Southwest: Headline risk

Kudos to Southwest Airlines for deftly managing communications around the devastating holiday travel disruptions. The airline acknowledged the thousands of flight cancellations and the personal impacts on hundreds of thousands of passengers, then apologized and pledged to learn from the mistakes.

That’s textbook crisis communication.

While the news cycle is over, though, the brand and business headwinds have not abated. As I write this post, consumer Buzz remains highly negative and brand perceptions have eroded significantly. Purchase consideration remains down 20%. Purchase intent is down 30%. Customer satisfactions scores also likely will decline, even among passengers who were not stranded by canceled flights.

That’s headline risk.

In communication terms, Southwest experienced a news-driven crisis. In business terms, Southwest experienced a news-driven shock.

To manage this level of shock, major companies and national brands that are covered by the press need to stand up a risk framework and several critical barometers before the news breaks.

Virtually every major company relies on media monitoring and social media listening to do this. That’s vital to measure the trigger event — the volume and velocity of breaking news. Beyond that, early warning indicators and forward-facing risk barometers are needed to:

• Call the bottom: In business, it’s critical to know you are at the point where things will not get worse.

• Ride the rebound: A steep reversion to the pre-event mean signals a shallow shock.

• Forecast the recovery: A stalled rebound signals a long-tail recovery.

Source: YouGov BrandIndex daily brand tracking, two-week roll; n > 1,800

How does this work in the real world? In the case of Southwest, a key shock forecasting metric — consumer Buzz — bottomed quickly and is currently in the rebound phase. After tracking more than 50 shocks experienced by national brands, we know the end of the news cycle marks the bottom of the shock. Makes sense. The catalyst is removed from the reaction.

While PR typically stands down when the news cycle ends, this is the point where a shock-tested headline risk framework can mitigate material financial damage. This is where headline risk management pays off.

Here are some common — and costly — mistakes companies have made because they were unable to draw on reliable content metrics and crowd-sourced insights:

• Executives sometimes act on an urgent need to “set the record straight” through PR campaigns, independent investigations or even litigation. Weigh that urge against the very real risk that a secondary news cycle will trigger a shock that was worse than the original tremor. When the consumer perceptions bottom, turn off the PR machine.

• Marketers often want to pitch in with full page ads to tell the company’s side of the story in a crisis. Don’t advertise during the rebound phase. It will just extend the news cycle, remind customers about the news, lengthen the overall recovery, and dampen sales. You can use the company’s website to communicate directly with your customers.

• If the rebound continues, and the brand fully recovers, there is no need to spend resources on a brand refresh campaign. For large companies and national brands, that’s a potential savings of tens of millions of dollars.

• Pricing adjustments are the most effective mitigant to a shock, and can help maintain market share. But if customer acquisition and sales are accretive, that’s a sign you over-reacted — and over-spent. That can be an expensive mistake. Again, on the order of tens of millions for large corporations. In order to make data-informed pricing adjustments, you will need to integrate shock data into pricing models ahead of the shock.

• Alternatively, if the rebound stalls, cue marketing. That’s a sign of deeper brand damage that needs to be managed, likely at the C-suite level. And if the recovery is forecast to stretch out for more than a year, the Board likely will have some tough decisions to make.

• Here’s a handy benchmark: News-driven shocks typically generate two to four quarters of sales suppression. In the most severe cases, these headwinds can last for a year or more. The most severe shock we have tracked to date is currently in year seven.

Beyond brand impacts, customer satisfaction scores will decline, even among customers who were not directly impacted. You don’t have a customer satisfaction issue, you had a news issue. Save your employees a round of needless customer service training. Give them bonuses instead for taking care of your customers during the trigger event.

Bottom line. The key to verifying that a PR crisis is actually a more severe business shock is to have your critical barometers tested and validated before the news breaks. Otherwise, you may find yourself at the mercy of some highly flawed media data, expensive consultants, and executive-level gut instinct.

“I’ve always said, manage in good times so that you’re ready for the bad times.”

— Herb Kelleher

OK, let's go back to the narratives.

In the articles posted to Moodle,

or other articles you find on your own,

what struck you about how the Southwest employees described

the causes and events around the holiday travel delays,

and how Linda Rutherford described them?

Fact-based discussions, as always.