According to Accenture’s 2016 UK Financial Services Customer Survey, customer trust levels have lowered in recent years across multiple industries. Nowadays, information travels fast around the world and Internet-connected devices allow people to react instantly on every new piece of information. Companies benefit from that, as marketing departments can directly engage customers. However, when businesses make mistakes, the information quickly spreads, resulting in PR scandals which downgrade the customer experience. Below I summed up three of the worst public image crises and how the targeted companies managed customer backlash.
Equifax data breach
Hacks with disastrous effects on customer security and trust make headlines almost every month. As businesses now grow in a digital environment, the amount of leaked data is more abundant, detailed and harmful. Best VPN Rating’s recent article shows leaked data figures for attacks that took place in the last 10 years. If Heartland Payment Systems security led to a leakage of data on 130 million credit and debit cards, the recent Equifax website hack affected 143 million citizens of the US.
From ignoring their security company’s alerts and announcing the accident two months late with cold apologies, to letting its executives sell stock to an informed market, The Equifax aftermath is an example of faux pas in customer relationship management. Now they have to deal with numerous lawsuits, a big stock price drop and federal investigations.
In this time of intensive cyber hacking, every company dealing with sensitive data must have a well-defined action plan in case of a breach, with a strong focus on the customer. The backlash can be minimised if the enterprise offers accurate information about the exposed data, actionable advice for immediate protection and constant updates on the matter. Also, businesses need to communicate their long-term plan for better protection.
The Volkswagen defeat device
Volkswagen has introduced software able to cheat on emission tests on 11 million Diesel cars between 2009 and 2015, putting on the US market automobiles which emitted 40 times the legal levels of nitrogen oxides. The he scandal erupted in 2015 and two years later, the company is still facing customer drawback.
Volkswagen’s strategy in dealing with angry and disappointed consumers was prompt and smart: they immediately admitted their mistake and CEO Martin Winterkorn resigned. They also offered a 1000 $ split gift card to the affected customers- half of the sum for mending costs and the other half for personal purchases. These goodwill spendings lead to ‘positive emotional outcomes for consumers who see it as a windfall or bonus, especially around the holidays.’ as Marketing Expert Sylvia Long-Tolbert highlights in this interview.
However, that doesn’t make up for the fact that the exposed models have no resale value or that the cars are highly polluting, a very important issue for younger customers who believed they bought a clean car. Moreover, the scandal affects the brand’s identity - VW was praised for innovation. The company has profited down 20% after the emissions’ scandal and hasn’t recovered well since.
Wells Fargo’s employee misconduct
Another recent corporate scandal was caused by employment misuse of personal information. Over 5000 workers created bogus accounts using real customer money, which obviously resulted in overdraft and other costs for clients who had no idea of what was happening.
The first two cases were related to decision-makers’ lack of professionalism and ethical values in treating customers, but this one was caused by the misconduct of thousands of bank employees. The corruption culture that spread across the company is believed to have emerged from the unrealistic targets, most notably the Gr-eight campaign.
Wells Fargo fired over 5000 guilty staff members and tried to turn the situation in their favor, showing they are willing to make up for their mistake at all costs. However, none of the top management members has said to be guilty of this situation. Then, under public pressure, the company gradually acknowledged the management failure, removed their disputed sales targets and agreed to a $110 million settlement to cover all affected clients. But customers penalised the lack of honesty and the bank is still struggling with the aftermath of the event.
All things considered, companies dealing with the communication of their wrongdoing need to start rebuilding customer trust immediately as the news has gone public. Before making organisational changes, consumers need detailed information, proper guidance in preventing further loss, compensation and constant follow-up about the businesses strategy to prevent future issues.
About Philip Piletic
My primary focus is a fusion of technology, small business, and marketing. I’m an editor, writer, marketing consultant and guest author at several authority websites. In love with startups, latest tech trends and helping others get their ideas off the ground.