How to Handle a Brand Crisis PUBLISHED BY Latana.com Welcome to the Latana guide on How to Handle a Brand Crisis! What would you do if the unthinkable happened and your brand was affected by a natural catastrophe, a huge data leak, or a large-scale customer boycott? Of course, we all hope these things will never happen to us. But the truth is, nobody expects a crisis. It just happens, and usually at the worst possible time. Don’t wait until disaster strikes to start planning what to do. Appropriate crisis management processes and a solid communication plan will buy your brand valuable time in a challenging situation. In this guide, you will learn about the different types of brand crises, how other businesses have dealt with them in the past, and how to build an effective crisis management plan for your brand. While we hope you won’t need it, it is always best to be prepared. Happy learning! Introduction What is a Brand Crisis? Types of Crises and How to Solve Them Real Brand Crisis Case Studies How to Build an Effective Crisis Management Plan Final thoughts C h a p t e r 2 C h a p t e r 1 C h a p t e r 3 C h a p t e r 4 C h a p t e r 5 Content 1 C h a p t e r What is a Brand Crisis? A crisis can take many forms and is defined in the Oxford Dictionary as: A brand crisis, therefore, can be seen as extremely challenging and often unforeseen circumstances which have a negative impact on your brand’s ability to promote itself, serve customers, and even stay in business. “A time of great danger, difficulty or doubt when problems must be solved or important decisions must be made” What is a Brand Crisis? Time is of the essence. Being well-prepared and taking swift, appropriate action will give your brand the best chance of emerging stronger. Let’s dive into the various types of brand crisis and explore appropriate strategies for each. A brand crisis can have a severe impact on your brand health, including brand awareness, brand usage, and brand loyalty. No brand is immune and, in today’s global, social media- driven world, bad news travels fast. Therefore it is essential to be aware of the different kinds of situations your brand could face and the best strategy for dealing with them – as well as knowing what not to do, as an incorrect response will only make things worse! Types of Crises & How to Solve Them 2 C h a p t e r From the weather to computer hackers to a disgruntled customer, there are many different risks threatening brands today. Here are the main types of disaster situations your brand could face one day: Confrontation Crisis Financial Crisis Personnel Crisis Organizational Crisis Technological Crisis Natural Crisis Crisis of Malevolence Crisis of Error Let’s dive into the most common types of brand crisis and appropriate solutions, so you will be prepared to deal with them if necessary. Types of Crises & How to Solve Them What Is it? A confrontation crisis is caused by severe disagreement – whether it’s employees fighting, senior management arguing about the direction of the company, or a public outcry. In a confrontation crisis, the dissatisfied party is looking to get its demands met. If this doesn’t happen or doesn’t happen fast enough, the brand could face a public boycott, hate campaigns online, or mass resignations. How to Handle It The most important thing is to show you understand the concerns of the dissatisfied party. Oftentimes, a sympathetic ear and an opening mind are enough to dissipate or at least de-escalate the situation. If things have gotten this far, the issue must be significant – at least to them – so empathy is essential. The next step is to understand their needs and review any demands they may have issued. Are you able to implement the changes needed to meet those demands? If yes, then that should help solve the problem. Otherwise, you will need to be diplomatic, clarify your position, and ideally, suggest a compromise or alternative solution. Confrontation Crisis What Is it? A financial crisis occurs when a business suffers a severe drop in revenue to the extent that it can no longer cover its costs. This can be caused by a drop in brand usage and brand loyalty – fewer loyal customers buying your products will quickly hurt the company’s revenue. It can also happen if the company’s ongoing costs, such as the price of raw materials, dramatically increase. How to Handle It In the short term, the company will need to look at moving funds or generating financial backing from investors. In serious cases, such as bankruptcy, this is needed for the business to cover immediate costs such as rent and staff salaries. The business will need to analyze and possibly diversify its revenue sources. From a brand management perspective, this will mean evaluating the company’s position in the market and making significant changes to the value proposition. Financial Crisis What Is it? If one of your employees or someone associated with your company is accused of unethical behavior or illegal misconduct, you could end up facing a personnel crisis. Employing and supporting someone who behaves illegally and/or unethically reflects badly on the company and its values. Whether the incident takes place in the workplace or in an employee's personal life, these situations can seriously damage your company’s