Measuring the ROI of Brand Reputation Management

November 04, 2015

45 percent of customers say they’re more likely to visit businesses that respond to their reviews

Online Reviews Survey

RORI brand reputation investment

Approximately 50 percent of purchase decisions are influenced by word of mouth, and as many as 4 in 5 consumers will reverse a purchase decision after reading a negative review.

How much more challenging will it be to sell in the face of a reputation disaster gone viral?

You may have heard of this story.

In 2008, singer-songwriter Dave Carroll arrived in Chicago’s O’Hare airport for a layover and discovered that his $3,500 Taylor guitar had been damaged by the baggage handlers of United Airlines.

Not long after the incident, he repeatedly tried to get a process claimed, but United said no and refused to reimburse him. For the next nine months, Carroll sent E-mails, made phone calls, pleaded with the airline’s customer service reps, and suggested that $1,200 in flight vouchers would be enough to compensate for the damaged guitar. United wouldn’t budge.

Finally, Carroll decided to do what he did best. He wrote a song, called “United Breaks Guitars” – and it went viral.

“United Breaks Guitars” has over 15.3 million views on YouTube. At the 150,000 mark, United decided to offer Carroll payment to take the video down; he suggested that the airline donates the money to charity instead. According to the Times, United Airlines’ stock price plunged by 10 percent within four days of the song going online – and cost shareholders as much as $180 million. This isn’t to mention the tsunami of bad PR and negative online comments that came United’s way.

Of course, a cheeky 4-minute song is unlikely to be the only reason (or even the main reason) for the airline’s staggering loss. But that’s not the point. The fact of the matter is that in the age of the Internet as an impactful platform, “United Breaks Guitars” made a very real impact on the brand reputation of United Airlines, which could have so easily put things right – but never did.

Reputation as a key investment area

Many have used the “United Break Guitars” story as a case study on customer experience management. For many, it also presents a strong case for managing one’s brand reputation. There are companies who specialize in assisting with brand reputation.

Indeed, regardless of the size of your company – be it a small business or an enterprise-level organization with multiple locations, an upstart venture or a 20-year-old corporation – brand reputation is one investment area that you will have to focus on over the lifetime of your business.

If not, you’ll be leaving yourself vulnerable to nightmares such as the one United had.

Investing in brand reputation saves money

“United Breaks Guitars” would probably not have happened if the airline simply agreed to pay Carroll the $1,200 in flight vouchers that he had asked for. Instead, saving $1,200 cost United Airlines 15 million negative impressions, and that’s on YouTube alone. (A Google search of “United Breaks Guitars” produces approximately 350,000 results.)

Investing in your brand reputation will positively impact the financial health of your company. Not only does it save you money in the long run; it also strengthens your entire foundation, so that a negative social media comment, a critical online review, or an unflattering search result won’t send your business reeling.

I’m not saying have a stack of gift vouchers handy whenever a customer complains. See the big picture and structure your investments accordingly.

  • Establish brand guidelines and ensure that these are followed at all levels of the organization.
  • Foster a customer experience culture in which everyone takes part in developing and evangelizing your brand.
  • Implement tools, training, and technology that enable you to stay on top of your online and offline reputation.
  • Manage customer feedback and respond proactively to customer needs and expectations.
  • Have crisis communication plans and reputation protection measures in place for worst-case scenarios.

You might find it worthy of note that it was only when Carroll’s song on YouTube became a hit that United took action and offered the vouchers. “They definitely want this to go away,” said Carroll at the time.

To me, this highlights the power of preventive over corrective action.

No one in his right mind would believe that Carroll singing the blues could actually have cost United as much money as some media outlets had reported. But, there is no doubt that preventive action on reputation can save your business from lost sales and embarrassing brand situations.

Investing in brand reputation promotes sustainability

Here’s an aphorism that gets passed around, from one entrepreneur to another (either as grim business fact, or precautionary myth): 8 out of 10 businesses fail within the first five years – or, according to Bloomberg, the first 18 months.

So: can you last five years (or two) and breathe a sigh of relief?

