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Taking a stand with your brand? Beware of the reputational pitfalls

January 11, 2023

Luxury brands repositioning to be more socially or politically conscious should tread carefully. If their actions or past behaviors contradict their new stance, it could do their reputation more harm than good.
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A company talking about their position on social or ethical issues can help luxury brands stay relevant and appeal to younger consumers.

Whether responding to injustice, a social movement, or the zeitgeist, it can demonstrate the brand understands changing attitudes and can move with the times. 

But there are potential pitfalls too. Any skeletons in the closet can quickly take the shine off the brand’s image, especially if they appear to contradict the claims you make.

For example, repositioning as a more sustainable brand could backfire if stories emerge about environmental damage or poor labor practices in the supply chain.

So what do companies need to consider? How can they avoid missteps that could damage their reputation – and recover the situation if the plan backfires?

Like any big change, brands should make sure they take the organization with them, do careful due diligence, and make sure they have a plan if things go wrong.

The pressure to take a stand

People are not just passive consumers any more. Through social media they seek more interaction with brands – and ask more of them.

64% of people said they felt social media had given them a voice to influence brands

In recent surveys, 64% of people said they felt social media had given them a voice to influence brands1, while 54% believe it’s easier for people to get brands to address social problems than to get government to act2.

This creates a pressure to take a stand on important issues – and even to join in forms of activism.

For example, many brands felt compelled to respond to Black Lives Matter and MeToo, rushing to condemn racism and sexism and position themselves alongside these movements.

The risks of being cancelled

In a heated social media environment, companies as well as celebrities can be targets for cancellation.

Activists are particularly quick to pick up on any perceived hypocrisy – saying one thing in public while private actions or past behaviors demonstrate the opposite.

In the case of Black Lives Matter, some luxury brands that supported the movement found themselves exposed and embarrassed by past racist comments and associations, or examples of cultural appropriation.

In the case of Black Lives Matter, some luxury brands that supported the movement found themselves exposed and embarrassed by past racist comments and associations, or examples of cultural appropriation.”

Richard Sheldon | Head of Specialty Broking & Senior Director, Carrier Management

As a result they were boycotted by customers and forced into changing their own cultures rather than leading the change in society as they intended.

Similarly, a maker of luxury activewear walked into a social media storm when it promoted a workshop on how to ‘resist capitalism’ despite profiting from products that most people can’t afford.

Although the workshop was not run by the brand, it shows how any inauthenticity can be pounced on and how brands can be tarnished by association.

Brands that try to push the boundaries and challenge accepted norms also risk a public backlash if their campaigns are perceived as stereotyped, sexist or harmful – witness the ‘cancel Balenciaga’ movement following the recent controversy over its advertising campaign.

How to avoid the pitfalls and protect your reputation

Investigate your past

Before you take a stand on an issue, you need to know how that sits with your actions and behaviors, in the past as well as the present.

Transgressions that took place during World War II or even the time of slave trade can be exposed and rebound on you.

Your due diligence needs to go back through the entire history of the company and identify any dark secrets before others do.

Check your associations

Brand ambassadors or influencers who turn out to have shady pasts could undermine your stance and tarnish your reputation.

Review all your associations, including sponsored stars, to make sure they reflect your ethos.

Be authentic and walk the walk

Make sure the new stance has buy-in across the company and is backed by action at every level.

Create programs and policies internally to make sure the change happens.

Otherwise the repositioning will only be skin deep and risk being contradicted or undermined by people who ‘didn’t get the memo’.

Respond, don’t retreat

If someone highlights an issue from the past or asks difficult questions, face it head on.

Research shows that customers are very willing to forgive a brand that admits its mistakes and tries to make amends.1

Research shows that customers are very willing to forgive a brand that admits its mistakes and tries to make amends.”

Richard Sheldon | Head of Specialty Broking & Senior Director, Carrier Management

Accept responsibility, apologise and make public statements if needed.

Show genuine contrition and a move away from the offending behaviour in action as well as words.

Have a plan if things go wrong

Even the best laid plans can’t always prevent a reputational crisis. You should have a comprehensive crisis plan in place, backed by the right resources and know-how.

The plan should cover how to respond to the situation, minimizing financial losses and rebuilding any unavoidable damage to your reputation.

A helping hand: WTW reputational risk

WTW has partnered with some of the global leaders in this field to develop a holistic solution that can help prevent a crisis happening and support the response and recovery if it does occur.

Planning: our Reputational Risk Readiness Review can help organizations define and quantify their reputational risks, identify the potential impacts and map any gaps that need mitigation.

Prevention: to get ahead of events and prevent potential reputational issues escalating into a crisis, the powerful Polecat platform offers real-time horizon scanning.

AI-powered algorithms synthesize data from online and social media channels into dashboards and risk alerts for relevant media.

Response: WTW offers access to experienced crisis communications experts who have managed crisis situations of all types around the world, from advice on media handling and strategy to leadership statements and speeches.

Risk transfer: our reputational risk insurance product offers up to $50 million cover for loss of gross profit as a result of a significant adverse publicity event.

This can include immediate interim payments to get through the crisis and support spread over up to 12 months to help you stay afloat in the aftermath.

Rehabilitation: our experts will work with you over the longer term to develop campaigns and communications to help you turn the tide of public opinion back in your favor.

To find out more about our Reputational Crisis Insurance and Risk Management Solution, please get in touch.

Footnotes

1 Porter Novelli 2021 Business of Cancel Culture study
2 Edelman 2018 Two-thirds of consumers now buy on beliefs

Disclosure

WTW offers insurance-related services through its appropriately licensed and authorised companies in each country in which WTW operates. For further authorisation and regulatory details about our WTW legal entities, operating in your country, please refer to our WTW website. It is a regulatory requirement for us to consider our local licensing requirements.

Contacts

Richard Sheldon
Head of Specialty Broking & Senior Director, Carrier Management

Kevin Velan
Director, National Product Recall Team

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