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Part Two: For Worse
It is difficult to live life completely unaffected by what other people think or say. Like pollen, the attitudes and opinions of people blow into the lives of others, shaping their perspectives and influencing their decisions. This is especially true in the age of technology, with digital winds blowing every bit of information farther and faster than ever before. When those opinions and messages are positive, it can be a valuable thing. In business, arguably nothing is more valuable to a salesperson, exec or company than for a customer to share a positive review with others. Customer and vendor recommendations are like gold. They yield a harvest of opportunity and good will over time. But what happens when the opinions and attitudes are negative? What happens when people are talking but what they are saying is not good?
In a world obsessed with being remembered and staying top-of-mind, the goal is to be talked about, no matter what’s being said. In fact, some like to say that there is no such thing as bad publicity. But that is just not true. Not all publicity is good or beneficial and there are countless examples of how bad publicity can be really bad for business or careers. For professionals and businesses alike, bad publicity can hurt in a multitude of ways. Consider the cost.
The Cost of Bad Publicity
When businesses or people are caught behaving badly, that kind of talk can not only be humiliating and shameful but it can actually damage reputation, erode trust and destroy brands. And even when there is inadvertent negative talk, it can hurt. There are countless examples of people and businesses who were deeply affected by “bad buzz”. When the reason a company or business exec is top-of-mind for all the wrong reasons and the chatter is bad, it can cut into sales, profits and even long-term success. Here are six ways that bad buzz hurts.
1. Loss of Employees or Good Candidates
With the Great Recession over, the employment pendulum has definitively swung in the other direction. Unemployment in the U.S. is hovering at around 4.3% and businesses are competing hard to attract and retain talent. Salaries are on the upswing. Companies have to put their best foot forward to hire the best and brightest. In competitive industries and occupations, such as technology, engineering, sales and marketing, employees are in the driver’s seat as to where they work. So how will Sears’ bankruptcy filing in Canada affect the company’s ability to hire or retain staff in the U.S. to help turn around the iconic but sagging brand? Even though Sears Canada, which has more than 200 stores and 17,000 employees, was spun-off as an independent company in 2012, the news media is buzzing about how CEO Eddy Lampert is struggling to keep the company afloat. Bankruptcy filing wasn’t a surprise when it happened on June 22 but that won’t help U.S. stores to recruit and hire top sales or marketing talent. The negative talk may very well push the overall brand even closer to collapse.
2. Loss of Sales
There is no question that bad buzz can deeply affect sales for companies and salespeople alike.
Case in point. Just how much has Samsung lost in sales in the last year? Reports of the Galaxy products exploding and burning people began to trickle in just two weeks after they launched their incredibly popular Galaxy S7, Galaxy S7 Edge and large-screen Galaxy Note 7 in mid 2016. While isolated reports of such incidents are not uncommon, when the number of complaints increased to a steady stream, the bad buzz became a problem. Samsung halted sales and issued a global recall for all 2.5 million Note 7 smartphones that had been sold, admitting that a malfunction with the battery cells was the cause of the problems. But the bad buzz continued.
The U.S. Federal Aviation Authority issued a warning, urging airline passengers to avoid using Galaxy Note 7 phones on planes, leading to airlines making safety announcements about the Galaxy Note 7 before flights departed. Stories emerged about airplane fires, cars burning, a 6-year-old boy being burned and a firefighter’s house burning down. All were blamed on Samsung’s new phone. Samsung products got banned from a college campus and from the NY public transportation system.
Samsung was definitely top-of-mind but for all the wrong reasons. As consumer confidence went up in smoke with Samsung’s battery blunder, what was the cost? It is estimated that the company lost $22 Billion off its market value in just a few days. While Samsung regained some of that, it’s hard to gauge the long term impact. It will surely have a lasting impact. There were just too many stories and too much coverage of the battery issue for it to simply fade in the public’s memory. Some of this bad talk will stick around and make people think a little longer about buying future Samsung devices. The loss of sales is likely to linger for years.
3. Loss of Job and Job Offers
Bad buzz can also hurt individuals, not just businesses. Consider the bad buzz that Uber’s former CEO Travis Kalanick experienced over the last few years that led to his recent leave of absence and then finally his resignation from the company. Employee harassment. Secret, illegal business tactics. Lawsuits. The list of reasons why people were talking, but talking bad about Kalanick was long. In fact, Kalanick may be the 2017 poster child for what bad buzz can do to a career…. even the career of a person who founded a ride-hailing startup that turned into a $68 Billion, global tech giant with 14,000 employees and over 1 million drivers.
And yet, Uber was not the first startup to experience growing pains. And it was not the first to spark controversy. Nor was it the first to develop a bad reputation that affected how customers viewed the company or its leadership. Nor was Kalanick the first CEO to have ugly run-ins with the media. All of that has happened many, many times before. Think Bill Gates, Steve Jobs and Larry Ellison. All of that could have been managed, but not the way Kalanick went about it. Kalanick needed to control the bad buzz but didn’t. Kalanick is just the latest high-profile CEO to step down from a company he founded. Founder firings, forced resignations, and leaves of absences aren’t unusual in the business world. Nervous investors and fed-up boards of directors will even give founders the boot from their own company if they think that’s what’s needed to turn a business around. Some of these execs bounce back, such as Jobs did, and some never do. That’s a high price to pay for bad buzz.
