In today’s interconnected world, a brand’s reputation is a fragile entity that can be shattered in an instant. A crisis — such as a product recall or poorly handled customer service experience that gains traction online — has the potential to irreparably tarnish, if not erode even the most robust of brands. To understand the dynamics of this vulnerable relationship between companies and their publics, it is necessary to examine the delicate nature of brands, the risks facing brands today, and strategies for navigating a reputational crisis.
Brands and trust
Trust is the bedrock of any successful brand; no brand can stand the test of time having not forged it. A brand is more than what an organization is known for — it is a currency built over time through positive interactions, compelling marketing and proven reliability. Add to that, it is a culmination of consistent quality, consumer well-being, and ethical business practices. At its core, the degree to which a brand can bounce back from a reputational crisis is interconnected with the hardiness and depth of its customers’ trust.
Today is different than times before; in an era when people are increasingly discerning and socially conscious, the tenuousness of a brand’s reputation becomes glaringly evident as consumers and employees consider whether a company prioritizes profits over people’s welfare. We also live in a time when circumstances can shift instantaneously, trust can disintegrate from one second to the next, and one voice can reach the masses through the touch of a screen.
Communications with customers have always been opportunities to build or degrade trust. But social media has raised those stakes exponentially. Fallout used to be limited to a dissatisfied customer’s word of mouth, whereas now, a network connects everyone on the web, enabling one disgruntled customer to spread their negative experience via scathing review or viral video. Then, once an incident snowballs into a brand crisis, it cannot be erased from the internet’s memory, nor hidden from discerning customers’ research.
A product recall’s cascading impacts
While often necessary to rectify safety concerns, recalls can lead to a series of events that ultimately test the brand’s spirit. The costs associated with withdrawing, replacing or fixing faulty products — along with related legal battles, customer frustrations and declines in sales — can create a perfect storm that jeopardizes the stability of the business.
If a recall event is mishandled, aftershocks can continue influencing consumer perception for years to come. Some recalls handled particularly well, however, have been shown to add value to brands, as those impacted felt the companies sincerely cared about their customer experience and the safety of their families. In the immediate aftermath, brands must tread carefully.
According to reports by Sedgwick’s brand protection experts, companies are facing recall events ever more frequently. Their data show that, in 2023, recall events in the U.S. reached a seven-year high, with 3,301 events occurring across the five industries tracked by Sedgwick. Within these, 135.2 million total units were recalled, a seven-year high — with 322 events being consumer product recalls, a 12-year high; it was also a record year for fines ($55.3 million issued). Factors driving these trends include greater regulatory scrutiny, persisting supply chain issues and a complex global geopolitical landscape.
The rising incidence underscores the importance of organizational preparedness, and that companies remain as vigilant as ever about product safety. It is a fine line between a good customer experience and a bad one, and companies must stay on the right side to protect and preserve their brand value.
Mitigating a reputational crisis
To effectively navigate the aftermath of a crisis, brands must proactively engage with their publics, acknowledge any fault and outline concrete steps taken to rectify the situation. A brand should not, however, issue a single quick-minded statement and expect the dust to clear, but instead a genuine demonstration of the brand’s dedication to the well-being of its customers and employees.
To mend broken trust, a brand must act in obvious alignment with its costumers’ best interests. Communication must be transparent, clear, thoughtful and urgent. And it must be timed correctly, towing the delicate line between communicating prematurely prior to the recall’s causes are thoroughly understood, or communicating too late, when the customers presume that, at best, the organization lacks control over the situation, or at worst, it does not care to rectify harm to its customers.
Safeguarding the fallout of a potential recall event should begin far in advance. Leaders should proactively foster recall readiness within the company, proactively strategize how to build organizational resilience, and implement a comprehensive, long-term plan of action for overcoming each possible challenge that may arise during and following a recall. Though product recalls are unexpected by nature, ample preparation can attenuate lasting disruption and reputational harm.
These ideas were shared in a piece for the 23rd issue of Sedgwick’s digital magazine, edge.
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