- Companies keep customers by providing exceptional products or services that exceed expectations.
- In turn, companies depend on loyal customers to keep their cash flowing and their businesses thriving.
- But it can often take only one controversial incident to turn companies’ most dedicated fans against them, costing them millions.
- Here are 7 companies that found themselves in a scandal that moved customers to turn on them immediately.
The goal of successful companies is not only to satisfy the value they promised to their customers in whatever product or service they’re offering, but also to exceed expectations and keep those customers coming back.Repeat customers who become brand loyalists are often the golden ticket to success.
Tesla and Apple are prime examples of great customer retention. Tesla has multiple fan clubs, such as theTesla Motors Cluband theModel 3 Owners Club, and the average American household has more than two Apple products, according to aCNBC survey from 2017that polled 800 people.
When a company enjoys a client base of devoted fans, it can generally count on consistent sales.
That is, unless the customers turn against the brand. Over the past few decades, some companies have suffered severe turns of fortune when their most rabid fans turned against them.
People abandon once-beloved companies for various reasons. A brand may have a drop in product quality, corruption may come to light, or a company could fail to keep up with cultural trends.
Whatever the reason for the change of heart, when a company’s fans turn into foes, some brands never recover.
Martha Stewart Living Omnimedia
According to a report issued by theUS Securities and Exchange Commission, Martha Stewart was charged with insider trading based on her sale of thousands of shares ofImClone stockshortly before the company announced a new cancer treatment had been rejected by the FDA in 2001.
Stewart was convicted and hit with a five-month jail term and a $US30,000 fine,ABC Newsreported. But the financial losses didn’t stop there. In 2004, Stewart owned 60% of Martha Stewart Omnimedia. ABC News reported that her company’s value dropped 50% after Stewart’s insider trading scandal, netting the founder’s personal loss at more than $US325 million in company holdings.
Today,Town & Countryestimates Stewart’s net worth at $US300 million, down from about $US1 billion in 2000 -though this is likely also a reflection of the decline of the magazine industry as a whole.
In the spring of 2010, a deadly blowout at the Deepwater Horizon oil rig led to one of the worst petroleum spills in history. Nearly 210 million gallons of oil poured into the Gulf of Mexico,CNN reported.
Then-CEO of BP Tony Hayward drew criticism during the disaster by telling The Today Show, “I’d like my life back.”
Eleven people andhundreds (if not thousands) of animalslost their lives to this disaster that BP was responsible for as operator of the oil rig at the time. Hayward laterapologisedfor the insensitive remark and promised that BP’s priority was to restore the lives of people living in the Gulf region.
2018 estimates say the total cost of the spill to BP is expected to reach $US65 billion, according toReuters.
A study published in 2014 inHarvard Business Reviewexamined the effects of the spill on BP’s sales. The researchers found that initially, sales dropped by 3.6% after the spill, as customers “punished” the company for the disaster. However, this effect peaked in August of that year, about four months after the leak began.
Back in the late 20th century, there were hundreds of Ratners jewellery shops spread throughout Great Britain and the US, according toThe Guardian. It was a multimillion-dollar jewellery chain, until Ratners’ CEO made a fatal comment about the quality of his company’s products.
During a speech at a conference in 1991, Gerald Ratner made a joke that one of his own company’s products was “total crap,” theBirmingham Post reported.
A year after the 1991 speech took place, Ratners had shut down 330 locations, fired more than 2,000 employees, and watched its profits plummet, according to theIndependent. Eventually Ratners replaced its founder and changed its name to Signet Group,BBC reported.
In 2016, theConsumer Financial Protection Bureau(CFPB) fined Wells Fargo Bank $US100 million for illegally opening unauthorised accounts in consumers’ names so its employees could meet sales goals and earn bonuses.
The bank also had to pay an additional $US85 million in fines to the Office of the Comptroller of the Currency and the City and County of Los Angeles.
The result of the practice was abouttwo million fraudulent accounts. Consumers were hit with fees on accounts they had never authorised and didn’t even know they had.
In the months following the scandal,Fortune reportedthat customers opened 35% fewer bank accounts at Wells Fargo and that the company received 42% fewer applications for credit cards as it did at the same time the previous year.
Electronic Arts (EA)
In the gaming world, Electronic Arts, also known as EA, earned two “Worst Company in America” titles in 2012 and 2013,Consumerist reported.
According toUSA Today, EA has a reputation for buying small game companies to get a particular title and then running them out of business.
When EA released an early access of “Star Wars Battlefront II,” consumers were unhappy to find out that unlocking popular material required over dozens of hours of playing and pricey in-game purchases.
When the companyrespondedto players’ outrage about the blocked characters on Reddit and defended the decision, the message became the most downvoted comment in the site’s history, according to TechCrunch.
After a decade of growth that saw Chipotle become one of the most beloved fast-casual chains in America, in 2016, the company suffered its first annual decline in sales since its IPO after an E. coli outbreak the previous year scared away customers, according toFortune.
A case ofnorovirusat one Chipotle location two years later, as well as reports of rodents at another store, added to the negative press. A March 2018 report by UBS Evidence Labs found that 26% of respondents said that they were eating at Chipotle less because of concerns about food safety, asBusiness Insiderpreviously reported.
However, in April 2018,Chipotlereported an increase in sales under the guidance of a new CEO, Markets Insider reported. In July 2018, the company recorded an additional uptick in sales, which they credited to their new queso recipe and menu price increases,Business Insiderreported.
It hasn’t been all smooth sailing for the company this year, however. In late July, 2018, aChipotlerestaurant in Ohio was temporarily closed after reports of customer food poisoning. It only affected one store, but almost 650 people were sickened, Business Insider reported.
In the spring of 2017, a video went viral showing a security guard forcibly removing a man from an overbookedUnited Airlinesflight, as Business Insider previously reported.
In the days that followed,CNN reportedthat the company’s value plummeted by approximately $US1 billion. According to anotherCNN report, many customers took to social media to post images of their chopped-up United Airlines credit cards.
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.