How much money are you willing to put on your reputation?

Really, lets think about it.

As blunt as this question may come across as, it is nevertheless a concern many of us face on a day to day basis, in a world where our actions leave an impact and an accompanying inevitable digital trace. The age of digitalization has exponentially changed the way individuals are held accountable for their actions both on and offline. Consequently the same ethos of accountability driven action, heavily impacts small to large scale corporations on a daily basis.

It’s an exciting time for the Communications and PR sector, with the rise of Gen Z as prominent consumers of media, the sector is encouraging their clients to lead with clarity, efficacy and transparency. Being able to communicate in an authentic way that builds trust between the brand, and the client has never been more crucial.

And yet still, reputation can be destroyed in a moment.

Let’s talk about a recent story that’s been circulating both domestic and international headlines.

On Monday, September 23rd, the Competition Bureau Canada has ordered Cineplex to pay nearly $39 million CAD in penalty after the agency stated the company engaged in illegal drip pricing based on the 2022 revisions of the Competion Act. Breach of legality aside, Cineplex customers were understandably left frustrated and ripped off, as the integrity of a business that inherently aims to bring a positive, entertaining experience to its consumers- was entirely compromised, and so was Cineplex’s reputation.

With customer relations in shambles and internal stakeholder management scrambling to maintain transparent investor relations, the question remains- what could’ve been done to better handle this situation?

Before jumping into the best practice manual- let’s understand why reputation is so important. Aside from leaving a sour taste in the mouth of the public should an image of a company or brand go astray, there is a huge financial cost for recovery for a business should they fall from grace. Interestingly enough reputational management, especially in the face of a communications crisis, is treated simlarely to insurance or a prenup.

A prenup? Really? Bear with me, I have a point.

Much like a prenup prior to marriage, or buying life insurance- its a tough sell because of the nature of the proposition. Humans are hard wired towards an ethos of aversion from the unpleasant. From a psychological perspective, it connotates a definitive outcome in absolute terms (divorce and end of life respectively). This is by no means an attempt to paint robust crisis communications frameworks as macabre, but rather to demonstrate a point. Businesses are unwilling to invest into the possibility of a failure as opposed to a strategy of success (ex: robust sales and marketing strategies).

The proof is in the pudding.

In a 2019 study run by PWC, showed 95% of respondents whom stated that they expected a crisis to hit within the next two years, but only 30% of respondents to the 2021 follow-up survey said that they actually had a crisis management team in place when the COVID-19 pandemic hit (PWC). In a Deloitte survey, only 49% of respondents said that their companies have playbooks for likely crisis scenarios (Deloitte). Perhaps the greatest of statistical indicators for a robust Crisis Communications Strategy is evidenced in another Deloitte study which investigates businesses that have already experienced a crisis who expressed from their experience that the most important lessons that they’ve learned was to accurately identify crisis scenarios (34%), executing a more timely communications plan (29%) and communicating more effectively with their employees (29%)

And therein we are at a crossroads. On one hand, the recognition that a brand and its reputation are intertwined. After all there’s no Mattel without Barbie, there’s no Kylie Cosmetics without Kylie Jenner and there isn’t a Patagonia that doesn’t deliver on its promise to source and produce ethical clothing. And yet, at the same time, we can visibly see the aversion towards robust crisis communications investments.

Now is the time for recognition.

In an increasingly volatile digital space, cyber attacks on reputation have grown at an alarming 600% since COVID times. Especially having a critical impact on small-medium scale businesses. Enterprises are forced to recognize now more than ever, that intangible assets such as reputation, good will, CRM and brand recognition are part of the larger umbrella working assets of a company that are worth protecting.

Don’t believe the preaching?

● A company’s reputation alone accounts for 63% of its market value (Weber Shandwick, The Online Reputation Management market is estimated to attain an annual growth rate of 15.33% ($239.99 million). This figure is increasing year by year and creating records.
● Approximately 25% of a company’s market valuation is due to its online reputation. (Review42)
● Customers are ready to pay more for a particular product if the brand or company selling it has goodwill in the market. (University of Technology, Sydney).

The value of the Communications sector simply cannot be underscored, as the global communications sector market was valued at US$ 92.91 billion in 2022 and will grow at a compound annual growth rate (CAGR) of 9.45% to reach US$ 145.96 billion by 2027. With the cumulative revenue generations in the communications sector estimated at US$ 695.41 billion for 2022-2027 (GlobalData UK Ltd. (2023, August 30). This demonstrates that the current market is crucial to take notice of, especially when implementing Corporate Communication strategies in order to ensure long-term entity success.

The statistics speak for themselves, as the steady march of AI continues its steady trudge, it will ultimately be the onus of agencies and companies alike to invest in mitigation techniques for dealing with reputational crisis as opposed to scrambling to salvage and mitigate a crisis’ fallout.

Reputation has a number, and its cost is far from negligable, including:

● Cost to Recover
● Excess Operational Costs and Fees
● Reputation and CX
● Lost Revenue
● Lost Market Capitalization
● Security and Threats

So what is our takeaway? Although not quite as crass as asking ‘“so how much money do you make at your job?” on a first date, it is crucial that we consider the valuation of reputation on a brand or business. Recognizing the cost to your business in the case of a crisis/reputational mismanagement is the first step to enforcing barristers for when, not if, the crisis comes.

To learn more about best practices for protecting a brand’s reputation based on global leaders’ expertise, stay tuned for my next article!