Reputation and your brand – the effect of bad publicity

Corporate slip-ups don’t go unnoticed. Scandals make headline news. Employees go on strike, consumers voice their outcry on review websites, and TikTok influencers put all your dirty underwear on full blast. All of this bad publicity can knock a brand’s reputation. But what is the real effect of all this and is the motto ‘no publicity is bad publicity, even the negative’ correct?

The Damage Is Done - Bad Publicity Wreckage

Various brand valuators all point to bad publicity as having serious consequences for a brand. In 2016, Sports Direct saw their reputation drop to a weak rating by the Reputation Institute after a series of scandals. On YouGov’s BrandIndex which measures public perception, the brand fell 13 percentage points to -13.4, putting them last on a list of 44 British high street stores. SD’s reputation score fell to -34, again putting them bottom of the ranks.

After Volkswagen’s emissions scandal, Brand Finance estimated the company lost $10 billion in brand value.

In 2023, Adidas reported a 23% drop in e-commerce sales, affected by their fallout with Kanye West and the termination of the Yeezy brand.

Bad publicity can set a brand back. In some cases, all the hard work that went into building up the brand’s reputation suddenly seems pointless. The positive associations people once carried can quickly turn sour just by one wrong X post or a reel. Consumers can lose trust in a brand they have been devoted to for years before the negative event.

Bad publicity can also mean brands are in for a rough time financially. Most consumers avoid buying products from companies they don’t like and share prices usually go into freefall.

The Psychology of Harmful Reputation

Companies might also have to deal with the fallout of bad publicity affecting their employees. Morale could drop, and employees who were once proud brand ambassadors would rather not tell people where they work.

Why does it happen, thorough? One such reason is what the Social identity theory suggests. In it, we read that people derive a sense of self-esteem and identity from the groups they belong to, including their place of employment, their employer and direct management as representatives of the entire team, and the company owners or officers.

When a company suffers a reputational blow, employees might experience a diminished sense of pride in their affiliation with the organisation, leading to a weakened identification with the company.

Cognitive dissonance occurs when there is a conflict between an employee's beliefs or values and the actions or reputation of their employer. For instance, if an employee identifies with the company's values, but the company is involved in unethical practices, this discrepancy creates discomfort. To resolve this discomfort, employees might distance themselves from the employer, leading to a loss of confidence.

In 2023, Starbucks faced significant backlash and controversy when it was perceived as taking a political stance in the ongoing Palestine-Israel conflict. Many employees at Starbucks, particularly those who personally or culturally identified with the Palestinian cause, or who held strong beliefs about human rights and social justice, experienced cognitive dissonance.

Employees who had previously viewed Starbucks as a socially responsible and progressive company were now faced with a situation where the company's actions (or inactions) were in direct conflict with their personal values. As a result of this cognitive dissonance, some employees chose to leave the company. Unable to align with their employer’s actions, they opted to resign rather than continue working for an organisation that they felt was morally compromising.

The Long-Lasting Post-Negative Reputation Hardships

Having a bad reputation also makes it hard to attract top talent. Companies with a negative employer brand reputation can end up paying at least 10% more to persuade candidates to work for them. This could extend for prolonged periods and even years, making it more expensive to hire good upper-management candidates. Many would ask for a higher starting salary based on the company’s negative rep.

Regaining a good reputation takes time. Lots of it.

Brands can begin to rebuild their reputation by acknowledging and rectifying their mistakes. While some scandals may be small enough to quickly blow over by themselves, others warrant apologies.

After the Volkswagen emissions scandal we mentioned earlier, the company made apologies in newspaper ads, on video, and even directly to the then-current US President Obama. That’s a lot of saying sorry, but the situation called for it.

Brands might even try to reinvent their brand to repair the damage. Changing aspects of the brand, whether it’s a logo, a slogan, or the values, can feel like a fresh start. However, this can’t just be a surface-level makeover. The public will be sceptical so brands need to prove they’re working to make a real difference on the inside as well as the outside.

In some cases, selling your brand might be the only way forward to free your personal name off the bad reputation gained in the past. Such is the case with the co-founder of Uber, Travis Kalanick. In 2017, Uber became notorious for a toxic workplace culture, allegations of sexual harassment, legal battles, and aggressive business practices. Kalanick's leadership style was heavily criticised, and the negative reputation of Uber was closely tied to him. In the weeks leading up to the resignation, Kalanick sold off approximately 90% of his shares in Uber, for a profit of about $2.5 billion.

In 2018, Kalanick turned a new page by buying a controlling stake in City Storage Systems LLC. The contract also includes CloudKitchens, a startup focused on the ghost kitchen industry, which provides kitchen space and infrastructure for delivery-only restaurants.

The Aftermath Is Not Permanent

In the wake of a reputation crisis, it's easy to feel like the damage is irreversible. But the truth is, with the right strategy, your brand can bounce back stronger than ever. At Huddle Creative, we specialise in rebranding services designed to help you rebuild trust, redefine your narrative, and reconnect with your audience.

Whether you're facing the aftermath of a minor mishap or navigating the complexities of a medium-sized reputation challenge, our team is here to guide you through every step of the process.

Don't let a past mistake define your future. Contact Huddle Creative today and start your journey towards a fresh, revitalized brand identity. Your next chapter begins now.