Reputation is one of those concepts we throw around a lot. But what does it really mean? Reputation is all about perception, and this makes it a very difficult concept to grasp. It’s not a product we manufacture; when a product no longer sells we retool it and create a new reason for consumers to purchase it. Reputation is an intangible product and the effect of a good, bad or missing reputation can be astounding.
Menu Foods is one organization that has never recovered to its pre-crisis state after selling tainted pet food in 2007. Today, opinion of the auto industry, specifically GM and Chrysler, is quickly falling, leading analysts to wonder if those companies can ever recover. But not all damaged reputations are unrecoverable.
In August 2008, Maple Leaf Foods was blamed for one of the worst food-borne disease outbreaks in Canada’s history, which left 21 people dead and more suffering from listeriosis after eating tainted meat products.
At this time last year, Maple Leaf sat in 21st place with a score of 66 out of 100 on the 2009 Marketing/Leger Corporate Reputation Survey. Seventy-three percent of Canadians said they had a positive opinion of Maple Leaf and only 7% had a negative opinion, a fairly strong position to be in. Once it was announced that listeria was found in its products and people were dying, Maple Leaf’s reputation score immediately dropped from 66 to 8. Almost half the people surveyed moved from a positive opinion to a negative opinion of the company.
As its reputation dropped, so did its business. The company posted a third-quarter loss of $12.9 million, while earnings per share amounted to 10 cents, compared to $1.67 a share a year earlier. In the fourth quarter, Maple Leaf said the recall cost the company an estimated $59 million to $69 million before taxes, and profits were down 40%.
By January, Maple Leaf was experiencing calmer times. Its share price had recovered and its reputation score had crept up to 40, with almost two-thirds of Canadians (63%) having a positive opinion of the company. So, how did this happen? Why did it garner a strong recovery while companies like Menu Foods have never seen its share price rise substantially again? Why does Maple Leaf have the support of Canadian consumers while GM and Chrysler continue to fall further down the public perception pit?
The answer comes down to several key attributes that affect reputation: trust, transparency, credibility, commitment and honesty. Maple Leaf CEO Michael McCain appeared in a television ad, which was also posted on YouTube, to issue a candid apology for the outbreak. “We have an unwavering commitment to keeping your food safe with standards well beyond regulatory requirements, but this week our best efforts failed and we are deeply sorry,” McCain said sullenly. The company has since positioned itself as a leader in food safety, and is urging the government for tougher food-safety regulations.
The response from Maple Leaf was received by a consumer population that was open to the message and appreciated the honesty and credibility of McCain. In fact, additional research has shown that people who saw the video are significantly more likely to trust the company, are more likely to have a good opinion of it and are more likely to repurchase Maple Leaf products. All of this is great news for a company that is trying to recover its brand value and market share.
Canadians who purchased Maple Leaf products prior to the recall are significantly more open to Maple Leaf’s message and more likely to retain a good opinion of the company. In fact, even when Maple Leaf’s reputation score was dropping, 57% of those who bought Maple Leaf products still had a good opinion of the company compared to 30% of those who were not buyers. The relationship Maple Leaf had with these previous customers gave it the potential for a greater recovery. By January, 88% of the previous purchasers felt good about the company and only 7% felt bad. This marks a pretty decent recovery and explains why there is optimism that Maple Leaf can recover completely.
The lesson that comes from this is any company can recover from a crisis. And if you think you are not open to a crisis, think again. Companies that have a head-in-the-sand approach should start asking questions: “Are we prepared? What is our plan?” We need to think of ourselves as always being in a pre-crisis state, and embrace the Boy Scout motto: “Be prepared.” To prepare for recovery, we need to understand and then improve our relationships with our stakeholders. Let’s build up our reputation capital so if something occurs, whether it is in or out of our control, we have some capital in our reputation bank we can use.
One last note, Maple Leaf’s reputation has dropped a bit since January, after yet another recall of tainted food. Additional recalls and ongoing media reports on listeria will obviously not help Maple Leaf rebuild its reputation capital. Now it has to really convince consumers it will deliver on its promises. As long as the company continues to work at rebuilding this capital, we should see its score rebuild over the next few years.
Dave Scholz is vice-president of Leger Marketing in Toronto
