I had a great conversation recently with two of ITSMA’s brand gurus, Geoff Dodds and Julie Schwartz. We put ourselves in a hypothetical situation that some of you may have faced for real: when something bad happens that involves your company–think Tylenol poisonings, accounting scandals, etc.–what do you do to protect the brand image you have spent years building up from crashing down around you? And perhaps more importantly, should you let the brand crash–i.e., start fresh with a new name and image?

We agree that there are a few steps that you have to take right away before making any drastic decisions about the ultimate fate of the brand:

1. Respond quickly. Everything that a brand stands for is up for grabs during a crisis. Customers and prospects will be anxious to hear whether they were right to place their trust in the brand. And they won’t wait long before making up their minds. Quick response is critical to making sure that the perceptions attached to the crisis don’t become permanent. Before making any drastic brand decisions, it’s important to clarify what will be done to rectify the crisis and to understand the impact of the crisis on the business.

2. Be transparent. As soon as you have an action plan in place for the business, communicate it. Be open and honest about what happened and what is being done to fix the problem.

3. Assess the pace and depth of customer losses. The most important vital signs for companies to monitor in the wake of a crisis are the pace and depth of customer losses. Factors that will impact the pace and depth of losses include the following:

• Low switching costs. If the costs of switching to another provider are low, customers may panic and try to switch in the immediate aftermath of the crisis, increasing the pace and depth of losses. If switching is difficult, the pace of loss will likely be slower.
• Dire predictions from analysts. If Wall Street and/or industry analysts are outspoken in predicting that the crisis will have a substantial impact on the provider’s ability to do business now or in the future, it could precipitate a stampede.
• Level of commoditization. If the provider’s offerings are not substantively different from those of competitors, brand loyalty may be slim and customers will be vulnerable to aggressive poaching by competitors.
• Length of the crisis. If the crisis is something that can be resolved relatively quickly, press and analyst attention will likely die down quickly too, perhaps decreasing the long-term pace of customer losses. However, if the crisis results in a lengthy public investigation, the long-term impact could be severe.

Have we left anything out? Please let me know.

Next time, we’ll get into some of the specific customer reactions to a crisis.