Managing Negative Publicity

Amici Restaurant, Whangarei.

Executive summary

The purpose of this report is to advise Amici Restaurant of Whangarei on the processes and

options in achieving a favourable outcome to counter the recent crisis issue of negative

publicity experienced. Due to horrendous consequences of negative publicity to the business,

specific objectives were to identify key problems and offer recommendations to Restaurateur

owner, Ms Deister.

Problems were located in the restaurant’s lack of crisis management plan in conjunction with

the need for the development of a Corporate Social Responsibility approach in helping secure

and deter the dire effects of bad publicity via ‘Consumer Generated Social Media’ from its key

public’s lack of consumer purchasing habits. The report suggests a major implementation of

initiatives in crisis management communication with the recommendation for the formation of

a crisis management team. In addition, training in professional media and presentation is

recommended for restaurant owner, Ms Deister to ensure future stability in risk management

relations is secured.

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Table of Contents

Executive Summary 2

Table of Content 3

1. Introduction............................................................................................................ 4 1.1 Background.................................................................................................. 5

2. Discussion2.1 Issues/Crisis Management........................................................................... 42.2 Consumer Generated Social Media - Word of mouth................................. 8 2.3 Corporate Social Responsibility................................................................... 9

2.3.1 Trust Bank of Goodwill............................................................... 10

3. Conclusion............................................................................................................... 11

4. Recommendations................................................................................................. 12

5. References............................................................................................................... 14

6. Appendix A.............................................................................................................. Appendix B...............................................................................................................

1.0 Introduction

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This report was commissioned by Ms Deister – owner/manager of Amici Restaurant,

Whangarei. Its purpose is to analyse and advise on the implementation of a crisis management

plan to Amici Restaurant in order to improve existing crisis management and communication

practices to its external publics.

Amici Restaurant is characterised in experiencing a lack of development in crisis management

and communication planning, whereby all staff including the owner should follow under

emergency situations. This oversight, coupled with the lack of initiatives in the formation of a

crisis management team inevitably has lead to ineffective management decisions and practices.

This not only jeopardises the restaurant’s capacity to continue operating in business, but also

the long term damage that it is potentially harming to its reputation is apparent.

The report analyses these problems and offers recommendations on how to counter them in

improving better management and communication practices. These no doubt will lead to the

stability and improvement of the restaurant and save its reputation. Crucial elements include,

the need for the restaurant to identify in managing the crisis of ‘consumer generated social

media – word of mouth’ and the implications that it brings in terms of its negative publicity

which has affected consumer purchasing habits as highlighted by the media.

Fundamental to this entire dilemma and the underlying key to preventing similar occurrences in

future is what Al Golin(2003) would suggest in aligning the restaurant’s need to be Socially

Responsible in the concepts of ‘Trust Banking’ in goodwill, ensures a guaranteed positive result

in handling reputation management threats in future.

Restructuring the restaurant’s management practices and instigating new communication and

training programmes are the key to addressing these problems. Bindoff’s (2010) ‘Rebuilding

Crisis’ plan and Corporate Social Responsibility strategies will be highlighted in this report. The

limitations to this report were found in little information received from the perspective of the

restaurant themselves, limited consistency of data from media coverage and blogs concerning

the case, therefore added assumptions were included to benefit the completion of this report.

1.1 Background

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In Febuary 2010 Amici Restaurant located in Whangarei, New Zealand with an estimated

population of 50,000 received negative publicity when an upset customer wrote and sent

personal angry email to a handful of friends. The email was forwarded and quickly spread

throughout Whangarei residents and eventually ended up in the Northern Advocate and the

New Zealand Herald online as news. Appendix A is a copy of the media article from the

Northern Advocate where it states that the email urged people to boycott the restaurant.

Appendix B is the media article from NZ herald online where it states the restaurant owner

estimates the email has cost her $4000-$5000 a week in takings and that a high school teacher

read it to a hospitality class.

Amici’s restaurant had received favourable reviews prior to this incident and has a service

rating of 8.4, with a chid friendly rating of ‘extremely’, (Dine out, 2010). Allens Goode Leith

Realty Ltd describes Amici Restaurant as a popular licensed Italian style restaurant set in quaint

cobbled Quality Street Mall: Very friendly staff serving delicious food and great coffee. Dine

inside or out on the spacious patio. Child friendly with toy box provided, plenty of room for the

kids to run around without interfering with other diners, and no traffic to worry about (Allens

Goode, 2010).

