Crisis Management: What causes consumer outrage, and how can companies prevent it from happening?

Consumer outrage can be damaging to a company, and cause headaches for management. Photo / Getty Images

COMMENT: In this monthly column, Dr Dan Laufer gives his perspective on important topics related to Crisis Management.

Over the past few years, there have been incidents in New Zealand involving people dressed in blackface during company events.

For example, last year a number of Harcourts' employees were filmed wearing blackface during a networking party at the real estate company's annual national conference. According to news reports, people were invited to dress as their favourite sportsperson or team for the party. After the party, a video of Harcourt employees wearing blackface was uploaded to Facebook.

Blackface is a practice that was used in minstrel shows in the early 19th century in the USA to mock black people through caricature. It is highly offensive to people of African descent.

It is not surprising that there was a backlash against Harcourts as a result of the blackface incident. Insensitivity towards social groups will generate consumer outrage by the groups offended by the company and others. Consumer outrage can be damaging to a company, and cause more than a decline in sales by people refusing to a buy the company's products. It could also escalate to calls for other consumers to boycott the company as well.

Another factor that causes consumer outrage is perceived corporate greed.

A good example is Air New Zealand and the Christchurch terrorist attack. Air New Zealand was criticised in the media for raising its airfare on flights to Christchurch at the beginning of the crisis. Grant Robertson, the Finance Minister, also publicly criticised the airline.

Air New Zealand should have known that during times of national tragedy, price increases would not be acceptable to the public. Photo / Michael Craig.

If the public perceives a company is exploiting a situation for financial gain, consumers are likely to be outraged. When travellers face increased airfare during popular rugby matches and concerts they are unhappy, but grudgingly accept the higher prices due to the increased demand. However, price increases during times of national tragedy are viewed differently by the public, and they are likely to generate a crisis for an airline.

How can companies manage consumer outrage? The best way to deal with consumer outrage is to prevent it from happening in the first place. A greater appreciation of sensitive issues that lead to consumer outrage would have prevented the crises at Harcourts and Air New Zealand. In the case of Harcourts, the company should have known that Blackface is an offensive practice based on the reporting of previous incidents at other organisations by the media in New Zealand.

In the case of Air New Zealand, the airline should have known that during times of national tragedy, price increases would not be acceptable to the public. The airline should realise that during these types of situations, it should avoid any perception of exploiting the situation to increase profits. Standard pricing practices incorporating supply and demand should not apply during tragic events such as natural disasters and terrorist attacks.

How did Harcourts and Air New Zealand handle the crises? Both companies have room for improvement. At Harcourts the company's CEO mentioned in media reports that "It was brought to the attention of the group that some attendees were offended by the black makeup they were wearing" and "As there was no intention to offend they were responsive to the concerns and left". This response is not sufficient. The issue goes beyond party attendees that were offended. What about the general public, and acknowledging that the behaviour is inappropriate? It is also not enough to say that people did not intend to offend.

It is worth noting that other companies in New Zealand have reacted differently to incidents of Blackface.

For example, in 2013 Burgerfuel experienced a crisis involving an employee in its Parnell store in Auckland who painted his face black to promote the company's new Jamaican burger. When the crisis was brought to the attention of the Chief Marketing Officer, Burgerfuel immediately apologised. The company emphasised that the stunt was not part of a national campaign promoting the Jamaican burger. The company also viewed the incident as an opportunity to educate their employees about the history of blackface, and why people of African descent view it as offensive.

BurgerFuel responded well and used the incident as an opportunity to educate their employees.

Burgerfuel's response to the Blackface Crisis was clearly more effective than Harcourts. Unlike Harcourts, Burgerfuel immediately apologised, and emphasised that it was an isolated incident. Also, by educating its employees about why blackface is offensive to people of African descent, the likelihood of a similar incident occurring at Burgerfuel in the future is significantly reduced.

There is also room for improvement in Air New Zealand's response to the crisis. Whereas capping its one-way domestic fares to and from Christchurch to $139, and mentioning how the airline is helping during the tragedy is useful, more can be done. For example, apologising and stating that in the future they will be more sensitive to pricing issues during times of national tradegy would also be useful. This type of response conveys to the public that Air New Zealand has learned from the crisis, and people will be more likely to believe that unjustified price increases will not happen again in the future.

Consumer outrage has serious consequences for companies. In many instances, these types of crises can be prevented. Companies need to pay more attention to the sensitivities of different social groups, as well as avoid price increases during times of national tragedies. These actions will help prevent consumer outrage.

- Daniel Laufer, PhD, MBA is an Associate Professor of Marketing at Victoria University of Wellington, and an expert in Crisis Management. He has previously provided commentary on best practices in Crisis Management for the Wall Street Journal in the USA.