Crisis management has grown into a robust, complex discipline since its inception and development as an important part of global business many decades ago. Although massive data analysis and technological advancement today allow for strong predictive analytics and risk management, crises are generally defined by their lack of predictability–they can happen at any time. Having a solid handle on how to approach a crisis can make the difference between business as usual and complete business failure. Some crises have become blueprints for modern responses to problems, while others have destroyed products, divisions, or even entire companies.
There is no substitute for strong and well-developed management, but technological tools can often help cushion the impact of unexpected business trauma. Here we look at a few such cases from the past to see what we can learn–what went wrong? How could modern technology have supplemented response initiatives? An objective look at historical strategies against crises means an informed workforce against future disturbances.
Grounded–JetBlue and the Storm of 2007
Sometimes the trigger for disaster is out of the control of any human being, as JetBlue learned in 2007. This small, low-cost airline faced much more trouble than its larger competitors from a major storm, having to cancel thousands of flights over the course of a week despite previously refusing to out-and-out cancel any flights at all. A weak communications system, severe staff shortages in its reservation system, and a general lack of preparedness led to full planes sitting on tarmacs for several hours at a time, an irregular and ineffective cancellation schedule, and disorganized personnel. Some customers ended up sitting inside grounded planes for many hours, which increased the tension and magnitude of the overall problem.
Some of these issues came from JetBlue’s lean operations. In 2007 JetBlue operated with an eye towards offering low fares, which meant employing fewer personnel. While these initiatives were responsible for its rapid growth from its founding in 1999 until the crisis, they also left the company short-staffed with serious structural faults–cracks that became massive fissures during the ice storm of 2007. Where most airlines suffered only a day or two of significant operational disruption, JetBlue dealt with the issue for a week due to its particularly small staff, and the total number of inconvenienced travelers reached more than 100,000.
Issues continued to compound when customers went to re-book their flights or change their travel plans. JetBlue’s disrupted workforce and heavily web-based booking system fell apart under the strain of massive simultaneous demand. The kiosks the company operated in airports offered no self-service booking option, causing the issue to affect even those already stuck at the terminal. Not only were customers facing a crisis–they had no tools with which to extract themselves from it.
Despite the lack of control over the cause of the crisis, JetBlue took ownership of its role in propagating it and did what they could to make sure it didn’t happen again, while inviting customers to see exactly how they planned to do so. The company announced its creation of a Customer Bill of Rights, which outlined everything a customer could reasonably expect from a JetBlue flight as well as specific monetary compensation for customers who were inconvenienced during their time on, or spent waiting for, company flights. Those who were affected by the crisis as it happened were offered even greater compensation at JetBlue’s significant expense, including refunds and free round-trip travel.
The company’s crisis communications stayed focused, apologetic, and sincere on top of it all. As with many examples of strong crisis communication, the company did its best to outline the reasons it failed, apologized for them honestly, and demonstrated the ways in which they would minimize the possibility of such a crisis occurring again. This, coupled with several small structural changes to the company’s business, allowed it to rapidly turn back around, posting solid profits in the following quarter and ultimately continuing to grow and develop as an organization.
Technological Tactics Today
Recent technological innovations offer a company in JetBlue’s situation even finer opportunities to assess the effectiveness of compensatory initiatives. With a solid CRM program, companies can note incidents and accidents in handling each and every customer, tracking inconveniences and the response to those inconveniences over the long term. While JetBlue became profitable again very quickly, did the customers affected by the service disruption ever return to flying JetBlue, or did they move on to competing airlines after the bad experience? With a good CRM program, the answer to that question can be found quite easily.
Likewise, this allows companies to track the efficacy of compensatory measures. Do those who receive a given amount of credit for a delay ever return to retrieve it? By tracking how many inconvenienced customers return and how many never show their faces again, companies can more effectively discern the literal price of a slighted customer’s loyalty. A business in JetBlue’s shoes today would be able to learn a lot more from the crisis a lot more quickly, and in turn develop a more sophisticated compensation program that most customers would find agreeable.