reputation. How to Handle It The first step is to identify the scope of the situation. How serious are the allegations? Have they been proven? You will need to evaluate the situation and determine how severely the individual violated your brand values. Next, your brand will need to determine the next course of action, which will depend on the severity of the situation and who is already aware of it. That might mean composing a written or verbal statement to be shared internally. If the situation has been leaked to the press, you will need to work with your legal team or a legal advisor to issue a statement explaining how the situation transpired and the actions you’re taking to rectify it. This might include a thorough investigation or disciplinary action towards the employee concerned. While you can’t change what has happened, you can influence what happens next. You will need to convince internal and external stakeholders that your brand regrets what happened, that the incident doesn’t reflect your company values and that you are doing all you can to put it right. Personnel Crisis What Is it? If your company has acted unethically or unlawful toward consumers or employees, you could face what is known as an organizational crisis. One type of organizational crisis is known as a “crisis of deception”, where a company deliberately tricks its customers, such as lying about product information or abusing customer data. Such acts of dishonesty can quickly turn into a full-blown scandal. The other type of organizational crisis is when senior management has been partaking in illegal activities or neglecting their responsibilities towards customers, employees and society as a whole. This can include corruption, fraud and generally abusing their position of authority and exploiting customers. How to Handle It This kind of crisis highlights issues with your brand’s company culture – possibly even within your senior leadership team. Your concrete plan of action will depend on the causes of the organizational crisis. Are employees dissatisfied and neglecting customer needs as a result? Do you need to weed out a few bad apples or is a full change of leadership required? A brand with great company culture and motivated employees is much less likely to encounter an organizational crisis, so be sure to hire employees who live and breathe your company's values. Organizational Crisis What Is it? IIn today's digital world, businesses are heavily reliant on technology. An outage or technical glitch can cost brands a lot of time and money to put right. Downtime is expensive, especially for eCommerce sites and software companies. It not only leads to a significant loss in revenue, but it also has a negative effect on consumer trust and the brand’s reputation. How to Handle It You will need to work closely with your IT and customer services departments to resolve the issue as fast as possible and keep customers informed. The most important thing is to minimize how many customers are affected and to what extent. Customers will usually be understanding if they feel the brand is being transparent and doing its best to put it right. Once the crisis has been resolved, work with your IT department and any internal stakeholders to determine what happened and create a process to prevent it from happening again. This might mean providing additional training for employees so they don’t fall victim to phishing attacks, investing in protective software, or setting up more secure IT processes. Technological Crisis Latana.com What Is it? Natural disasters such as floods, hurricanes, earthquakes and tornados can have a devastating impact on your business. Depending on where your business is based, such events might be rare in your area. But recent events such as the flooding in Germany, heatwave in Canada, and earthquakes in Croatia have shown that no country is immune. How to Handle It In the unfortunate event of a natural crisis, you will need to prepare an emergency response to ensure the safety of staff and customers. Due to the severity of natural crises, it is essential to have a business continuity plan already in place so that business operations can continue if your company is affected and your offices are unavailable. Natural Crisis What Is it? A crisis of malevolence is when a firm’s opponents use illegal or unethical means to harm an organization, its stakeholders, and its reputation. The methods are varied and increasingly digitized, such as using social media to spread false rumors or hacking into a company’s IT system to steal confidential data. Offline methods, such as tampering with a firm’s products, sabotaging company property, and resorting to physical violence, are also very real threats. A crisis of malevolence can come from competitors, disgruntled (former) employees, or other individuals who, for whatever reason, profit from inflicting harm on your brand. How to Handle It First things first – the most important thing is to make sure your employees and customers are safe. Depending on the severity, you will usually need to involve law enforcement and address the perpetrators in a safe way, such as through a legal mediator. Malevolence What Is it? Let’s say your company is a great place to work and has a fantastic company culture. You