2.0 Discussion

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An organisational crisis is defined as, any abnormality of negative consequences intruding

into the daily course of operations and it is usually a surprise (Linke, 2009 cited by

Nikolaev, 2010). Negative publicity is a crisis situation for any business small or large.

Whether the accusations are true or not, the resulting negative publicity causes particular

damage to how consumers perceive the company and its products (Grobben &

Vanhamme, 2009). Amici Restaurant had not contemplated in facing a crisis that was to

cause them significant disruption and as a result was in the view of public scrutiny from

media coverage. The negative perceptions that were not only highlighted from reactions

closer to home from customers and non-customers alike but nationally from public views

and opinion that seriously affected the restaurants’ reputation in addressing this issue of

difference.

2.1 Issues/Crisis Management

Issues management is the process by which the company can identify and evaluate those

governmental and societal issues that may impact significantly on it (Lazar & Tymson,

2008). What to do and how to resolve a crisis are not often considered until after a crisis

occurs. To manage a crisis an organistation needs to understand the issues facing them so

they can make steps to manage them therefore are able to minimise any potential harm.

This strategy can be started by asking what sorts of issues could cause the company

reputational damage (Lazar & Tymson, 2008).

A crisis creates witnesses; they are the people who become involved with the crisis

through learning and reacting to the issue. This witness becomes a stakeholder because

they are linked to the company via the crisis (Bies, 1987 cited by Coombs & Holladay,

2007). Anger is a factor that attributes for both negative word-of-mouth and purchase

intentions with existing and potential consumers. Anger energisers people to say or write

negative things about a company and to avoid buying a product or service (Coombs &

Holladay, 2007).

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Repairing damage from a crisis is called reputation building. Reputation management

strategies vary in how much emphasis is placed on the victim (not the company). Minimal

emphasis on the victim includes denial, attack the accuser, and scape-goating (Coombs &

Holladay, 2007).

Denial: Management claims there is no crisis.

Attack: Management confronting the person or group claiming something is

wrong.

Scape - Goating: Management tries to shift the blame to some person or group

Outside of the organization eg: the victim or blaming a supplier for the crisis.

As it was apparent with Amici’s, the crisis wasn’t handled well thus impacting negatively on the

restaurant’s capacity to be financially earning consistently in business. Due to the caliber of

media attention and negative repercussions instigated by one dissatisfied and unhappy

customer; a negative snowball effect transpired from the restaurants external publics. This in

turn had a major impact on the owner’s reputation as well as the staff that worked for Amici’s,

invariably resulting in an all round diminishing morale in considerably affecting the business’

workplace.

If we are to compare all efforts according to the structures of a typical PR reputation

management rescue plan, it would be fair to ask “What has Amici done in order to restore a

good reputation for itself?” Have all efforts been made in saying “I’m sorry that this situation

has got to the stage that it has etc.” Is it possible that Amici could be seen to be doing the right

thing in making all efforts to fronting up publicly in bringing resolution to this dilemma?

(2010) Bindoff believes that rebuilding a crisis plan, one must deal with the situation honestly,

in order to achieve three things;

o Must tell their story so that the media may know about it otherwise they may not be

interested ( or possibly only in the conflict of negative impact that it brings)

o Build on Amici’s own reputation – as the interface with media and the public, an utterly

vital necessity to developing a corporate reputation.

o Build on Amici’s own corporate reputation.

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“And how do you build that trust: be available, be honest, fess up, and say what you intend to

do and then do it – and if it isn’t working out be the first to say why” (Bindoff, 2010, p.16).

2.2 Consumer Generated Social Media – Word of Mouth

Stakeholders angered by a crisis will be more likely to engage in negative word-of-mouth,

dissatisfied customers are much more likely to tell friends and family about a product or

service than happy customers (Schlosser 2005 cited by Coombs et al 2007).The increased

use of the internet makes negative word-of-mouth easier to create and to disseminate

Word-of-mouth is recognized as a powerful force in shaping attitudes of consumers.

Negative word-of-mouth demonstrates a stronger effect on customer evaluations than

positive word-of-mouth (Brown & Reingen, 1987; Herr et al., 1991 cited by Coombs et al

2007). According to Jorgensen (1996) cited by Coombs et al (2007) crisis responsibility and

anger should be predictors of negative word-of-mouth because the two variables predict

purchase intention.

