Social media can make or break

But he gave a positive example, as well. Last year, US coffee giant Starbucks was accused by State media of charging higher prices for its products in China. However, general sentiment in social media was supportive of Starbucks. Starbucks ended up using this sentiment to reverse its position in the crisis. This was, according to Grove, because Starbucks had built a "deep" relationship in social media before the crisis. So when bad news occurred, public trust was not easily eroded.

Grove also noted that social media won't stand alone. In contrast to the practice of many Chinese firms, which put social media communication in a single division, he suggested that a social media team be integrated into a communication team and that this team should examine communication holistically "across all channels, at all times".

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It also is important to find "personal brands" to do communication work for companies, he said, adding that it is not necessary to be a celebrity or a blogger with a big following. An Edelman study showed that, compared with experts and CEOs, people tend to put more trust in "someone akin to them".

Volvo Construction Equipment knows this all too well. During a public relations campaign called "Operators Idol", equipment operators were trained in fuel efficiency and given the opportunity to test-drive Volvo machines.

A six-month contest was held to make heroes of these front-line workers in the construction industry. It was an unusual strategy for a business-to-business company like Volvo, as most B2B firms focus more on building relationships with their distributors.

"We think operators are a prime medium to start this 'word of mouth' communication. An operator would listen to what his peers are saying because it's someone with whom they can identify," Grove said, adding that Edelman had devised the campaign for Volvo.

Edelman's study also showed that in China, search engines have become the most important source for people seeking information. When it comes to gaining general business information, 44 percent of respondants chose search engine results as the most trustworthy information source, far higher than newspapers (24 percent). People also trust search engine results (34 percent) more than TV (24 percent) when they want to get breaking business news.

"This means that you really have to have strong mastery of managing search. It is a skill that has been developed only in recent years. It's a skill people do for their websites, but they don't do it for their overall communication," he noted.

In a similar vein, is it necessary for companies to buy search engines' silence when bad news happens?

Grove said that violates the "transparency" principle and is not recommended for companies that expect long-term success.

However, the rising importance of social media does not mean traditional media have become irrelevant, Grove noted, saying companies should strive for equal balance with traditional media, because to the Chinese, in particular, traditional media still matter. Instead, smart companies will learn to do their communication work through multiple channels.