How to strengthen customer relationships in a crisis

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By: Wise Marketer Staff |

Posted on August 4, 2009

How to strengthen customer relationships in a crisis

While conventional wisdom suggests that bad news from a brand - whether poor financials or cuts in staff or services - will damage customer relationships and cause distrust among consumers, the latest 'Simplicity Survey' from strategic branding firm Siegel+Gale has found that delivering bad news is actually a marketing opportunity.

If the bad news is delivered in the right way, the company argues, it can be used to strengthen customer relationships and lay the foundation for greater trust and loyalty when economic conditions improve.

"It's important to communicate facts clearly, but clarity is not enough," says Alan Siegel, chairman and CEO for Siegel+Gale. "In order to strengthen relationships with customers, organisations must commit to open, transparent communications that respect people's intelligence by offering complete, relevant, and insightful explanations of bad news. Consumers and investors alike are tired of self-serving platitudes."

The survey examined a cross-section of customer communications that are likely to appear in the average consumer's mailbox, and tested four representative examples, anonymously, in an online consumer panel. These communications were tested using six criteria: comprehension, clarity, credibility, relevance, usefulness, and engagement. The examples tested included:

  1. A charge card company letter, announcing an increase in late fees;  
  2. A major bank letter, announcing a credit card interest-rate increase;  
  3. A not-for-profit institution letter, announcing budget cuts and soliciting donations;  
  4. A mortgage lender pamphlet, explaining a new mortgage summary document.

According to Lee Rafkin, Siegel+Gale's global director of simplified communications, "We found that even though customers didn't like the bad news they were receiving, they still respected and trusted those organisations that clearly communicated the reasons for it."

The communications that scored the lowest on measures of credibility and engagement did very little to offer comprehensive, credible, and contextually relevant explanations. For example, the letter from the bank announcing a credit card interest rate increase gave as its explanation that it was raising rates "to maintain profitability". Quite predictably, it drew the comment: "It feels like the bank wants to squeeze me for all it can, and they're not interested in me as a loyal customer. I'm just a number to them."

The letter from the charge card company announcing an increase in late fees gave absolutely no reason at all for its change. This was considered even more offensive to consumers than a dubious or incomplete reason. When no reason is given, the company observed that consumers will tend to 'fill in the blanks' and invent their own - sometimes much more damaging - explanation. One such comment received was: "This company just wants average customers like me to compensate them for losses they've suffered due to their own poor business practices."

However, the letter from the not-for-profit organisation was both comprehensive and relevant in the detailed explanation it provided. It used two whole pages to explain the impact of the economic climate on revenues and fundraising, then detailed how and why it was cutting its budget, gave an overview of its future plans, and reaffirmed its commitment to its core mission. This letter scored twice as high as the bank and credit card letters for several factors, including both trust and loyalty. According to Rafkin, respondents appreciated the organisation's efforts to justify their actions, making comments such as: "This organisation seems honest and up-front. They are forthcoming and direct with their information, which is always good."

Interestingly, the Simplicity Survey also found that, when communicating in times of crisis, respect is even more important than clarity and comprehensive explanations. The communication that scored best overall was the pamphlet from the mortgage lender. It explicitly stated its commitment to transparency and easy-to-understand descriptions of loan terms and costs. It was judged to be the most informative, balanced, and direct, and it made respondents feel most loyal to the company. One typical comment was: "This pamphlet makes me feel the mortgage lender is being straightforward and inviting me into the financial institution. I feel very good about this company."

Rafkin added: "In the current climate of mistrust toward financial institutions, it's clear that communicating bad news does not have to damage customer relationships. In fact, if customers believe that organisations are forthcoming, provide an appropriate level of relevant detail to support their actions, and show they value and respect their customers, people are not only more accepting of bad news, they are also willing to show such organisations deeper loyalty down the road."

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