A reputation crisis is a situation in which the reputation of a company or individual deteriorates due to negative public or media perception. It can cause serious damage, including loss of customer trust, decreased sales, investor outflow, or deterioration of the brand image. Experts from an ecommerce software development company tell us how to deal with a reputation crisis.
Causes Of A Reputational Crisis
The main cause of the crisis is the incorrect behavior of a company or media personality in certain conditions.
| Reasons | Comments |
| External Events | Quarantines and military actions, natural disasters. The company’s and its management’s response to the force majeure that has arisen is assessed. |
| Errors in product production | Poor quality products, services, violation of eco-friendly principles. |
| Unethical behavior, advertising campaigns on the verge of a foul | Corruption, discrimination, violation of workers’ rights. |
| Failed communications | Statements or actions of company representatives, incorrect advertising, leaking of confidential information. |
| External crises | Actions of competitors, investigations or pressure from the public. |
Who Is At Risk?
All producers of goods and services, media and political figures are at risk. They can be divided into the following groups:
- Companies with a large number of clients, employees and partners.
- Spheres – medicine, education, mining, growing plants and animals, entertainment.
- Politicians, show business stars, athletes, bloggers, as their reputation is directly related to their behavior.
- Startups and small businesses, as their resources are insufficient to withstand reputational challenges. One wrong step or statement can cause an unwanted resonance.
- Government agencies – revealed corruption, illegal actions.
Stages Of Crisis Growth
Any event in the life of a company can cause problems with its reputation. For example, one of the top managers was rude to a flight attendant during a flight; environmental activists found out that the production was dumping waste into a reservoir.
The crisis avalanche goes through 5 stages:
1. Spread of negative information in social networks, mass media.
2. Aggravation of the problem, development of customer reaction to the negative event.
3. Fall in sales, income, stock price, financial losses.
4. Staff reduction, losses increase up to the stoppage of production.
5. End of the crisis – the enterprise has taken appropriate steps, coped with the wave of negativity and continues to work. Or it curtails production and business as a whole.
The loss of reputation can be stopped at each stage, with due diligence to minimize the consequences.
Steps To Manage A Reputation Crisis
The simplest method of solving a problem is to prevent it, work according to the rules, and adhere to the stated strategy of the enterprise. But if a crisis has occurred, then:
1. Recognize the problem – become an “honest guy”, admit that the trouble happened. Emphasize that it happened due to your fault (oversight). Do not blame competitors without strong evidence.
2. Transparency – inform the public about the reasons, plans to correct the situation.
3. Apologize – loudly, using all channels for communicating with the public.
The last step is to develop methods for monitoring and correcting the situation: punishing the guilty based on the degree of their responsibility, paying compensation, dismissing the employee. For this, specialists in communicating with the public, the injured party, are involved.