When it comes to crisis management, brand reputation is often at the forefront for PR professionals. Furthermore, with social media and 24-hour news cycles, the main issue is not if a story breaks but when. Reporters are no longer the only source of news—good or bad—about a brand.
But what about the goals of the business, namely the bottom line? That side of a PR crisis should not be ignored, as the costs of customer flight can have an outsized impact on a company's finances, especially over the long term.
This is one reason why communication and PR professionals are pushing for inclusion when it comes to overall business strategy and executive decision-making. By having a seat at the table with the rest of the C-suite, they can focus on crafting communications with the bottom line in mind—and be more prepared for when a crisis hits.
The financial impacts of crisis mismanagement
When it comes to a PR crisis, the first thought for most companies is to end it as quickly as possible, and to preserve the reputation of the brand. But taking a deeper look at the financial impact is also important.
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Here's where brands can also see long-term damage on the financial side after a crisis:
Driven by social media, a PR crisis can easily go viral and be broadcasted around the world in seconds. A brand often doesn't have the luxury of waiting for the evening news or the next morning's paper—action has to be taken immediately.
Beyond a crisis damaging the reputation of the brand, it can have a direct financial impact. This is seen over and over again through stock prices. Take Chipotle, for example: In August of 2015, the shares of the fast-casual chain were the highest they had ever been. Less than a month later, news hit that dangerous E.coli outbreaks from across the country were being traced back to Chipotle. By the end of 2016, the company's stock plummeted to 53% of its August 2015 highs, and it was forced to close dozens of stores.
Unfortunately for Chipotle, social media woes also impacted the company's stock prices. It saw a one-day loss of 3.4% in July 2016 based off the Tweet of author Eric Van Lustbader, who complained his editor was taken to the hospital after eating at the chain.
While Chipotle's stock has slowly been recovering through 2017 and 2018, it's still trying to make up for the valuation it lost nearly three years ago. What's the lesson here for PR professionals? Think proactively versus reactively, especially when it comes to news or stories that have a direct impact on stock. Knowing that something as simple as a Tweet could fluctuate valuation presents an opportunity for contingency plans and strategies to stem the tide of losses on the market and reverse course.
While customer acquisition is usually the main focus of many brands, it's actually repeat customers who are more likely to have a higher lifetime value.
Now, couple that with word of mouth. According to ZenDesk, "Ninety-five percent of customers share bad experiences with others, 54% share bad experiences with [five plus] people, 45% share negative reviews on social media."
Adding PR pros to the executive team
So, what can PR executives do to start putting more of a focus on the financial side of a crisis? Here are a few suggestions:
- Develop a crisis plan, and make it a part of that plan to remove any potential silos that exist between communications, marketing and social media, finance, and the executive team. Having data that flows freely to every stakeholder during a crisis can help a brand formulate a better response, and allow the PR team to keep finances front of mind. In addition, having a tool that provides real-time alerts and news updates can be a first line of defense and help PR pros to get ahead of the story.
- As part of that crisis plan, it's important to create financial key performance indicators (KPIs) for PR pros to track that have real dollar amounts. Both during and after a crisis, these can be used to monitor effective responses. Examples would include customer retention rates and stock valuation.
- It's also essential to work collaboratively with other functional teams. All too often, disasters escalate because data or teams are siloed with little or no communication until it is too late. Building a framework around teamwork can help to establish a sense of mutual trust and ensures everyone is on board with understanding who the stakeholders are.
- Know your main stakeholders. The PR team should be pro-active and strategic when angling for a seat at the table with senior leaders and key decision-makers, including the teams that must be mobilized when a crisis hits. That includes not only gathering important information and ensuring everyone is in sync but also highlighting the vital role they can play as communication experts in reducing the impact of a big hit to the bottom line during a crisis.
In a crisis, remember the bottom line
Crisis management can often depend not only on solving the immediate problem but looking at it from a financial perspective. Having more PR and communication pros involved in developing and strategizing with the management team can help ensure the financial success of a brand in face of an unexpected challenge.