On closer observation with the dilemma that Amici’s has encountered, The negative

word-of-mouth demonstrated two critical differences from the patron’s purchasing

intentions. First, its negative word-of-mouth spread by the complainant, Ms Donnelly. As

a result, the potential damage was not limited to her only in experiencing the crisis.

Typically unhappy as a customer, she told x amount of people about her displeasure and

negative word-of-mouth spread unfavorably with information from one person-to-

another. The result was that the crisis had a potential effect on behaviors well beyond

those she experienced. Many came to know the crisis or learned about the crisis through

the news media. Secondly the negative word-of-mouth from this scenario came about

with a longer lasting effect on buying intention from most that got news of it in

Whangarei. People may read or hear about the issue long after the crisis has happened.

The person who sent the message may no longer be angry but his/her angry words can

still influence the purchasing intent of others. As a result, they may become equally as

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angry when an organization or restaurant, as is the case here, is at the least partially

responsible for an unexpected and negative event because these violate stakeholder

expectations of how an organization should behave (Hearit, 1994, 2006.)

2.3 Corporate Social Responsibility (CSR)

Business experts have stressed the importance of establishing social initiatives to build a

strong company reputation since the 1990’s. Academic literature on Corporate Social

Responsibility (CSR) has a major influence on how consumers evaluate companies’

products positively (Grobben et al, 2009). Further more consumer reports imply that CSR

helps a company build a reputation that can protect its image against negative publicity or

help restore it. Klein & Dawar, (2004) cited by Grobben et al, (2009) found that consumers

tend to hold a company less responsible for a crisis when it possesses a strong CSR

reputation however the greater the need for legitimation, the more sceptical consumers

are of legitimating attempts. Consumers are more skeptical about the cause-related

marketing efforts of for-profit companies than of the same efforts by non-governmental

organizations as they perceive the for-profit companies’ motivations as mainly self-serving

(Webb and Mohr (1998) cited by Grobbenet al (2009)

CSR communication has to be used wisely especially during a crisis, as it represents a

defense mechanism that can seem suspicious to consumers and produce a negative effect,

and/or not the desired effect (Ashforth & Gibbs, (1990) cited by Grobben & et al, (2009 ).

Companies need to be careful they do not protest too much during a crisis. Grobben et al,

(2009 ) conclude that companies with a long history of CSR involvement have earned the

trust and goodwill of their stakeholders.

2.3.1 Trust Bank of Good Will

(2004) Golin’s term ‘Build trust today or lose your market tomorrow’ describes the

deposits of goodwill that can serve a company when it faces a crisis or other bad news.

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This effectively is what’s termed as a savings fund for trust, goodwill, and the support of

employees, communities and the media which can be used to maintain support when

inevitable hardships or disasters occur, as is seen with Amici’s. Although it may come

the umbrella of ‘Corporate Social Responsibility’ it goes one step further in that the

effects of its impact are synonymous as being a continuum of ongoing benefits from its

primary through to its secondary, tertiary etc stakeholders. It filters through to the very

core of the public.

This internationally recognized method can be used as part of an organizations

reputation management planning to prevent damage and /or as well as to repair

damage already facing crises. Unlike many facets of business in the traditional manner

of operation, whereby the organization’s worth is easily measured by its tangible assets;

trust bank is the opposite in that it is the intangible qualities of trust banking that result

directly from the approach of genuineness by the organization when applying honesty,

sincerity and openness to its intended audience.

3.0 Conclusion:

3.1 Issues/Crisis Management

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There are no existing risk management plans that have been incorporated as part of the

Amici restaurant’s overall business strategy incentives, therefore the lack of existing

reputation building processes have resulted only as reactionary damage control

responses.

3.2 Consumer Generated Social Media – Word of Mouth

Amici restaurant’s image and reputation is damaged from the greater social reach of a

disgruntled customer via its social media connections - the electronic form of ‘word of

mouth’

3.3 Corporate Social Responsibility

3.3.1 Trust Bank of Good Will

Amici restaurant does not operate under any form of corporate social responsibility

frameworks nor does it appear to be forming trust banking partnerships with any of its

publics.

4.0 Recommendations:

4.1

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Prepare and develop contingency plans as part of Amici Restaurant’s business

strategy and ensure that they are reviewed regularly as part of the business’

ongoing development

Form a crisis management team with the inclusion of restaurateur Ms Deister,

other management representative’s as well as Amici’s company lawyer.

