At last, the data supports what PR pros have known all along: A quick crisis response is essential in preserving support for your organization.
It can feel like there is little in the way of real, substantive data to support or dispute what many consider to be crisis management best practices. That’s why this particular piece of research stands out from the Institute for Operations Research and the Management Sciences (INFORMS).
In a piece for INFORMS journal Management Science, researchers took an in-depth look at 128 events of negative publicity tied to a celebrity endorser between 1988 and 2016. These events affected sponsors in 230 actual cases.
The exciting part of this case study is that it evaluated the effectiveness of company responses to celebrity endorsers’ misbehaviors using those companies’ daily abnormal stock returns. If a brand encountered a celebrity endorser crisis, as Nike did when Tiger Woods made news over his notorious marital problems, the study authors measured the negative publicity’s impact on the company’s stock price.
The research was able to analyze the way companies responded and how those responses influenced stock returns in the following weeks.
Fast is better
The researchers Stefan J. Hock of the University of Connecticut and Sascha Raithel of the Free University of Berlin studied the speed of the response by the company, the nature of its response and how that response impacted returns.They found that a faster response in the form of a statement from the company increased firm value by 2.10% over the next four trading weeks.
They also found that when companies issue a statement it is more likely to contribute to positive returns than if there was no response at all.
While firms that suspended celebrity endorsers generally achieved higher returns, it could be a simplistic overreaction to assume that the only course of action is to suspend or fire a celebrity endorser at the center of controversy.
When to cut off ties
The researchers found that there are different degrees of benefits to the company, depending on the actual nature of the crisis and which course of action is selected.
For example, if the celebrity is more directly responsible for creating the controversy, such as an irresponsible tweet or an incident of domestic violence, suspension of that celebrity earned higher returns. However, if the celebrity might not have been to blame for the incident, such as when a smartphone is hacked and nude photos are shared online, the public desire for a suspension lessens.
In cases where an occupation-related issue places the celebrity endorser at the center of a controversy, such as athletes using performance enhancing drugs, suspension of the endorsers earned higher returns in the following weeks at the affected companies.
However, it’s not always so clear-cut in cases where the celebrity is widely perceived to be a strong fit for the company’s product or brand.
Let’s say your organization sponsors a world-class golfer who is involved in an off-the-course incident. There simply aren’t that many world class golfers. So, while suspension of the sponsorship may be a consideration, the research found that there could be a trade-off.
“If a firm disassociates itself from a ‘high fit’ endorser following negative publicity, it loses some of the benefits associated with that relationship,” said Raithel, one of the study authors. “On the other hand, there is less of an incentive to maintain a relationship with a celebrity if that endorser is considered a ‘low fit’ such as where that professional golfer may have been under contract with a financial services firm.”
How would you advise a company to respond when a celebrity partner misbehaves or is caught in a crisis, PR Daily readers?
Tim O’Brien is owner of Pittsburgh-based O’Brien Communications, a corporate communications consultancy. A version of this article originally appeared on Muck Rack, a service that enables you to find journalists to pitch, build media lists, get press alerts and create coverage reports with social media data.