The crisis also led JetBlue to own practical innovations in technological problem solving. The company implemented a mobile app for personnel that allowed workers to more easily communicate locations and availability to the company, shoring up issues with under-staffing.
Cracked–Sony and the PlayStation Network Hack of 2011
Sometimes crises come as a direct result of hostile action, as Sony learned in its gaming division in 2011. In April a group of hackers compromised the security of the company’s PlayStation Network (PSN) gaming platform and social media interface, gaining access to the account information of more than 77 million PSN users. As many modern games give users the opportunity to buy additional chapters, character models, or in-game advantages through the web, the compromised information included home addresses, email addresses, and general account data. It was initially unclear whether the hackers could access credit card information, though data forensics experts ultimately determined that such information was not accessed.
In addition to the personally identifiable information available through the hack, the system itself suffered outages and loss of functionality. The system was rendered unusable for a week after the initial intrusion, and users were not informed of the details of the breach during this time. After the announcement of the breach, services remained unavailable for the better part of a month as Sony attempted to fix its cyber-security and create a better experience for users after the attack.
These measures did not pay off right away. While dealing with the hack, Sony faced another breach in its Sony Online Entertainment platform. This breach was less catastrophic, however, primarily affecting old accounts and invalid credit cards. Services on this platform were temporarily suspended as well. Operation returned completely by May 23, 2011, with a final cost to the company of reportedly more than $170 million.
Sony faced a lot of criticism for its slow reveal of information regarding the hack, as well as for its apparent lack of encryption on certain personal details. While the encryption issue was ultimately a non-factor, the criticism regarding the slow response lasted, as Sony knew about the intrusion as clearly as the 20th but did not inform users about the possibility of a credit card or home address information breach until a week later. This slow response time even drew attention from governments in countries in which Sony operated, and the combination of the scope of the breach and the slow announcement time led to significant fines in the UK.
Once service was restored in May, Sony hosted a “Welcome Back” initiative in which users affected by the outage could claim free games for each Sony system they owned from a short list of titles. Users in some non-American regions could also claim a system theme in addition to the available titles. All PSN users received free access to the service’s premium PlayStation Plus network features for 30 days, and those who already had such a membership received 30 additional free days.
Sony also extended significant potential compensation to those whose personal information was exposed by the breach. A $1 million insurance policy was set up to deal with potential cases of identity theft caused by the breach, though no verifiable reports of credit card fraud ever occurred as a result of the breach.
Technological Tactics Today
While many of the tools available today were available in 2011, companies hadn’t quite developed the sophisticated, multi-pronged approaches to communication that they enjoy today. What Sony could have improved upon with more modern CRM and social media technology is its communications–the speed and nature of the company’s response drew criticism. Both the company’s own communication technology and conventional CRM could offer Sony the means to provide more specially-targeted messages to different types of users and to the general public.
The ability to provide narrowly targeted marketing and informational communication could greatly serve a company dealing with a massive data breach like the one Sony faced in 2011. Those with current credit cards on file, those with expired cards on file, and those with no credit cards on file could each receive different emails with different instructions regarding appropriate measures to take to improved account security, for example. CRM programs and automation tools that focus on clear communication in a data breach requiring user intervention make initiatives faster, more-organized, and easier to handle.
Similarly, narrowly targeted messages can be used to encourage users to take advantage of the free gifts provided as compensation for the lost time and potential risk. Many of the games made available as part of the Welcome Back program were in genres that would primarily appeal to casual gamers, some of whom might not have noticed the outage. Some security-conscious users stayed away from their consoles long after the fact. Marketing automation tools allow for companies to reach out more enthusiastically to users who, for instance, might not have claimed their free gifts, with more details on the program and more information on the measures that were taken to ensure that no breaches would affect the PSN in the future.
