We are living in one of the most volatile, unpredictable and geopolitically uncertain environments for many decades. At the same time, the economy continues to be challenged, the cost of living is still high, and many consumers remain financially squeezed.
In this context, customers naturally look for brands they can rely on that offer genuine value for money, high levels of service, and have their best interests at heart. These qualities build trust and engagement and provide a reassurance of their own in unsettling times.
This makes reputation a key element for any organisation, because reputation can act as a magnet that attracts customers and helps retain them. Protecting that reputation should be a constant priority, all the more so in our digital and social media age where news (whether true or fake) can spread and be shared like wildfire. It’s certainly true that building a reputation can take years – but in today’s world, losing it can happen in an instant.
Risk and reputation research
This is why recent research from The Institute is particularly relevant right now. Our research into risk and reputation gathered insights from both customers on the one side and managers and employees on the other. The findings underline the extent to which service is a key determinant of reputation – coming second only to the quality of an organisation’s actual products and services. The gap is not large either – quality of products and services was cited by 42% of customers while consistent high quality of service was named by 32%. Amongst managers and employees, the two were rated almost equally (33% vs 31%).
It is also interesting to see that customers care about a range of issues. Third on their list is a good understanding of customer needs (30%), but fair pay and conditions for employees comes next (23%). How organisations treat their staff, together with wider conduct including their treatment of suppliers and the values they demonstrate in the course of operating their business, increasingly matters to a wider range of consumers. Completing the top five is security of data (19%) – a reminder that cybersecurity must be high on all organisations’ operational agendas.
Dealing with service failures
Clearly, one of the biggest threats to an organisation’s reputation is the possibility of a significant service failure, whether that’s due to an internal issue or external factors beyond their control (such as extreme weather). The recent shutdown of Heathrow Airport due to a fire at an electricity sub-station is a striking recent example, creating pressing service issues not only for the airport itself but countless airlines as well as travel and booking agents. How customers have been dealt with during this incident could influence their perceptions and buying decisions for years to come.
Our research throws an interesting light on this – revealing that organisations tend to think they have handled operational crises more effectively and with less damage to customer perceptions than customers themselves report. Nearly half (49%) of managers and employees believe their organisation has mainly recovered its reputation after a major service failure – but 61% of customers say that their experience of a failure has eroded their trust in the organisation. Nearly a fifth (16%) of managers and employees say that the organisation is in a stronger position because it has learned from the experience – but 30% of customers say they will avoid using the business if they can.
How organisations manage operational failures is critically important – with proactive communication about the nature of the issue, the impact on customer service, how the organisation is responding and the timescale for resolution being key.
Poor service risks silent customer exodus
However, I am concerned that when considering risk and reputation, many organisations are very focused on operational risk and disaster recovery – but not focused enough on longer-term reputation management and protection through the consistent delivery of excellent service day-in, day-out.
Without doubt, many organisations have comprehensive disaster recovery plans covering multiple scenarios and rightly practise these periodically in training exercises and simulations. This is to be commended, as operational resilience and business continuity are core aspects of maintaining the service to customers on which reputation depends.
But the fact is that customers don’t only judge businesses by their experience in a crisis. In fact, they judge them far more extensively and far more often through their day-to-day interactions and the quality of service they receive. If they don’t believe an organisation’s service is up to standard, or if they feel that a business is more interested in making money from them than offering a truly customer-centric service with value and quality at its heart, they will go elsewhere. In this way, poor service can result in an insidious erosion of customer trust and loyalty, causing many customers to silently go elsewhere. It may be the public expressions of frustration and dissatisfaction in the wake of a major service failure that organisations most fear, but it is the actions of a quiet majority simply stopping engaging with a brand and switching to a competitor that does the most damage of all.
Operational resilience AND long-term service commitment
For these reasons, organisations need to truly consider the service agenda as a key lens within risk and reputation management. It isn’t a case of either/or; it’s a case of attention to operational resilience/crisis management AND long-term reputation through the service agenda. This raises important questions for boards, such as:
- Do risk management systems sufficiently reflect the reputational significance of customer service?
- Do boards and executive teams give appropriate consideration to the customer experience and reputational implications of their decisions?
- Do executive teams have sufficient expertise in customer service to make effective long-term decisions and respond with agility and care in a crisis?
Given the highly disrupted and uncertain environment that surrounds us all, managing and sustaining reputation through service isn’t only a challenge – it’s an opportunity as well, because the organisations that get it right can create a significant advantage over their peers. I urge all businesses to embrace this agenda and put the customer at the centre of how they view risk, reputation and long-term business success.
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