Building a brand image and brand reputation is never an easy feat. When a new business opens, it takes time to curate an image, get on the radar and have new customers take a chance on the brand. But, done correctly, you’ll find your business growing its base of loyal customers after some time.
What’s frustrating for any business owner, however, is just how fast you can lose all that with just one damaging reputational risk. And by understanding what is reputational risk, you can prevent potential incidents that can cause you to lose loyal customers and online ratings.
In a digital age where concepts like cancel culture are more common, it’s no longer an option to try to ignore or bury a scathing review or post about your business. A study by public relations consultancy firm Edelman found that the majority of consumers are now what’s known as “belief-driven buyers.” Two-thirds of global consumers (and around 59 percent of consumers in the United States) are likely to buy or boycott a business based on the brand’s reputation and whether it goes against their beliefs.
The consequences of brand damage can range depending on the reputational risk factors affecting your business.
Here are the five most common reputational risks, some reputational risk examples and how you can protect your online brand reputation through effective reputation risk management and our own reputation management services:
1. Poor and Unsafe Workplace Conditions
More consumers are becoming conscious about the products they buy. This is why products tagged as “cruelty-free,” “all-organic” or “made with sustainable practices” are popular choices for consumers who want eco-friendly and ethical options.
However, this also includes factors like the treatment of employees and those in the production line. As a result, news about a business’s questionable cost-cutting measures or dangerous working environments can affect reputational damage for companies that want to reach out to a dominant belief-driven buyer market.
You can avoid these risks by performing a risk management analysis on your business. Assess your business model and how you operate. If you feel like there are business practices that you don’t want to be made public because of how they will be perceived, that’s a red flag for potential reputational risk. Addressing them as soon as possible can prevent them from damaging your reputation later.
2. Social Media and Virality
While social media provides plenty of opportunities for marketing and engagement, its ability to spread news and events like wildfire can be a risk for businesses. This isn’t necessarily limited to your business’s social media accounts posting content insensitive to current events or specific groups of people. This can also include your social media presence and that of your employees or anyone affiliated with your business – especially if the online crowd manages to trace your affiliation.
A recent example of this is back in 2020 when Lisa Alexander was recorded harassing a man for stenciling a political symbol on his property. She was later identified online as the CEO of the cosmetics company LAFACE, and users began to attack her business by leaving negative reviews on review platforms and social media. Because of the backlash, the business website had to be deleted. Affiliate companies like Birchbox, later on, had to denounce LAFACE and cut ties with the brand.
What’s interesting about this incident from a brand reputation management perspective is that the fallout affected another business uninvolved in the issue. Another cosmetics company, My LA Face, had a similar name to LAFACE. Unfortunately, many social media users mistook My LA Face’s Yelp business page for LAFACE and began spamming negative reviews.
While you can protect your business’s social media accounts by having experienced members on your social media team, the case of LAFACE and My LA Face shows how going viral can affect businesses even when acting outside the company. As a business owner, this can be tricky to mitigate since you can’t control what your employees do outside their working hours. However, you can take steps to address the incident and minimize its effects.
In the case of LAFACE, the CEO’s actions affected the company’s reputation, so their options on how to mitigate reputational risk were limited. As for My LA Face, it was fortunate for the small business that Yelp was willing to help with the mix-up by deleting the negative reviews. But given that their attempts to differentiate themselves from LAFACE weren’t totally successful, they’ll need to take steps to repair their online reputation.
3. Not Adapting to the Times
What was considered acceptable and commonplace 20 years ago isn’t the same today. This can include industry regulations, trends, business expectations, ethical practices and even the beliefs of your largest target market. And if your business isn’t adapting to the changes that will certainly affect your target market, there’s a reputational risk waiting to affect your brand image.
Harvard Business Review found that businesses that don’t adapt to these changes will fall behind on the expectations and beliefs of their stakeholders. In addition, when expectations and generally accepted practices change over time, remaining stagnant in your operations or your company’s practices can be at risk of backlash.
4. Data Breaches and Privacy Leaks
There are laws in place that protect our data in the hands of businesses. However, in case of a hacker or a virus causing a security breach, a business can experience data leaks that risk their customers’ information.
