September 4, 2019
The New Age of Reputational Risk
by Paul Carroll
Insurers have for decades nurtured brands that reflect stability and caring: Prudential’s rock, the Travelers umbrella. More recently, insurers have spent billions of dollars developing hip brands: Geico’s gecko, Allstate’s Mayhem, Farmers’ “we’ve seen a thing or two.” But we’re now in an age where brands can take a hit overnight, at the hands of an angry mob, so it’s important to think ahead about where the dangers may lie. Otherwise, your reputation may find itself caught up in Mayhem.
To see how quickly a reputation can change, look at the Equinox and SoulCycle fitness companies. They were growing fast, with progressive, healthful reputations. Then it was announced that Stephen Ross, who owns Equinox and has a significant stake in SoulCycle, was holding a fund raiser for the Trump 2020 campaign. Protests erupted all over, and many canceled memberships. It remains to be seen how deep the damage is, but damage has clearly been done.
In a fascinating podcast with our Wayne Allen, Ryan Cassin, a digital and political strategist who is the CEO of Asset, cited a 2018 study that found that 64% of customers buy on belief, which he described as a company’s values and politics. He said that figure was up 13 percentage points in just one year.
So, he argues, it’s crucial to make sure your beliefs as a company line up with those of your customers.
That’s not always easy. The Business Roundtable’s recent statement encouraging companies to focus on all stakeholders, and not just on generating short-term profits, sounds great in theory, but how does a CEO tell a major investor with a seat on the board that the management team isn’t interested in maximizing profit? How much should a CEO take on politically contentious issues, such as climate change or gun control? Some customers will feel one way, others the opposite—and, especially these days, many will be passionate about their beliefs.
Sometimes, the tradeoffs can be explicit. Chick-fil-A wins many fans because of the religious beliefs of the owners of the fast-food chain but those same beliefs alienate many others. Nike took a huge hit to its market value when it launched an ad campaign supporting football quarterback Colin Kaepernick but actually saw sales surge because its target audience was more likely than not to support his kneeling during the national anthem of NFL games to protest racism. The companies can sort through those sorts of tradeoffs.
Sometimes, though, problems can sneak up on companies. Wayfair found employees and customers suddenly up in arms when it became public that the company sold furniture for use in detention centers for migrants along the U.S.-Mexico border. Google faced an uprising among many employees over some work it was doing to use artificial intelligence to interpret video for the Department of Defense. Both companies could defend themselves. Migrants deserve good furniture, right? And the U.S. needs the best defensive capabilities possible. But some actions create problems even if reasonable rationales exist.
To me, the best way for our industry to head off reputational hits is to stay focused on our True North. We’re about removing risks from people’s lives and making them feel more secure. That’s a pretty great mission.
Nobody gets a pass in a day and age when an angry mob can appear on your doorstep in a nanosecond, so we have to defend our reputations every day, but if we keep the main thing the main thing I think we’ll be okay.