What Does a Bad Online Reputation Cost a Business?

While social media has the power to magnify brand damage, a bad reputation doesn’t only travel the digital space but can also go as far as your business finances.

In this blog, we look at the financial effects of having a negative online reputation and how a bad reputation ultimately impacts your bottom line.

The Cost of a Bad Online Reputation to Your Business 

Let’s go over the business aspects directly affected by a bad online reputation:

Customer Acquisition

Very few people will choose to engage with a business after reading a string of negative reviews. A previous study by Moz also revealed 22% of potential customers would skip doing business with a brand if they saw a scathing article on the first page of search results. And if there are three of these sorts of press releases, that figure rises to virtually 60%. Thus, a negative reputation ultimately has financial implications.

Customer Retention

While related to customer acquisition, customer retention is the ability of a business or product to keep its customers for a certain period. While bringing in new business is important, customer retention is more cost-effective and brings a high return on investment (ROI). Earlier findings by Bain & Company revealed a 25-95% revenue increase could be attributed to a mere 5% increase in customer retention.

Talent Acquisition

Your brand reputation as an employer plays a significant role in attracting the best talents. Prospective top talents act similarly to your clients, scouring the internet to find more information about your business. Job seekers will read what your current and past employees are saying about your company as a whole, its management, benefits and culture, considering both positive and negative reviews. 

Talent Satisfaction

Even if a talent decides to work with you despite your brand’s negative reputation, the matter will likely get to them sooner. Employees will eventually get tired of associating themselves with your business’s bad reputation. Your sales team will be impacted the most since they represent your brand to clients. So if you rely heavily on your sales team, it’s time to switch things up and improve your online reputation.

Brand Equity and Value

A negative brand image directly impacts your brand’s equity and, thus, your brand value. Brand value is the monetary significance a brand holds, whereas brand equity is the importance of a brand in the eyes of consumers. So when you have good brand equity, you are able to charge a higher premium for your product or services. Thus, mending brand damage is not only essential but incredibly lucrative.

Causes of a Negative Online Reputation 

As we previously learned, taking steps to undo your negative brand image and improve online reputation is essential to business growth and success. But could you prevent such a crisis?

From deceptive marketing to negative reviews, here are the causes of a bad online reputation.

False or misleading representation of products and services. Federal and state laws exist to safeguard consumers from misleading or false advertising. Such laws make deceptive claims illegal. So other than a negative online reputation, there are legal ramifications that ensue.

Direct actions of your company, its staff and partners. While you may think that the actions of your staff and partners are not direct actions of your company, the public will likely disagree. Actions can be unethical misconduct that leads to a bad online reputation.

Poor customer service. Neglecting client needs and practicing poor customer support inevitably leads to customers switching to competitors. Thus, poor customer support not only gives you a bad online reputation but also lost revenue and reduced profits.

Negative online reviews. Consumers seek out reviews before making a purchase. This stands true for everything, products and services. So if you have a couple of unmanaged negative online reviews tied to your name, consider addressing them before they snowball.

Lack of social responsibility. Social responsibility is an individual or a company’s duty to operate in such a way that benefits society as a whole. This may include charity work or supporting a cause. Brands that do not practice social responsibility risk gaining a negative reputation.

Your response to negative online reviews. In light of a negative brand image due to reviews, your response can fan the flame and worsen your brand reputation. Onlooking prospects can be forgiving when they see you respond to negative feedback that conveys sincerity and straightforward solutions.

Quick Guide for Replying to Negative Reviews

To mitigate further brand damage and improve online reputation, here are simple steps for responding to negative reviews:

1. Stay professional. It’s far from pleasant to receive negative feedback, especially if the comment is false. Still, stay professional in representing your brand.
2. Personalize your message. Avoid sending canned responses; personalize your answer and address the customer by name.
3. Thank them for the feedback. It may be counterintuitive to do so, but thank them for taking the time to write about their experience with your brand.
4. Take responsibility. If you realize you or your staff is at fault, take ownership of any shortcomings and apologize. Be sincere and emphatic when apologizing.
5. Ask for a second chance. If you own a restaurant, you can try reinviting over for a second time. Even if they refuse your offer, it won’t hurt trying.
6. Flag the review if necessary. In cases of false and defamatory statements, flag the review. For instance, you can report to Yelp if any reviews breach its guidelines.

Pro tip: You should have a dedicated staff working on your review responses. If short-staffed, you can hire an online reputation management services company to take charge of your reputation repair and review response strategy.

Brands That Paid the Cost of a Negative Online Reputation

Here are two examples of brands that could have done better in their online reputation management services.

University of Phoenix

Formerly among the most renowned for-profit universities, the University of Phoenix had a 70% fall in enrollees between 2010 and 2017. The school’s bad reputation as a result of claims that it preyed on veterans who knew they had little chance of graduating and would thus be eligible for federal help was a major reason for the institution’s decline.

United Airlines

In 2017, after a video of a passenger being forcibly ejected from his seat on a United Airlines flight went viral, outrage spread around the nation. Oscar Munoz, CEO of United Airlines, handled the situation poorly, and as a result, United’s stock fell 4% in the days that followed the incident. That translates to a loss of up to $1 billion in the market value of the business.

The Road to Brand Reputation Repair

Every brand wants to get a better online reputation but is unsure how. Here are simple steps you could take following brand damage.

1. Meet with key personnel. Involve all company stakeholders, including department managers. Remember, each department impacts your brand reputation; you need all the help.
2. Perform brand reputation audit. Since there’s a crisis at hand, you want to put a pulse on your brand’s standing. Scour the internet and learn what people are saying about your brand.
3. Establish a reputation management plan. The audit should present you with an informative assessment of your reputation, from which you can discuss your company’s next steps.
4. Call in the experts. Again, brand damage can lead to financial losses. So you don’t want to take it lightly. Instead, you should call for professional online reputation services.

Rize Reviews offers online reputation services for other agencies, including white-label solutions. If you do not require reputation repair, don’t wait until a crisis hits your brand; let our team safeguard you from future incidents and help you get a better online reputation in the long term.