Fifteen billion dollars! Ouch! That's a painful penalty for even a global automotive giant like Volkswagen. The news of the US government's suit against the car company, brought for deliberately misleading customers about fuel efficiencies on their diesel-powered vehicles, was a chilling wake up call for companies in any regulated industry. There are forces in the world of business that no brand is completely insulated from: tragic accidents, human error, environmental ambush, regulatory change, biological or digital bugs. But when a corporation engages in premeditative corporate malfeasance, you're gambling with your brand big time.
Obviously, there is no denying the damage wrought on brand reputation after incidents such as the 1989 Exxon Valdez spill all over Prince William Sound, Alaska, or, more recently, the BP's Deepwater Horizon explosion in the Gulf of Mexico. The impact was clear and significant.
However, Chipotle didn't deliberately add E.coli to their menus to sicken sixty people in over a dozen states. Nor was Ikea intending for six buyers of its MALM furniture to lose their lives after negligent installation, despite the company's extensive safety instructions. The recent auto fatality involving Tesla Model S Autopilot self-driving feature was the unfortunate result of adolescent technology and an unanticipated confluence of roadway events, not purposeful impropriety. These unintentional mishaps cause great crisis, though nevertheless still force a company to absorb the financial pains incurred through lost revenue and penalties, not to mention the tarnishing of their brands.
Here are three ways to "triage" a damaged brand:
The most essential part of brand triage is to address the issue head-on proactively and expeditiously before it is manipulated by competitors, misrepresented by the media, or, worse, misinterpreted by customers. Quick acknowledgement of the problem, even in the absence of all of the facts, will buy valuable time and foster the benefit of the doubt from the public. Innocent until proven guilty holds true, but brands would be wise not to abuse customer trust and act fast.
The old adage "the cover up is worse than the crime" holds true especially for corporations, whether embezzlement or infidelity. The willing and open invitation for scrutiny suggests the absence of deliberate wrongdoing and demonstrates genuine commitment to customer loyalty and restitution. Conversely, aggressive denial risks the impression of greedy capitalism, indifference to customers, or corporate arrogance.
In the end, Volkswagon's settlement with its customers appears to be fair. However, the actual reality of this will be tested in the coming months. Brands must weigh the short-term bottom line pain of paying reparations to customers against the arduously painful consequences of dwindling investor confidence, continuing bad press, and diminishing brand loyalty. Invest generously in the future of your brand.
In the case of Chipotle, Ikea and Tesla the damage, although costly, was addressed immediately and their brands will survive their wounds. For Volkswagon, it is too early to tell what the long-term effect will be for their brand and subsidiaries. Their bond of trust is badly broken.
If your brand is causing a crisis in customer confidence, simply do the right thing early, clearly and generously.
Photo illustration: Victor Clemente