How Crisis Affect B2B Brands

Survey: Majority of b-to-b marketers lack crisis plan

As appeared in BtoB Magazine on November 1, 2007
By Matthew Schwartz

The numbers are nearly parallel: About 53% of marketing executives responding to a recent survey said they have experienced a business crisis resulting in negative news coverage, declining sales or reduced profitability. But just about the same number (57%) said their company does not have a crisis response plan currently in place.

The online survey, which was conducted in mid-September by BtoB and Eric Mower + Associates, group b2b, took the pulse of 251 marketing executives about their crisis preparedness.

Among the 43% of companies that do have a crisis plan in place, 10.1% worry about their ability to implement it, and only half have tried spokespersons.

“If companies choose not to be prepared for a crisis, they and shareholders will pay the price, because crises have a way of twisting and turning till they do serious bottom-line damage,” said Peter Kapcio, director of reputation management services at Eric Mower + Associates and head of that agency’s crisis communications practice. “In most cases, it’s not the initial trigger of the crisis that causes the damage; it’s what follows a botched response.”

While crisis preparedness will not prevent an incident, it can “minimize the clean-up costs and the long-term damage to the brand.” Kapcio said, adding “It’s downright professionally irresponsible when b-to-b marcomm people allow their companies to operate unprepared. What if your brand new corporate headquarters building burned down, and it was discovered later that you facilities manager had “neglected” to buy fire insurance? It’s the same thing when b-to-b companies invest millions in building their brand or company reputation, and then do nothing while it’s all at risk from the next potential crisis.”

Indeed, corporate crises-ranging from product recalls to an increasingly digital age, vituperative online comments about a company’s products or services—take a significant toll. Twenty-three percent of respondents said it took three months to a year for their brand to fully recover from a crisis; 13.3% said it took more than two years to recover; and 17.7% said they have yet to recover after two years.

In 2004, Sun Microsystems began conducting quarterly crisis simulations, ranging from a natural disaster in the nearby Bay Area, to a breakout of avian flu to issues surrounding products and services.

“We do it because our reputation is everything,” said Karen Kahn, VP-global communications at Sun. “Whether you fail to communicate on a small issue or a natural disaster, the market is very slow to forgive.”

FedEx Corp. has had a crisis communications plan in place since 1996, said Sandra Munoz, the manager of communications at FedEx. She said the company globalwide conducts crisis simulations at least once every two or three years and crisis contingency plans are updated regularly.

“Crisis isn’t necessarily a disaster but anything that could affect you reputation,” Munoz said, adding that too many companies look upon crisis as the former rather than the latter. Buy-in from top management, she said, is crucial for crisis preparedness to flourish. “[FedEx Chairman, President-CEO] Fred Smith realizes that things happen and that there is an importance to having a crisis plan and a process; and that it goes down through the ranks of executives.”

According to the BtoB/Eric Mower survey, among those companies that did have a crisis plan in place, 29.3% said it protects the brand sufficiently, 26.3% said it protects the brand somewhat and 20.2% said protection cannot be anticipated.

Marketers Roles

Kahn said that while crisis plans are crafted at the management level, marketing executives have to know what role they should play if a crisis occurs.

“It’s very scary for [marketing executives to face] the potential risks of a crisis,” she said. “They have to work with [their] global communications [department] to determine what the protocol is during a crisis and how does it filter down to the marketing level. It’s just a smart thing to do.”

Kapcio endorses the idea of conducting crisis simulations. He said the most effective way to implement crisis preparedness is to identify the most likely risks and conduct “What if?” scenarios.

“Nobody can develop a plan that can completely foresee the future,” he said. “The real purpose of a crisis plan is to enable you to make good decisions under extreme pressure in difficult and unpleasant situations.” He added, “A crisis is not a time for large committees or complex systems.” Companies need to assemble a tight-knit team of “battlefield generals” or executives who have the personality to deal with a conflict, controversy and bad news, Kapcio said. “Chances are you already know who in your company belongs on your crisis team,” he said.

While the media will demand answers when a crisis hits, Kapcio said the most important constituency is the company’s employees. “In reality, 99.9% of the time, your first response audience is your own employees. Say and do the right things in front of that audience, and the odds are great you will have responded correctly in the first hour of a crisis,” he said. “We have found in many situations the press will judge you by how you communicated with your own people, and that will shape the media coverage that follows.”

According to the survey, a majority [55.7%] said layoffs, shutdowns, or business foreclosures sparked a crisis. Some 45.2% cited operational or services failures, 33% cited legal or ethical problems and 32.2% pointed to a competitive attack, such as negative word-of-mouth or messaging by other with a vested interest in damaging the business.

More than two-thirds of the survey’s respondents [39.1%] are marketers of services, both b-to-b and b-to-c; 41.6% work for small or family-run businesses; and 21.2% work for a Fortune 1,000 company.

See the Full Survey Results of the BtoB Magazine / EMA Crisis Survey