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What Happens When Brand Narratives Get Out of Control?

New Knowledge

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Apr 16, 2019

The unfortunate truth is that disinformation and the concept of “fake news” are here to stay. Users and small coordinated groups are spreading their narratives through social media and other avenues, making major headlines with wide-ranging effects. And there’s more - this activity not only poses a risk to the integrity of our information ecosystem but also to another community: brands and their loyal audiences.

Our information ecosystem is vulnerable to all comers, and brands are no exception. The unregulated realm of online information allows narratives, both authentic and inauthentic, to thrive in the wild. Brands lack the resources required to understand how these narratives take shape and the appropriate action to take, and they’re paying a hefty price.

With the proliferation of fake news, today’s consumers are wise to disinformation and its impact on brands. Over half of consumers surveyed in our 2019 Brand Disinformation Impact Study believe they’ve seen some form of disinformation about brands, and just under three-quarters report seeing disinformation on social media.

But, this is larger than a disinformation problem as there’s more at stake for today’s brands. Consumers value the public reputation of a brand more than ever. 75 percent of respondents from the same study report that the public reputation of a brand matters when it comes to making purchasing decisions. So what does that mean for brands whose narratives are taken out of their control and are exposed to false claims?

Unwanted controversy and media exposure

Brands have always received exposure from third parties, whether it is a brand champion or a user unhappy with a brand stance. The viral nature of the internet has allowed both types of messages to thrive and reach larger audiences. However, the spread of these narratives can evolve into disinformation and bring on negative exposure, controversy, and increased scrutiny of a brand.

Online users spread a narrative alleging that Coca-Cola was recalling Dasani water bottles due to a “clear parasite worm” that sickened hundreds of customers. Coca-Cola refuted the claim and the Food and Drug Administration (FDA) confirmed that there was no recall in process.

JD Wetherspoon was the subject of a Twitter campaign accusing the company of barring staff from wearing poppy flowers for Remembrance Day. The British pub chain released a statement that no such action taken and the Twitter account purporting the claims was fake.

Events like these have the opportunity to tarnish a brand’s reputation. With nearly three-quarters of consumers reporting they would buy from a brand with a positive reputation over a negative one, disinformation campaigns can have serious downstream effects.

Lost sales, decreased stock prices, and stock gaming

Disinformation campaigns against brands don’t just make them look bad - they can drain bank accounts too. 40 percent of survey respondents exposed to brand misinformation would stop doing business with a company, boycott its products, or buy from a competitor. And that’s not just survey data talking: it’s already happening.

The Karri Twist Indian Restaurant in London fell victim to claims alleging that the owner of the restaurant was arrested for serving human meat. Since the false claim started circulating online the restaurant has received harassing phone calls, vandalism threats, and lost 50 percent of its revenues. Six other U.K.-based Indian and Asian restaurants are targets of similar claims.

For public companies, stock prices may fluctuate based on how their narratives take shape with the public. Fake quotes attributed to Indra Nooyi, CEO of PepsiCo, incited a boycott of PepsiCo products and dropped the company’s stock price by 3.75 percent.

Coordinated efforts to game stock can also lower valuations. Various parties have used online channels (like Facebook and Twitter) to inflate the stock prices of micro- and small-cap companies, with one Canadian couple reaping a profit of $2.4 million.

While the exact amount of monetary damage a brand controversy inflicts varies from company to company, the power of influence online can cause offline costs.

Increased costs due to counter-crisis resources

In order to stay ahead of narratives taking shape and respond appropriately, brands must dedicate resources to these efforts. Quelling a controversy can be costly not just on the public, but also in the increase in resources needed to gain back control of the situation. Responses to counter devastating claims have to be wide-reaching in order to thwart efforts to bring down a brand.

Given that this is a new arena for brands, there’s not as much known about exactly what is required. Consider the assertions of Matthew F. Ferraro and Jason C. Chipman, authors of the article “Fake news threatens our business, not just our politics”:

“To preempt and eventually overcome these threats, a corporation needs communications and litigation strategies — it needs to be ready to respond to incidents online, through the press and even in the courtroom.”

That means more than just the standard social media response. Creating a centralized communication plan to inform the public of the hoax - and even going so far as suing the initiating agents - are valid ways to counter current campaigns and prevent future ones.

Long-lasting damage to the brand

The biggest risk of all when it comes to disinformation and coordinated narratives is that these types of events can change behaviors for years to come. 78 percent of consumers surveyed agree that disinformation inflicts damage on a brand’s reputation.

Over three-quarters of consumers report that it would take them between one and five years for a brand to reestablish trust with them once that trust has been lost. In those intervening years, consumers will likely take their business elsewhere. Consumers also indicate their willingness to take action against a brand if trust is broken, with 13 percent going as far as telling others not to shop with the brand and 9 percent pulling stock positions (or not investing in the first place).

Ultimately, consumers feel it is up to brands to take action against disinformation, with two-thirds reporting that brands are responsible for taking action. In the fight against misinformation, brands have a lot more to lose than consumers.

Brands must take action to control their own narrative.

Our modern information landscape is like the American wild west: anyone with access to social media and the internet can publish and spread their opinion, authentic or not, without repercussions - and achieve their desired results. Though consumers are more aware that some percentage of brand narratives are invalid, they’re still scrutinizing brand activity (regardless of the source).

Brands can get caught in a loop of negative media exposure, decreased financials, increased costs, and a damaged brand reputation. Executives must take action to better understand how their narratives take shape, create integrated plans to protect brand integrity, prevent the spread of false information, and take a stand for trust wherever possible.

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