Social media can make or break

Companies must realize how rapidly reputations may rise and fall

In the fast-moving business world, nothing is guaranteed but change: change is in the market, in customer preference and technology.

One thing corporate executives are likely to take for granted, however, is the media environment in which they communicate with the outside world.

Bob Grove, chief executive officer for public relations company Edelman North Asia, said told China Daily that what worries him is that in the fast-evolving media landscape, a company's reputation can be very fragile.

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"The velocity of a decline of reputation is now faster than ever, but I don't think companies really understand how much that has changed," the public relations and marketing veteran said.

Grove explained that unlike "trust", which relates to customers' perceptions of a company's present or future behavior, "reputation" is based on the aggregate of its performance in the past: It means that "reputation" is hard to build up but easily broken.

"Because of social media, they are not able to hide unethical behavior. It does not matter whether you did it yesterday or 10 years ago because today, everything is discoverable. There are no secrets," he said.

Grove said in this environment, it is vitally important to maintain a relationship with stakeholders.

Corporate executives must be transparent about their actions, he said, not just when they have something important to say but all the time. So when bad news happens, they already have established a form of trust that will give them a kind of "leeway" with their customers.

A negative example of this is Netflix, the on-demand Internet streaming media website. In 2011, through a social media video, its CEO announced that the company was raising prices. It sparked a public outcry that savaged its share price.

"They did it the wrong way," Grove said. "They did not give any warning to their customers. [The CEO] did not explain it very well, and the social media content was interpreted out of context."

He said Netflix lost more than 50 percent of its share price and thousands of customers.

"It took them two years to recover from that," Grove said.