ONCE LOST, TRUST CAN NEVER BE REBUILT

If you have a strong brand and a desire to take restorative action, trust can often be either fully or at least partially restored.

Brands, just like people, can get things wrong. Most of the time these mistakes are innocent enough, small everyday errors impacting a small number of customers, the usual stuff of business, unfortunate and frustrating for the customer but relatively straightforward to rectify and resolve to the customer’s satisfaction. But occasionally things can go very badly wrong. These are mistakes that are so large and so systemic that they have the potential to jeopardize the future existence of the brand and the undertaking that supports it.

What tends to sit behind these kinds of mistakes is bad behaviour (in all its various forms) and the reason these mistakes are so damaging is that they directly impact upon trust. If your customers don’t believe you are trustworthy the consequences can be dramatic.

So if trust is hard won and easily lost, can it really be rebuilt? And if it is true that some brands have disappeared completely as a result of their behaviour, why is it that some brands are seemingly able to recover from a breach of trust while others never recover? Well, here’s the good news (especially if you are in the middle of a major issue): it is usually possible to rebuild trust, but first you need to understand both the nature of the breach and the actions required to address the problem.

Intentional, negligent or in open contempt?

The single biggest determinant that dictates the outcome of these types of event is the nature of the breach that has occurred. Was the breach intentional or ‘merely’ negligent? Was the breach the result of a direct instruction from the top of the organization or a rogue employee? Is the breach the result of a fundamental disregard or even an open contempt for customers? It also helps if you have deep reserves of cash and a large amount of existing goodwill.

At the beginning of the book, we touched upon Gerald Ratner and the subsequent collapse of his brand. His highly successful brand folded in the early ’90s amid a media storm after he spoke at a conference and openly admitted (with considerable hubris) that his own products were ‘crap’. This admission was fatal for the brand because it showed an open contempt both for his product and more importantly for his own customers. No one likes to be taken for a sucker, especially when it concerns items that are frequently bought as expressions of love or endearment. Ratner’s brand was fatally holed below the waterline.

Deepwater Horizon

Contrast that with the BP Deepwater Horizon scandal, which began on 20 April 2010. It seems reasonable to suppose that no one at BP intentionally set out to cause an environmental disaster, but Deepwater finished up being the largest accidental oil spill in the history of the petroleum industry. A sea floor gusher flowed for 87 days unchecked and subsequently discharged an estimated 4.9 million barrels of oil into the Gulf of Mexico. Eleven people lost their lives and some of these were never found. Operators Transocean and Halliburton were also implicated in the scandal and BP was eventually found to be grossly negligent. Yet in spite of criticism of leadership at the time and the potential damage to BP’s fledgling green credentials (remember ‘Beyond Petroleum’?) BP is still very much with us.

The key point here is that there was no intentionality to this disaster. Although BP was found grossly negligent and arguably should have foreseen the potential for an accident, it was in the end just that, a terrible accident. Most people appreciate that oil exploration is a dirty, dangerous and (at least for now) a necessary activity. Oil is increasingly difficult to find and increasingly difficult to extract. Yes, there were clearly failings and there may have been systemic issues at play but no one at BP ‘intended’ for the leak to occur. There is no doubt, though, that a less well capitalized and strategically important business might not have managed to survive. BP also made a well-documented hash of its early attempt to manage the situation and this ultimately resulted in the departure of its Chief Executive, Tony Hayward. The total cost to BP of the Deepwater Horizon disaster is currently estimated at around $65bn. The complexity of the accident and its contributory causes, together with BP’s ability to be able to pay huge reparations, has helped to ensure the brand’s survival. But the environmental impact is still being felt today: trust is slowly being rebuilt, but among certain constituencies this is likely to take a lifetime.

Dieselgate

The more recent VW ‘Dieselgate’ scandal serves to illustrate a number of important points. For those not acquainted with the detail of this story, VW was found to have secretly fitted ‘defeat’ devices to over 500,000 diesel cars sold in the US. The purpose of this device was to ensure that under certain test conditions the car would emit less pollution than it would under normal ‘real world’ driving conditions. This allowed the cars to appear to pass the stringent US emissions tests when in fact they were in normal conditions exceeding the specified limit. The car was actually able to detect when it was being tested and the device would be automatically activated for the duration of the test. In this instance there was clearly an intention to deceive both the customer and the regulator and it caused global shockwaves across the automotive sector. It was particularly shocking because VW was (until this point) very highly regarded and regularly posted the highest trust scores of any mainstream manufacturer.