all do everything you can to keep your customers happy. Mistakes still happen. Whether you’ve launched a faulty tech gadget, missed a bug in your latest software, or need to recall a food product due to contamination in the factory, errors can cause havoc internally and externally. How to Handle It If your brand messed up, own up to your mistakes. A sincere apology and appropriate measures to improve the situation are the best course of action here. Customers will respect your transparency and honesty. It is important to act fast to deal with the damage, so having some prepared PR scripts with pre-approved language can be helpful. Crisis of Error PAGE NOT FOUND 3 C h a p t e r Brand Crisis Case Studies Samsung Crisis of Error What Happened In 2016, Samsung launched the Galaxy Note 7 smartphone. The brand was keen to position the device as a large-screen, high-end alternative to the Apple iPhone. However, a flaw in the battery design meant they were quickly flooded with complaints of the phone overheating and even bursting into flames. Images appeared in the news of a Note 7 exploding, followed by more images of burning phones. How They Dealt With It Samsung immediately and voluntarily recalled 2.5 million devices, offering customers a free refund or replacement. They hired 700 researchers and created a battery advisory group to conduct a full scientific investigation into the issue. The brand halted production of the Galaxy Note 7 and made assurances that the issue would not affect future devices such as the upcoming S8. Ultimately, consumers forgave Samsung. The company had a solid reputation for developing high-quality smartphones and acted quickly to put things right. Uber Organizational Crisis What Happened In February 2017, a female engineer who used to work at Uber published a viral blog post claiming that she was sexually harassed and experienced gender bias during her time at the company. This was the beginning of an extremely turbulent time for the taxi app. As if things weren’t already bad enough, The New York Times reported that Uber employees had been involved in substance abuse and inappropriate behavior. The final straw came when founder and then-CEO Travis Kalanick was caught fighting with an Uber driver on camera. How They Dealt With It Uber launched an internal investigation into the claims of discrimination and inappropriate behavior, receiving 215 complaints and firing over 20 employees. However, ultimately these actions were not sufficient to repair the deep-rooted issues at the core of Uber’s company culture. Uber investors decided that the company needed new leadership. Travis Kalanick was forced to resign and was replaced by Dara Khosrowshahi, who is credited with turning the company around. This example shows that, in extreme cases, a quick apology is not enough. Change needs to come from the very top. At the time, many news outlets were predicting the “end of Uber”. Years later, the company is still going strong. Under the right leadership, even a severe crisis can be overcome. Facebook Technological Crisis What Happened In March 2021, Instagram, WhatsApp, and Facebook Messenger experienced a major outage. The social media platforms were unavailable for over an hour, aggravating over 100,000 customers and business users. How They Dealt With It Facebook fixed the issue within one business day and issued an apology on its own platforms and to The Verge. The statement said, “Earlier today, a technical issue caused people to have trouble accessing some Facebook services. We resolved this issue for everyone, and we apologize for any inconvenience.” Since people rely on the platforms every day and outages are rare, the incident was quickly forgiven. In this case, fixing the issue and apologizing was enough. Marriott Crisis of Malevolence What Happened Between 2014-2018, Malware infected the IT systems of Starwood Hotels, which includes prestigious hotel brands Sheraton, W Hotels, Westin, Le Meridien, Aloft, and St. Regis. Marriott acquired Starwood Hotels in 2016. Two years after the acquisition, Marriott discovered a four-year hacking campaign attacking Starwood Hotel’s reservation database. The hackers had stolen personal details from 383 million customers, including credit card information and passport numbers, making it one of the largest breaches in history. The company was fined millions by the authorities for putting customer data at risk. How They Dealt With It Marriott issued a statement saying that that the brand "deeply regrets the incident" and “remains committed to the privacy and security of its guests' information”. Marriott set up a dedicated website and call center to deal with guests’ concerns and reached out to affected customers to inform them of the breach. They also offered one year of free enrolment in a Web Watcher service which monitors shady websites and alerts people if anyone is selling their information. They fully complied with the authorities and beefed up their IT security systems. The data leak is a permanent stain on the hotel brand’s otherwise immaculate reputation. Two in three people trust a company less after a data breach. While Marriott’s response was good, the brand will need to work hard in the long term to prevent recurring incidents and rebuild trust.