A leader in the Financial Times last month entitled ‘Corporate reputations are fleeting, thankfully’ pointed out that United Continental’s share price is not underperforming the market since the incident; much like Samsung’s shares since it scrapped the Note 7 ‘exploding phone’ last year. The FT editorial also cited VW’s buoyant first quarter profits in the wake of the emissions scandal in 2015, warning "PR and brand consultants... will not want this idea getting out".
Despite huge admiration for the FT, I’d argue that the ‘pink ‘un’ is failing to see the big picture here. Yes, consumers can have short memories. One only has to look at the ethical scandals affecting Primark over the years, and yet the stores continue to thrive. As the FT rightly says, price and convenience always will be crucial differentiators.
But, although sales and share price may apparently recover quickly from a scandal, if the CEO and leadership fail to respond adequately they can be mortally wounded; severely disrupting the business in the medium term.
In many of the aforementioned crises, it is precisely because the communications response was (eventually) so good that they did recover. History shows that where the response is poor – jeweller Ratners and accountant Arthur Andersen spring to mind – some brands simply die.
Many large corporates – BP, Starbucks, Tesco – ended up investing millions in reputational and communications strategies, and continue to do so, in order to rebuild from corporate crises. Most will argue that they emerged even stronger as a result of such learning.
Indeed, it is probably precisely because Samsung and VW have thrown comms resource at their respective crises over the past six months that their businesses have been less affected than they could have been.
But more fundamentally, I would argue that the FT is taking a rather unsophisticated long-term view – and that long-term reputational excellence does affect long-term success.
This type of organisational success and growth will be based on a crucial word here: trust. And trust is engendered over many years, many decades, from delivering the core competence of that business (flying aircraft safely, building reliable cars, auditing businesses accurately, making tasty food that doesn’t poison people) and by delivering on your brand promises. Failing on both counts ultimately will lead to business failure.
Now, the latter is firmly in the remit of marketing and communications professionals because they can help mould both the brand promise and the delivery of that promise. This promise might be based around product innovation or societal purpose.
Often, organisations fail to deliver what they promise, sometimes spectacularly. And this was certainly the case with United Airlines, whose brand motto for many years was ‘Come fly the friendly skies’. As that now infamous smartphone video showed, there was nothing particularly friendly in the treatment of that poor Asian doctor in Chicago.
Or sometimes organisations simply mess up the promise itself, as was the case with Pepsi’s disastrous new global campaign (above) featuring Kendall Jenner. On the face of it, this was simply a terrible commercial that went viral. Look closer and while Pepsi’s heart may have been in the right place over issues of diversity and protest, the brand promise wasn’t clear. What was the focus of Pepsi’s cause? And surely it was crass to deal with diversity when one’s workforce may not reflect that – or indeed one’s choice of brand spokesperson.
It could be argued that some companies – and that possibly includes United Continental – operate in relatively uncompetitive market places, thanks to the large capital investment required in some business; that there is only limited choice if a passenger wants to fly from point A to point B at a certain time of day.
However, while a loss of reputational brand trust may not immediately affect a business such as this, and sales may remain solid, it will take its toll over time.
This is because without trust the cost of doing business becomes much higher: partnerships become more difficult and you gain less access to innovation; governments regulate you more aggressively; employees are less engaged and less productive; it gets difficult and more expensive to hire and retain the best talent.
And it is why the best organisations invest in "PR and brand consultants"; because the right brand and reputational strategies build long-term trust. They can ultimately mean that companies become more accountable, which ultimately builds more motivated, more efficient businesses.
Now that is a very virtuous circle; one well worth investing in.
Danny Rogers is the editor-in-chief of PRWeek UK