Bad news has a long shelf life

Rebecca Watson Date published: Apr 03, 23

Three decades working either as a journalist or public relations manager has taught me a few things about the fragility of reputation. Whether reporting on it, or trying to protect it – nothing gives you the sense you’re earning your salary more than a corporate crisis.

There’s a saying in the UK: “Today’s news is yesterday’s chip paper” which basically means, what might be a headline today, is tomorrow just something we use to soak up grease and fat – it’s not important.

However, as recent Ideagen consumer survey ‘Building trust in uncertain times’ showed us, that saying could not be more wrong. When presented with a list of ‘bad news events’ relating to quality and safety, people’s recollection went back many decades.

£500m wiped-out in a day

One of the most infamous ‘bad news day’ examples was that of Ratners Jewellers. It’s now a module in virtually every media training course for how NOT to talk publicly about the quality of your business. In 1991, at an Institute of Directors dinner at the Royal Albert Hall in London UK, Gerald Ratner, Chairman of the group of companies that consisted of high street jewellery retailers such as Ratners, H Samuel and Ernest Jones in the UK and Kay Jewellers in the US, described a pair of earrings they sold as “…cheaper than a prawn [shrimp] sandwich … but I have to say the sandwich will probably last longer than the earrings." As well as some other descriptive terms too impolite to put in writing.

The following day this was all over the news and almost immediately, the share price plummeted, knocking £500m off their stock value (a huge amount back then). They finished the year £122m in the red, closed 330 shops leading to more than 2500 people in the UK and US without a job.

That’s perhaps one of the most extreme examples, but the findings of the survey show that these high-profile examples of quality or safety failures stick in the minds of consumers. The BSE beef crisis, termed by the media as ‘Mad Cow Disease’ was recalled by 65% of respondents, despite the peak outbreak being in the early 1990s, 62% were aware of salmonella in eggs in the 1980s, and PPI miss-selling in the early 2000s (57%). If you factored out those age groups not alive at the time of the crises, those numbers rose to more than three quarters of those questioned.

It also appeared to impact all industries, as the top ten most recalled included food, financial services, medicine, medical devices, automotive and fashion.

Scandal by association

It doesn’t even necessarily need to be your actions that cause you issues. How closely you’re aligned with individuals can also have an impact. ‘Cancel culture’ is the modern term for brands disassociating themselves from celebrities, but it’s not a new phenomenon. According to the University of California, when golfing superstar Tiger Woods went through a very public marriage breakdown in 2009 admitting a number of extramarital affairs, his main sponsors experienced a collective loss to their shareholders of a reported $5-12 billion. His main sponsor Nike’s value on the stock market immediately fell by 11%. Nothing to do with the brands themselves, but they felt the impact on their bottom line. Kate Moss lost lucrative deals with Channel, Burberry and H&M when it was revealed she had used class A drugs and more recently many brands have disassociated themselves with rapper Kanye West after his antisemitism controversy.

Reputation matters

Another interesting finding from the Ideagen survey was that a quarter of people who recalled the mad cow disease scare or salmonella in eggs said it changed their purchasing decisions, healthcare decisions and opinions. This highlights the lasting impact that quality issues can have on consumer trust and behaviour.

So what does this mean for business?

Clearly prevention is better than cure, the importance of quality and safety management systems cannot be understated. Failure has to feature in organisational risk registers and businesses need to consider the end-to-end supply chain – because even an association is enough to be reputationally damaging. Digital systems over paper-based will help provide a complete picture and spot risks before they become failures. Over and above any fines or regulatory action that can result from quality and safety mistakes, organisations have lost customers and gained enduring mistrust, some like Ratners Jewellers, have disappeared completely.

What's next

For more insight on the impacts of quality and safety on consumer behaviour, download the Ideagen survey ‘Building trust in uncertain times’

Download now