Ensure all can be called together easily, from having noted all contact details at

times of when confronted by future emergencies.

Ms Deister to undergo professional media and presentation training on a regular

basis during the year in preparation for future possible scenarios

Have in place action plans with each member being given specified

responsibilities to particular assigned areas to guarantee

* informing internally that Ms Deister, is the central spokesperson

and the only one to speak about the crisis externally.

*moving quickly through the stages of crisis management with the

help of specialized expertise including the media to inform the

public.

Visible and honest in owning up to the problem and apologizing

Visible in keeping in touch via the media

Always show remorse and concern

Be honest and sincere in assuring fix time

Give a generous compensation offer as a starter to relay Amici’s genuine concern

for its disgruntled customer

Must show respect for all involved

4.2

Set up Amici’s very own social networking blog or discussion group posting

via Face Book/Twitter

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4.3.1

Assess where Amici stands in matters of trust

Take steps to create trust amongst its constituencies and stakeholders

Provide a framework to put things in perspective based on Amici’s

organisational core values

Identify and establish partnership incentives by engaging with open and

honest communications at all times

When creating trust bank relationships, keep customers in mind and focus on developing a solution that’s the best possible return for them, and delivers successful business results.

References

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Allens Goode Leith Realty. (2010). Whangarei and the CDB. Retrieved on April 25, 2010 from

http://www.allens.co.nz/content/web/index.cfm?

ContentTypeID=18828&MenuItemID=58781

Coombs T.W and Holladay, S. J. (2007). The negative communication dynamic exploring the

impact of stakeholder affect on behavioral intentions. Journal of Communication

Studies, 11, 4.

Dineout (2010). Amici Restaurant review. Retrieved May 7, 2010 from

http://www.dineout.co.nz/restaurant.php?rest=7570

B. Grobben and J. Vanhamme. (2009). ‘‘Too Good to be True!’’.The Effectiveness of CSR History

in Countering Negative Publicity. Journal of Business Ethics.

Lazar and Tymson. (2008). The Australian and New Zealand Public Relations Manual 5th ed.

Millennium Books.

Nikolaev, A.G (2010). The Handbook of Crisis Communication. Wiley-Blackwell Chichuster UK

Mersham, G., Theunissen, P., Peart, J. 2009. Public Relations and Communication

Management: An Aotearoa/New Zealand Perspective. Auckland :Pearson

D. Bindoff, personal communication/class lecture, April,2010.

Golin, A. 2010. What Does a ‘Win' for Amadeus Consulting's Software Clients Mean? Retrieved

26/05/2010 http://www.articlesbase.com/software-articles/what-does-a-win039-for-

amadeus-consulting039s-software-clients-mean-2215732.html#ixzz0p2FcKwef

Appendix A

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Ejected diner in email attack

Northern Advocate

12th April 2010 A Whangarei restaurateur has taken an online bagging from a disgruntled mother who was asked to leave when her baby started yelling during an opera performance.

Amici owner Angie Deister said her business had suffered because of damaging comments  forwarded to hundreds of people.

In her  email, Nicola Donnelly  urged people to boycott the restaurant. Her version of events and that of Ms Deister's differ.

Both women say they are collecting witness statements that back up their own stories: the mother's that her child had behaved perfectly and the family was shocked at how rude the restaurateur had been; Ms Deister's that the baby had made a lot of noise as the opera was starting, at which point she asked them to leave.

Ms Deister said she had waived the family's dinner bill, telling them "to just go", and while she felt under pressure at the time had not been rude.

Ms Donnelly's family group, which included two other children, had gone to Amici on February 24 to celebrate her 1-year-old daughter's birthday.

She agrees that when Ms Deister saw the booking included young children she had tried to warn her it was not a suitable night. But the Donnellys did not get the phone message in time.

As soon as the family arrived Ms Deister told them about the opera performance and they had agreed to eat and leave before it started.

But the meal was slow to arrive and before it ended Ms Deister had come over and yelled at them to take their baby and go, according to Ms Donnelly's email.

Ms Deister said that since Ms Donnelly's critical email "had flown around the whole town" bookings had been cancelled and people had come into the restaurant or stopped her in the street to complain.

