scrutiny of such plans is often intense; therefore, they need to be robust. If perceived as insufficient, it can create additional reputational harm.
Insurance solutions
Consumer facing brands can take out insurance against reputational harm. As soon as an event is notified that could damage the client’s reputation, insurers can provide crisis management expertise to help manage and mitigate the problem. If the crisis deepens, seriously impacting business, the policy can provide substantial coverage for loss of profits, including a sublimit for advice on reputation remediation.
You can find more information on how to protect your business here (opens a new window), or contact:
Matt Humphries, Head of Crisis Management
E. matthew.humphries@lockton.com
Freddie Schlesinger, Vice President
E. freddie.schlesinger@lockton.com