Incidents like these can affect customer trust, especially for businesses with higher data privacy standards or sensitive information. For instance, hospitals and health insurance companies are required to be compliant with the Health Insurance Portability and Accountability Act (HIPAA), so a data breach that leaks patient information can call into question a business’s legal adherence. And then, you have specific businesses like banks with highly sensitive information or cybersecurity companies whose job is to protect your data. So a data breach incident can be a source of serious concern for the stakeholders.
5. Poor Quality Products and Services
Having a couple of negative reviews is a regular part of establishing an online brand reputation. For most businesses, this can be mitigated by review monitoring. At best, readers may chalk this up to a few unfortunate experiences.
But when most of your online reviews paint the same picture of having substandard experiences with your business, readers may start to see a recurring theme. And since many people share the same sentiment about your products and services, they’re unlikely to expect anything better and will turn to your competitors.
One business that comes to mind for brand reputation management necessary due to product quality is Jaclyn Cosmetics. Back in 2019, beauty vlogger Jaclyn Hill launched her beauty brand with a range of lipsticks that sold out on the first day. However, many users took to social media to show the issues of her products. Many lipsticks were damaged or had air bubbles, white fibers or a gritty texture.
With so many negative reviews on the makeup quality, Jaclyn Cosmetics was forced to stop producing lipsticks and issue refunds. The backlash grew when Hill tried to defend her products until she was forced to delete most of her social media accounts. It wasn’t until two years later that she managed to recover and relaunch her brand in 2021.
Looking back at the timeline, this could’ve been managed better to minimize the negative impact the products caused. Better quality control measures could have prevented the issue entirely. But following the launch, from a brand image and reputational risk management standpoint, Hill’s mistake was how she responded to the online reviews about the quality of her product.
After word of Jaclyn Cosmetics’ lipstick quality started to become a trending topic on social media, Hill took a defensive stance on her products. When someone posted a negative review on Twitter and claimed the issue wasn’t an isolated case, Hill claimed that she hadn’t “seen one other person complain” about her lipstick, despite many reporting similar quality issues. Hill went on to suggest that the lipstick’s quality may be compromised because customers were using it with other lip products or because of dry lips. Hill later apologized for the quality of her lipstick and promised to refund everyone unsatisfied with her product.
In this case, understanding what is reputational risk, proper review monitoring, knowing how to respond professionally to negative reviews and creating a crisis management plan could have helped minimize their effects on your brand and reputation. In addition, having a team to conduct review monitoring and responding the right way can help businesses keep track of the overall feedback of a product.
How Reputation Management Services Help Small to Medium Businesses
You might think that reputational risks aren’t as bad and all it takes is laying low or waiting for the backlash to die before resuming operations. After all, you have brands like Nike and Gillette taking stands on divisive political and social issues and then businesses like Amazon and claims about their working conditions. Despite these issues, these brands are still standing.
This begs the question: If brands like these can survive reputational risks, are these brand damage issues important when considering your overall online brand reputation?
For starters, you have to remember that these brands are part of major corporations with plenty of revenue and an army of lawyers, public relations specialists and advertisers to soften the blow.
“Big brands can take more risks and survive bigger hits to their bottom lines,” Rize Reviews’ Senior Reputation Manager Tim Clarke said.
Smaller businesses, on the other hand, don’t have these resources to mitigate reputational risk, so the effects these have on their brand and companies can be devastating.
Our reputational risk examples show that a negatively impacted brand reputation can affect a business. Sales can go down during boycotts, customers could lose confidence in your product quality, and you could lose a number of loyal customers in the process.
In many cases, small businesses that experience a serious reputational risk often struggle to recover from reputational damage. At best, they learn how to mitigate reputational risk and manage to bounce back after the risk has been resolved. At worst, it can have financial consequences that could tank your business.
Let Rize Reviews’ Reputation Risk Management Minimize the Risk of Brand Damage
At Rize Reviews, we understand what is reputational risk and how a bad online reputation can affect your business’s interests. Through our effective crisis management and brand reputation management services, we can manage your reviews, repair your online brand reputation and take steps to undo reputational damage.
Get in touch with us today to get your free demo of our reputation risk management services and regain your target audiences’ trust with a brand image they can get behind. Then, let’s create a crisis management plan to mitigate the effects of those unexpected risks.