For a short while it looked as though this crisis had the propensity to destroy VW, but eventually things began to stabilize. VW was probably helped by a number of factors. While this was clearly a big issue and there had been an obvious intention to deceive, the impact appeared (at least initially) to be limited to a specific number of cars in a specific territory. VW, prior to the scandal, was regarded as a global powerhouse, producing safe and reliable cars and while not good for VW’s reputation the scandal did not fatally undermine VW’s reputation for engineering competency and excellence. They were further helped by the lack of an apparent link (no direct instruction) between senior management and a global testing regime that could at best be described as highly flawed. Trust in VW had been severely damaged (the business posted its worst-ever financial performance in 80 years,) but the business has managed to regroup. Again, just like BP, the resignation of the Chief Executive helped draw some of the fire but deep pockets have also helped. The scandal is estimated by UBS to have cost VW in the region of $42bn. Since the scandal VW has worked extremely hard at rebuilding trust and while the scandal initially impacted sales, in 2017 they became the world’s largest car company. Their share price is also improving, albeit more slowly; at July 2018, VW was trading at approximately €143 per share. That is down from its 2015 high of €240 but up from €136 in 2016.

What BP and VW both demonstrate is that brands can survive catastrophic events but much depends on the strength of the brand before the crisis as well as the nature of the breach – how and in what way has trust been impacted? That is not the end of the story, though; assuming you have a survivable event, how do you start the process of rebuilding trust?

Righting the wrongs

Between 2006 and 2009 a number of customers started reporting incidents of ‘unintended acceleration’ across a range of Toyota and Lexus models (Toyota’s premium brand). Around the same time a number of Toyota drivers were involved in fatal accidents and these were directly attributed by the US National Highway Traffic Safety Administration (NHTSA) to episodes of unintended acceleration as a consequence of a defective accelerator unit. This had the potential to have a catastrophic impact on one of the world’s largest carmakers, especially one that had built its worldwide reputation on the reliability and durability of its vehicles. Once Toyota realized the seriousness of the situation, however, they quickly took decisive action. They finished up recalling and rectifying over nine million vehicles, initially to replace defective floor mats (first believed to be the source of the issue) and later to replace defective accelerators. Defective software was also later identified as an issue in wireless accelerators. The total cost of the recall was estimated at $5bn but both the willingness to address the issue and the scale of the recall helped to reassure customers. This incident demonstrated what could be achieved when a brand was prepared to take ownership and get proactive.

Samsung did something similar when their customers started reporting that significant numbers of their latest mobile device, the Galaxy Note 7, were catching fire and in some cases even exploding. For a premium global brand increasingly synonymous with cutting-edge mobile technology this had the potential to cause significant damage to Samsung’s reputation and undermine customers’ trust in their brand. Once the brand realized the extent of the problem, as well as the risk that the device could explode, the business took unprecedented action. Initially Samsung recalled 2.5 million devices and swapped them for devices with different batteries, believing wrongly that this would rectify the issue. When it didn’t (one of the replacement phones allegedly caught fire on a plane while it was switched off) Samsung then recalled all of the Note 7s and even took the unusual step of ‘bricking’ (effectively disabling) any devices still in circulation so that they could no longer be used. By admitting the issue, performing extensive testing and then being unrelenting in their quest to resolve the issue, Samsung were able to quickly recover and move on. Customers largely kept faith with Samsung and the brand continues to go from strength to strength.

Whether the issue at hand is a major crisis or even just an embarrassing incident, the extent to which trust is impacted is dependent on a) the strength of the brand before the incident b) the nature of the breach and c) how the brand chooses to react.