4. Boost to Competition
When people are talking bad about one company, the company’s competitors rejoice. It is a boost to businesses when a top brand is top-of-mind for all the wrong reasons. While bad buzz hurts business for the company being bad-mouthed, it is a boon for those businesses trying to take its market share.
One need look no further than to the airline industry to see a multitude of recent examples of how bad buzz is pushing business from one airline to the next. The bad buzz, of course, resulted from bad behavior. The most notorious occurred in April, 2017 when United Airlines ordered security staff to drag a paying, seated United Airlines customer off an airplane so that an employee could take the seat instead. The customer, an Asian physician, was knocked unconscious and dragged off the plane bleeding. United CEO Oscar Munoz eventually got it together, backtracked on his lame initial statement, and told a congressional committee that he realized how badly his airline had screwed up and explained what it was doing to repair its policies. The fact that the incident results in United’s testimony before a congressional committee attests to just how bad the “buzz” was. It was particularly offensive considering that United’s slogan is “Fly the friendly skies.” Surely, Delta and American Airlines more than glad to get a boost in business thanks to United’s gaffe.
But that happy dance was short-lived for Delta. Not long after the United Airlines incident, a Delta customer was told that a seat he had purchased for one of his children, but that was occupied by a different child, was no longer his. As the situation escalated, he and his wife were threatened with jail time and losing custody of their children. The entire family was eventually escorted off the plane and lost their flight. And then there were the thousands of stranded passengers and many canceled or delayed flights because Delta’s mid-20th century communications system failed. A lot of people were talking about Delta alright… but none of it was good. And it certainly must have not only cost them business but served as a boost for their competitors. It’s one thing for bad buzz to hurt a company. It’s another thing when that bad buzz, in turn, helps the competition win market share. That is the proverbial example of adding insult to injury.
5. Increased Scrutiny and Criminal Punishment
Negative talk has an insidious way of snowballing into unintended consequences. When a company or person is the subject of negative publicity, more can come out of it besides a loss of face or damage to reputation. Consider how the bad publicity that presidential candidate Hillary Clinton experienced just before the 2016 election likely cost her the presidency. When they public got word of her use of a private email server to send not only secured government information, but then also emails related to a key staffer’s husband, it became the final straw for many. The increased scrutiny from the FBI at that key moment was damaging and led many to believe she should even be charged with criminal wrongdoing. In that case, no punishment was pursued but damage was done nonetheless.
6. Damage to Public Image
Violating a customer’s trust can not only get people to talk badly about a company, but that talk can, in turn, do serious damage to a company’s public image. Case in point. The Volkswagen emissions scandal started in September 2015, when the U.S. EPA issued a notice of violation of the Clean Air Act to the German automaker. They found that Volkswagen had intentionally programmed turbocharged direct injection (TDI) diesel engines to activate certain emissions controls only during laboratory emissions testing. The programming caused the vehicles’ output of NOx gases to meet U.S. standards during regulatory testing but emit up to 40 times more NOx in real-world driving. Volkswagen deployed this programming in about eleven million cars worldwide, and 500,000 in the U.S. between 2009 and 2015, winning awards for Green Car of the Year. For seven years, Volkswagen’s advertising campaigns even touted their vehicles’ bogus eco-friendly credentials in print, media, and even Super Bowl commercials.
The cost to Volkswagen for the bad buzz they have generated is sure to be severe. The U.S. Department of Justice and the EPA have filed a civil suit that could theoretically subject VW to tens of billions in fines. The Department of Justice and the EPA are also pursuing a criminal inquiry, as are prosecutors in Germany, France, Italy, Sweden, and South Korea. All 50 state attorneys general in the U.S. are also armed with state laws that could be as damaging as the federal law. There are also over 500 class actions filed on behalf of owners and lessors of Volkswagen diesel cars and there are class action lawsuits filed by used car dealers, dealers for competing models (such as Chevy diesels and Toyota hybrids) who claim unfair competition, and shareholder suits. But it is the damage to Volkswagen’s public image — not its bottom line — that will be the biggest price paid for their bad behavior and the bad buzz resulting from it. Who knows how long it will take for Volkswagen to recover from that damage. It took decades to Ford to overcome the damage to their public image after the Pinto fiasco, and this incident is far worse and has affected far more people than the exploding Pinto ever did. Moreover, the Pinto’s bad buzz happened before the creation of the Internet and social media. So the question may not be when, but if, Volkswagen will be able to overcome this damage to their public image. Only time will tell.
The moral to all of these stories is simple. Yes, keeping top-of-mind is good but only if it is for good reasons. While you may want them talking about you, it is only if the things they are saying are good. There is, in fact, such a thing as bad publicity. And in the digital age, bad buzz can kill companies and careers. Act accordingly.
Quote of the Week
“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” Warren Buffett
© 2017, Written by Keren Peters-Atkinson, CMO, Madison Commercial Real Estate Services. All rights reserved.