Rewound–Netflix’s 2011 Price Increase
Sometimes a crisis comes not because of intervention by a third party or by chance, but strictly as a result of customers’ attachment to the brand and their relationship with the company. Netflix learned this lesson the hard way in 2011 when it announced a change in the price scheme of its service. No longer would all accounts benefit from both red-envelope DVDs and online streaming by default; customers would now face a subscription price increase from $10 to $16 if they wanted to keep both components of the service. Users who only had one component, meanwhile, would actually receive a modest discount, with the price going to $8 per month, but the pricee increase was front and center. Customers were furious, as they perceived it as a drastic price increase with no clear rationale and minimal forewarning.
Amid the outrage, Netflix doubled down during an intended apology on their blog, announcing almost immediately after the price increase went into full effect that the company’s DVD-by-mail operations were soon to become an entirely separate operation, titled Qwikster. Users would no longer be able to manage their subscriptions to both components through the same website, either. Instead, users would deal with two credit card charges, two sites, and two totally disconnected services. User ratings and recommendation data would also not be shared between the sites, potentially rendering it more difficult for users to find new content.
Users left in numbers greater than Netflix expected as a result of the repeated changes to the business model. While Netflix predicted about 600,000 users temporarily or permanently ending their relationship with the company as a result of the change, more than 800,000 actually left. Over the course of the crisis, Netflix’s stock price fell from $300 to less than $80 a share. While it has remained the largest paid video streaming service in the U.S. and internationally, it has ceded market share to competitors like Hulu and Amazon Prime Instant Video since the crisis.
Netflix waited two months to offer much in the way of communication to its customers, and its apology came with an additional inconvenience for those who held subscriptions with the company. The announcements did not clearly outline why prices had to increase by 60% all at once, nor did they demonstrate the reasons for splitting the DVD and streaming operations succinctly.
Meanwhile, Netflix’s social media accounts remained totally silent, even as users took to Facebook and Twitter to shout their displeasure. While the company didn’t attempt to remove or hide negative comments, it didn’t respond to more than 40,000 comments left on its Facebook page regarding its changing operations. This lack of response lasted for months, with users left unclear on what would happen to their accounts, their billing information, and their viewing history.
Only at the very end of the crisis in October did Netflix respond, providing no apologies to users. The company reiterated the price changes were necessary, but announced that it would not be splitting its DVD and streaming operations into different brands after all. They remained separate subscription services, however, requiring users to pay a premium for maintaining both DVD shipping and streaming accounts.
Technological Tactics Today
The customer relationship crisis Netflix handed itself could have been mitigated with better communication, and CRM technology could have helped tailor that communication to users’ specific viewing habits. Users who primarily streamed, users who primarily rented DVDS, and users who did both could have been batched to receive more specific communication regarding the future of their accounts and a clearer picture of how the proposed changes would affect their use of the service.
While a significant potential cost increase is always going to be a bitter pill for customers to swallow, using the technology to create more targeted communication could have shown many users that their prices might actually go down as a result of the split. Before the announcement, plans were $10 per month; after, DVDs and streaming each separately were $8 per month, or $16 as a set. Users who spent more than 90% of their time on one side or the other of the company’s two services would actually end up with a better deal, but poorly-targeted communication made it seem as though users would generally be forced to accept a massive price increase.
The ability to archive users’ activity profiles and relationship with the company could also have provided options for compensating those most strongly affected by the changes. Those who heavily used both the streaming and DVD rental features could have been extended a free month of the service, a few extra months at the lower price point, or a more gradual fee increase rather than the immediate jump proposed by the company. By using technology to provide user-specific communication and deals, Netflix could have rewarded customers for their loyalty while still transitioning through business models.
Post-Crisis Cleanup–Clear Communication
While the measures to get customers to come back after a crisis vary depending on the scope of the situation and the particulars of the industry, one thing customers always appreciate is clear communication that clearly matches their needs. Tools like marketing automation and CRM software can help companies plan and reach the right users with the right data faster, and avoid overwhelming them with information they don’t need or won’t understand. These tools can provide insight into effective promotions and services, and who those promotions most benefit.