Not quite. As I mentioned earlier, you’ll have to continuously develop and protect your brand reputation throughout the entire lifetime of your business, no matter how long in the game you’ve been. Don’t let a bad rep destroy what you have been working hard every single day to build.

Warren Buffett once said, “It takes twenty years to build a reputation and five minutes to ruin it.”

Even if you’re not in the business of breaking guitars – even if you’re currently enjoying glowing 5-star reviews across the board – make brand reputation management an intrinsic part of your overall strategy. It will help you earn lifelong fans and followers who will remain loyal to your brand.

  • Regularly create fresh, compelling content that communicates the values that your brand stands for.
  • Identify and engage with the influencers in your community to consistently build positive buzz around your brand.
  • Monitor all relevant social media channels – including local business listings and online review sites – to keep up with what’s being said about you online.

Even though you may feel like you have no control over what people say or think – that your reputation is all based on their perceptions – sound brand management will give you the ability to influence those perceptions. It can drive increased awareness, engagement, and customer loyalty, and enhances your business’ capacity to endure.

Take online reviews, for example: investing time and effort to manage your presence on a site like Yelp can produce very real and very valuable results. A Harvard Business School study found that a 1-star improvement on Yelp translated to anywhere from a 5 to 9 percent swing on revenue, while Boston Consulting Group suggested that simply signing up and creating a Yelp listing can help you generate an average of $8,000 in annual revenue from the review site.

Investing in brand reputation fosters consumer trust

According to research by Forrester:

  • 70 percent of US adults trust brand recommendations from friends and family.
  • 46 percent trust consumer-written online reviews.
  • 15 percent trust posts by companies on social media sites like Facebook and Twitter.
  • Less than 10 percent trust advertising communications.

Consumer trust is something you cannot buy; it certainly can’t be won by simply spending money on ads or embarking on massive blitz campaigns.

“Advertising can help build brands,” said Starbucks CEO Howard Schultz. “But authenticity is what makes them last. If people believe they share values with a company, they will stay loyal to the brand.”

Authenticity resonates. That’s why it’s so important to invest in your brand reputation and make it the kind that consumers find authentic, and can therefore trust.

  • Own up to your mistakes. If a customer had a bad experience, don’t hesitate to say sorry. Don’t pull a United Airlines and wait until you have to pay for the consequences of your mistakes to go away.
  • Resolve customer issues. When the voice of the customer speaks, demonstrate that your brand knows how to listen. Address legitimate concerns. In situations where there’s been a misunderstanding, state your policies clearly without sounding dismissive of your customer.
  • Respond to negative feedback ASAP. Your ability to respond can prevent reputation-damaging scenarios; more importantly, it shows people that your business is not unwilling to connect and engage. 78 percent feel that responsive businesses care more about their customers than those who do not respond at all. (Don’t get into a catfight with your critics, though!)
  • No need to control or censor. In an attempt to gain more control over how they are perceived, some organizations do everything to stifle the voice of the customer. They censor or delete reviews. They pay people to give them 5-star ratings. They make use of non-disparagement clauses. But this isn’t brand reputation management: it drives customers away instead of drawing them toward your brand.

Simple steps like these can strengthen the authentic identity of your brand – particularly in channels where people would have a general mistrust of traditional advertising messages.

Investing in brand reputation creates stakeholder value

Your brand is more than just your trade name, logo, and tagline or slogan. It’s one of your most valuable and important business assets and a major factor in determining what your company is really worth.

Be wary of negative reviews and social media comments that might fester undetected in the background, quietly causing damage to your reputation. Not only does this make you look unattractive to customers – your own employees’ sense of pride might take a hit, too.

This is to say nothing of how your investors and stakeholders might feel. Can you imagine the kind of conversations that United Airlines execs were having after “United Breaks Guitars” was posted? “So, um, there’s this video on YouTube…”

Sadly, a majority of businesses are not investing enough in their brand reputation. According to McKinsey, company performance in all areas that impact brand reputation fall short of what’s required:

brand reputation

Simply put: investing in brand reputation can help prevent avoidable problems in your organization. More importantly, it provides reassurance that everyone who comes into contact with your brand – customers, prospects, suppliers, the media, employees, and stakeholders – will have a reliably positive, engaging, and valuable experience.

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