Managing online “spillover” reputational crises

This paper includes an interesting analysis of online reputation management. It discusses “reputation spillover”, which is defined as a “reputational crisis that impacts a focal organization [and] spread[s] to others.”

Reputation crises are triggered by financial crises or accidents and spread virally because consumer “link” like firms together, even if one of the “linked” firms has nothing to do with the crisis. The paper limits its analysis to “within-industry effects”. For example, a large player in an industry can casts a wide reputational reverb:

In the mid-1980s, the FDA released the results of a study that showed an unusually strong link between a tampon manufactured by Procter & Gamble and toxic shock syndrome (TSS) – a rare, life-threatening bacterial infection (Behr, 1980). The cause of TSS seemed to stem from a unique and innovative material used by Procter & Gamble (but by none of its rivals). In response, Procter & Gamble began a recall of their product from store shelves. Interestingly however, Tampax, the next largest rival in the product category, also began to experience declining market valuation, even while their product was recording record revenues (Metz, 1980). Arguably, had the crisis struck not Procter & Gamble but a much smaller organization, rivals would probably not have faced the same generalized and negative reactions.

Behr, P. (1980) ‘Toxic shocks, tampons under scrutiny’, The Washington Post, L1, Washington, DC.
Metz, R. (1980) ‘Toxic shock and Tampax’, The New York Times, 8, New York.

The paper points out that “any organization is at risk for a negative impact aimed at its reputation due to the actions of others in its competitive environment.” In response, the paper suggests that managers should have response plans in place along “marketing and public relations, legal and technical considerations.”

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