In a crisis, beware the false memory phenomenon

When responding to a crisis event, PR pros must be careful to avoid mental mistakes. Here’s how to make sure your brain doesn’t play tricks on you.

You might not know what you think you know.

In 2013, MIT scientists successfully implanted false memories in mice to better understand how faulty memories arise. Think court cases where witnesses mistakenly recall information about a crime that is inaccurate, and the accused are later exonerated with DNA evidence – but with vermin.

The premise of this experiment forms the basis of a provocative new novel I’ve been reading titled “Recursion” by Blake Crouch. The MIT experiment prompted Crouch to consider the implications of false memories spreading throughout the United States and the resulting effects: widespread confusion, instability and people beginning to question their own reality.

In an era dominated by fake news, manipulation and staggering polarization, one begins to question how vulnerability to false memories might affect public memory and perception.

This is an important question for brand managers to consider, particularly those weathering a crisis. More specifically, brands must ask how their messages to stakeholders impact brand perceptions and loyalty amid a sea of bombastic Twitter exchanges, hysterical punditry and sensationalism.

Boeing’s safety

This past week, in Paris, Boeing Chief Executive Officer Dennis Muilenburg said the company should have been more “transparent” relative to the problematic safety and design features on its 737 Max planes. Assessing the overall damage to its reputation and stock price is still premature. We won’t know the lasting implications for a while to come, but the situation begs the question: If Boeing had responded promptly and transparently about issues with its planes, how would consumers remember its actions?

Would they be like my mom (God love her) and forcefully question the safety of all of Boeing’ planes, based on how she perceives the brand over time, or would they take a more “temperate” approach? Memory can shape perception over the long-term and be much more lasting.

While we don’t know the answers to these questions yet, a look at how other brands have responded during times of crises and how their stock prices fared is instructive.

How is memory and perception affected during times of corporate crises?

Although gauging how memory affects brand perception over time—especially how a company responds in a crisis—observing its actions in the immediate aftermath bolsters our understanding.

Was the company open and transparent? Credible? Empathetic? These factors shape one’s memory of the event and the long-term brand perception.

Hot Paper Lantern recently conducted comprehensive research examining how brands’ stock prices were affected based on major corporate crises. The Crisis Response Index considered 80 companies (e.g., BP, Johnson & Johnson, Delta, Facebook) that all experienced a significant crisis event. It also analyzed 450,000 media articles and 85,000 social media mentions about those crisis events. The analysis used two criteria (speed and effectiveness) and asked:

  1. How quickly did the company respond?
  2. How effective was the response, as measured by sentiment analysis?
  3. Were companies being transparent, authentic and empathetic in their responses?
  4. How were these responses resonating?

What we found

The stock price performance of companies in the CRI significantly underperformed against their peers in the Dow Jones Industrials Average, S&P 500 Index and Nasdaq Composite Index.

Being able to respond in hours vs. days or weeks is crucial: When companies are slow to respond, shareholder value takes a major hit, but those who respond swiftly retain more value in their stock price. Though speed is important, a poor or ineffective response will inflict far more damage on a company’s stock price. A company should never sacrifice the quality and effectiveness of its response for speed.

The data shows it’s better to be late and good than quick and bad.

Problematic responses during times of corporate crises negatively impact a brand’s stock price and likely will damage one’s long-term perception of an organization. Ultimately, brands must consider not only the short-term concerns, but the long-term implications of how conflicting memories and emotions can shape perceptions.

Luckily, we’re not living in a society where corporations and governments can implant false memories to make themselves look better or sabotage opponents. However, if the past several years of fake news and group fragmentation, paired with algorithms pushing one-sided commentary tells us anything for brands, it’s the importance of delivering clear, accurate, transparent and empathetic information during a crisis.

Books like “Recursion” and TV shows like “Black Mirror” might be fictitious explorations of our understanding of memory and perception. For PR pros board executives, understand this: there’s nothing imaginary about the effects of public memory and perception when processing a company’s response to a product recall, environmental disaster or accusations of financial impropriety.

The damage to stock prices and customer losses will be quite real.

Matt Panichas is the VP client services at Hot Paper Lantern.

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