Samsung took a decision to act quickly in the interest of their customers. They made a mistake, apologized, took clear steps to resolve the issue and then implemented in a way that was consistent with their brand, including being prepared to face up to the full financial impact of their mistake. This contrasts with BP and VW, both of whom appeared to take longer to realize both the seriousness and culpability of their respective situations. Perhaps their relative size and organizational structure impeded their ability to act in a more agile manner? Eventually, however, these brands did grasp the seriousness of the situation and faced up to their responsibilities.

So evidently trust can be rebuilt (or at least partially restored) but how a brand chooses to act has a big impact on the eventual outcome. Even when a breach is much less serious, the same playbook still applies. Technology and social media have the power to amplify any small transgression. What matters is how brand owners choose to respond. This makes speed and agility incredibly important. Act quickly and imaginatively to a situation and you can turn a potentially damaging incident to your advantage. Virgin Trains did this brilliantly on a Pendolino inter-city train. After sitting down and using the toilet a passenger subsequently discovered there was no toilet paper in the cubicle. The passenger tweeted his annoyance and jokingly asked for help. Virgin picked up the tweet, worked out the precise location of the passenger and arranged for fresh supplies to be delivered to his toilet door. The passenger was delighted and the story went viral across a variety of social media channels. By reacting quickly to a single customer Virgin were able to turn a small negative into a large positive media opportunity.

The same logic also applies to fast-moving tech businesses like Uber. They are quickly discovering that what gets you to your first destination or business objective may not necessarily be sufficient for the next. Managing trust is not just about reacting to potentially damaging circumstances. It is also about taking steps to proactively avoid them in the first place. You may offer your customers a great service but that doesn’t mean you can get away with having a poor internal culture. In today’s business environment the way you behave to your staff is as important as the way you treat your customers. As we mentioned earlier, the better-known the brand, the more customers expect it to observe high levels of good conduct. When your brand has potentially negative social consequences you can’t afford to ignore them. You may not agree with the materiality of the situation or even the way the issue is being framed but you must not bury your head in the sand. If Uber appears to ignore the allegations that it is luring Indian taxi drivers into unsustainable commercial relationships, it raises suspicions that it either doesn’t care or is blind to the plight of others.

Trust and reputation are especially important in a regulatory environment. The constant flow of negative press sentiment surrounding Uber’s conduct has raised enough suspicion for the Mayor of London and the regulator to use this as the basis to suspend Uber’s licence to operate. Whether politically motivated or not, the Mayor has alleged significant safety concerns and expressed serious doubts over Uber’s legitimacy. At the time of writing the company has had its licence restored ‘on probation’, but a failure proactively to address trust issues has provided a basis for challenging what many customers see as a highly innovative and convenient service.

As we have seen repeatedly, if you have a strong brand and a desire to take decisive and restorative action, then in most circumstances (given time) trust can often be either fully or at least partially restored. That doesn’t mean that brands can rest on their laurels. Many of the high-profile scandals could have proved fatal if they had affected weaker brands with less robust balance sheets. Trust is hard-fought, easily lost and often costly to restore.

Neither should issues of trust be left to the realms of crisis management. Managing trust is integral to the management of your brand. It is an everyday activity; the constant drip of negative sentiment has the power to fundamentally erode trust even for the most celebrated and innovative companies.

So to conclude; should you ever find yourself part of a serious (but potentially survivable) breach of trust, follow these steps:

Act quickly; business, like nature, abhors a vacuum.
Take responsibility; offer an unequivocal and unreserved apology.
Develop a clear plan to mitigate and resolve the issues at hand.
Communicate the plan to all of your key constituencies.
Deliver in a style that is recognizably consistent with your brand.

If, however, you have directly insulted your customers, shown a cynical disregard for your own business, instructed your employees to do something completely dishonest or been revealed as a complete fraud, then you may find that trust has completely deserted you.

Of course, the best thing to do is to avoid such an incident in the first place. However, if one occurs the more goodwill you have built for your brand before the incident, the greater the likelihood that your customers will forgive you and give you the chance to rectify the issue.

ONCE LOST, TRUST CAN NEVER BE REBUILT

Intentional, negligent or in open contempt?

Deepwater Horizon

Dieselgate

Righting the wrongs

Further reading