 "A lot of people reacted to it, and it's shocking to realise how much impact something like that can have,"  Ms Deister said.

"I hope nothing like this happens to other businesspeople in town. It is so easy for one nasty act to destroy a reputation."

She said she was seeking legal advice. One witness who did not want to be named at this stage but is supplying a written statement to Ms Deister, told the Northern Advocate the baby had been noisy for some time before the family were asked to leave."The whole restaurant heard it," she said.

Meanwhile, Ms Donnelly told the Advocate she did not want to be seen as "an email bully". While she stood by the sentiments expressed in the email she initially sent to a handful of friends, she did regret the matter "had spiralled out of control and generated so much publicity"

Appendix B

New Zealand Herald

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Owner cries foul over emailBy Joseph Barratt A restauranteur claims her business was pushed to the brink of closure by an angry email from a disgruntled customer spread "all around town". Thousands of Whangarei residents are believed to have seen criticism of Italian restaurant Amici written by Nicola Donnelly on February 19. The email claims owner Angie Deister screamed at Donnelly as she threw her out because her baby Maia was making noise during an opera performance. It has prompted an inquiry at Whangarei District Council, where Donnelly works as a part-time human resources adviser.

Council spokesman Alan Adcock said Donnelly sent the message to colleagues from a personal account while she was home during her lunch break. The organisation had launched an "internal investigation" after recipients used work accounts to forward it, contrary to email policy.

Deister says Donnelly and her family had been told about the opera night but decided to eat there and leave before the singing. She says she politely asked them to leave and waived the bill. Deister estimates the email has cost her $4000-$5000 a week in takings.

She said almost everybody in town had seen it and she had heard about a high school teacher reading it to their hospitality class.Deister said her business was only three years old and just getting off the ground when the incident happened.

"Turnover has dropped, group bookings were cancelled. One email almost wiped me out. It's unbelievable one viral email about an untrue story could impact on us so much." Donnelly's email said family members were celebrating her daughter Maia's first birthday when Deister said "shut her up or go".

When she later refused to pay the entire bill, she said Deister came up at her screaming: "Just shut up, shut up, go away. Shut up and get out of here, get out. I don't want your money just leave, get out."

Donnelly wrote: "Honestly throughout the whole thing Maia hadn't made a sound. By this time she was eating icecream and playing with my phone." She ended the email by asking recipients to pass it on.

Thomas Brown, who was sitting two tables away from Donnelly on the night, disputes her account and said the backlash against Deister had been "completely unfair". "I could hear the child where I was at. It was absolutely distracting and hard to hear what was happening. "It was not the sort of thing you want to deal with while trying to listen to classical opera."

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Donnelly said this week she was "sick" of talking about the incident and was standing by her version of events. Despite urging recipients to pass on the email, she had only sent it to a small group of friends and never intended it to spread so widely."I'm surprised it has gone so far. I stand by what I said but I regret all the publicity."

Viral venom

Other Kiwis have learned the dangers of forwarded emails the hard way.

March, 2010: DB Breweries executive Anna Isaac received an email containing one word - "whore" - from a work account belonging to Fergus Cleaver.Isaac had rejected an approach for event sponsorship that Cleaver had been copied into.She wished him luck getting sponsorship for future events after copying in key colleagues in the industry.

Cleaver apologised but denied sending the email. December, 2007: Caterer Margaret McHugh sent an email to Hayley Johnstone, an accounts and event manager at Ray White in Auckland, which said: "Get into the real world young lady ... You were probably bottle-fed till late teens." The email was sent after a series of emails querying a quote for a catering job.

McHugh later said she received more than 1000 emails criticising her.August, 2007: Auckland University lecturer Dr Paul Buchanan was sacked after sending an email to a student refusing to extend an assignment deadline.

In a follow-up he said: "I say this reluctantly but not so subtly: you are not suitable for a graduate degree. It does not matter if your father died or if you have a medical certificate."The extension is meaningless because you have not attended the last few classes and are the worst performer in the class."The Employment Relations Authority ruled he had been wrongfully dismissed and awarded $66,000 in lost wages. He was later reinstated.October, 2006: Kiwi law clerk Craig Dale hit headlines around the world after sending an email to colleague Azadeh Bashari proposing they become "friends with benefits". Bashari forwarded the email with the title "loser alert" saying: "If you ever have the misfortune of meeting this little charmer, run!!!"

By Joseph Barratt

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