Tuesday, October 16, 2012

Social Media Crises Aren't Crises

We social media bloggers love a good "crisis." It can be tough to come up with new things to write about month after month, so when a company stumbles in social media--a daily inevitability across the entire social web--bloggers pounce. But is the focus on "crises" and "disasters" good for our industry, and is all this attention really warranted? When one examines the actual business ramifications faced by those companies that have suffered the most visible social PR events in the short history of social media, there seems little evidence to justify the level of attention and alarm dedicated to the never-ending cycle of "social media crises."

Certainly, when your company finds itself the target of hundreds (or even dozens) of irate and critical tweets and posts, it feels like a crisis, but are these events truly business crises? I recently explored this topic in a presentation I gave at the PR and Social Media Summit, and I suggested the term "social media crisis" is hyperbole--an exaggeration that marketing, PR and social media professionals leverage for more attention (and budget) but that inflates the short-term risks (while ignoring the actual long-term causes and threats).

Look at the granddaddy of social media crises, United Breaks Guitars. You all know the story, of course--how could you not? Back in 2009, as social media was beginning to attract serious attention, this event became fodder for thousands of books, blog posts, articles and conference presentations. Given the attention this received, one would think United was fighting for its very life, but did "United Breaks Guitars" really damage United's business?

While everyone seems to believe this infamous situation did harm to United, I have yet to find a single person who admits to altering their own travel habits because they heard Dave Carroll's sad tale. Did you, as a result of seeing the video, opt for a more expensive flight or less convenient itinerary in an effort to avoid United? Of course not, and neither did anyone else; in the six months following the release of the "United Breaks Guitars" video, the company's stock outperformed competitors Delta and US Airways by more than 150%.

Perhaps United Breaks Guitars is a bad example; after all, it occurred way back in 2009, when Facebook had 250 million users, 75% fewer than today. Here is a more recent example: Just two months ago, Progressive faced its own "social media crisis" when a comedian blogged how the company helped the defense of the person responsible for the accident that caused the death of his sister and, more importantly, Progressive's own premium-paying customer. That blog post went viral, and soon Progressive's Facebook page and Twitter feed erupted with anger (a situation further exacerbated when Progressive's Flo robo-tweeted identical responses.)

Did Progressive's "crisis" harm its business? We do not need to wonder, because the company's financial performance from this period can be found in Progressive's recent SEC filings. This event occurred in the middle of the company's last quarter, which ended September 30th. That quarter was the most profitable the company has had in over a year. Progressive's revenue was up 5.7% from the previous quarter and up 14% from the same quarter in 2011. The results were better than expected, lifting shares of Progressive's stock above the rest of its sector. There is no evidence this well-publicized social media event dented Progressive's financial results.

Update 10/26/12:  Remember the backlash Chick-fil-A faced?  Here's how it turned out for them according to USA Today: "So much for ‘bad’ PR. Consumer use of the chain was up 2.2 percent in the third quarter compared with the same period in 2011, says the Sandelman survey of more than 30,000 fast-food consumers conducted in markets where Chick-fil-A is located. Market share was up 0.6 percent, and total ad awareness was up a hefty 6.5 percent.”

And what about the 800-pound gorilla of social media crises--Bank of America's debit card fee debacle? This social media event made headlines worldwide thanks to a Change.org petition with 300,000 signatures, a Bank Transfer Day event with 57,000 likes and real-world protests at Bank of America headquarters.

At first, there was convincing evidence that this social media crisis caused real damage to Bank of America's business. In the month following Bank of America's debit fee announcement, credit unions reported they gained 650,000 new customers, more than the 600,000 customers who joined credit unions during the entirety of 2010. The Credit Union National Association reported that deposits into those new savings accounts totaled $4.5 billion. A poll by Harris Interactive found that nearly 90 percent of credit union customers said they were extremely or very likely to stick with their current institution, while only 40 percent of BofA customers said the same. Notably, all the attention forced Bank of America to reverse its decision and rescind the new fees.

Success--a social media crisis that demonstrably stung a company! Or did it? While some customers fled Bank of America, it was not enough to impact the company's overall performance. In fact, while credit unions reported picking up $4.5 billion in new deposits, Bank of America saw average deposit balances rise 500% more--an increase of nearly $25 billion in the same fiscal quarter as bank transfer day. And if any shareholders dumped their stock in the face of the vociferous social media protests, they regretted that decision; in the six months following Bank of America's disastrous fee announcement, shares of its stock rose 51% while the Dow Jones increased just 22%. In fact, after hearing how social media anger adversely affected the entire banking sector at the end of 2011, in the last twelve months, the KBW Bank Index has risen at more than twice the rate of the Dow Jones Index.

What does this all mean for social media professionals? I am interested in hearing your insights, but here are my conclusions:

  • We should stop using the term "Social Media Crisis": Merriam-Webster defines crisis as a crucial time with "the distinct possibility of a highly undesirable outcome." Social media "crises" are simply not resulting in "highly undesirable outcomes," at least as measured by important financial measures. Our use of the term "crisis" does not reflect well on our profession; it connotes panic when what we need to convey is assurance and capability. I have begun to change my language, using the word "event" instead of "crisis" or "disaster." An event is something we handle; a crisis is something we suffer. An event is something that can be planned for and prevented; a disaster is something we are powerless to foresee or affect.
  • "Social Media PR Events" do matter but are not as acute as many make them out to be: I compare social media PR events to broken bones. A broken bone is a serious medical event--it is painful, requires immediate attention from a professional, and needs treatment to prevent more significant long-term problems--but no one in the medical field calls a broken bone a "crisis" (unless the patient is elderly or has an underlying condition). In the same way, our social media PR events are serious--they take us off message, weaken relationships, increase costs, distract leaders and may result in short-term loss of sales--but our attitude should be similar to how doctors react to broken bones: Professional, capable, experienced and calm. That is the approach our bosses want and expect of us--not calling a "code" and pulling out a crash cart every time we receive a couple angry tweets.
  • Focus on the prevention, not just the cure: Certainly social media professionals must prepare their organizations for social media events--that is an important part of our job--but the exaggerated attention to crises may distract us from an even more important task--proactive prevention. Helping our organizations avoid the problems in the first place is not something we do just with tweets and posts; instead, we have to be consultants, helping peers understand the way the product and service experience, corporate decisions, employment policies, leadership, culture and mission can encourage or discourage advocacy, strong relationships and positive reputation.
  • It is our reputation that matters, not the individual events: To be clear, I am not suggesting that reputation and social media does not matter; to the contrary, reputation is increasingly important, regardless of the "crises" experienced. It is possible for a company to suffer from crises and still succeed--look at Apple, which has faced considerable questions about its environmental commitment and supply chain labor policies but still continues to set records on Wall Street. It is also possible for a company to struggle despite avoiding social media events; Hewlett-Packard stock is down 44% in the past year, but it has not (to my knowledge) suffered a serious social media event in this period. (In fact, search for the term "Hewlett-Packard social media" and you will find a great deal of praise and positive press.) Of course, social media is but one of many factors that impact company performance and stock price, but the power of reputation continues to grow in the social era. As Bob Garfield and Doug Levy shared in Ad Age, the 2006 Edelman Trust Barometer demonstrated that "quality products and services" was the top response in identifying the standard of trust, but by 2010, "quality" had dropped to the third slot. "Transparent and honest practices" is the new number one, with 83% of respondents citing it. In short, it's not the crises that matter, it's your reputation.

What do you think? Are we too obsessed with "the social media crisis"? Do you have some good examples of social media crises that have demonstrably and adversely affected company performance? Your input is appreciated!

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