This is Part Two of a three-part series on diagnosing the severity of a trust related matter and the suggested response

In Part One we looked at matters where there might be enduring negative publicity that is usually only noticed by those closest to the category. Surveying the market at the time, provided an objective conclusion that the best course of action was to ride the trust issue out and from a marketing perspective, do nothing.

In this Part Two, the regulator is now involved and is flagging a likely regulatory intervention. Often the perpetrator of the breach of trust is focused on minimizing damage to its own brand and therefore, less concerned about a possible loss of social license. Loss of social license has category-wide implications requiring a coordinated, category-wide response.

Three scenarios involving an alleged breach of trust have been proposed. These are trust related matters classified as a:

1. Passing concern;
2. Troubling development; and
3. Full-blown crisis.

It is important to acknowledge that some breaches of trust can escalate from a passing concern, to a troubling development, and eventually become a full-blown crisis. The escalation can happen in days or even over years. The example discussed shortly (Victorian Thoroughbred Racing) was played out over years.

This article discusses the ‘troubling development’ scenario which displays three characteristics:

1. Sensationalized attention lasting beyond a week;
2. Objectively measured negative brand attribution; and
3. Attention from the regulator flagging a likely regulatory response resulting in category wide, loss of social license.

Double Jeopardy and contagion risk

Trust related matters classified as troubling development raise the prospect of being punished not only by the market but also, by the regulator. Once the regulator expresses an interest, the prospect of category-wide, contagion risk in the form of a regulatory response and loss of loss of social license becomes likely.

For the perpetrator of the breach of trust, the market’s punishment plus the subsequent regulatory imposition might be considered as being punished for the same “crime” twice and therefore, a kind of double jeopardy.

The hallmark of a troubling development is the persistent negative publicity being attributed to your brand and the imminent intervention by the regulator. It is during this period when reparative action by the perpetrator of the breach can make a marked difference.

The usual approach is mea culpa involving self-punishment, usually taking the form of sackings, remuneration reduction, demotions, free services and so on, all in the hope of releasing the pressure on the brand and ultimately avoiding the regulator punishing the category.

Timing is also critical. Within hours of the news breaking of a serious matter, if there is a void of information from the brand, then the brand cedes control to alternative agenda-driven interpretation of the facts and the brand’s narrative becomes less relevant.

A category wide, regulatory impost resulting in a loss of social license raises the prospect of “collateral damage” to bystander competitors. For example, in the UK, the News of the World phone hacking scandal led to the permanent closure of the newspaper in July 2011 and the winding-up of the voluntary Press Complaints Council.

This was replaced by a stricter body with more forceful regulatory powers including the power to compel media organizations to issue annual statements, as well as issuing fines. The loss of social license effects not only the perpetrator but, the entire category.

The revocation of social license

Dating back as far as 1861, The Melbourne Cup has been a thoroughbred horse race held in Melbourne, Australia. It is conducted by the Victoria Racing Club (VRC). The peak body for thoroughbred racing is Racing Victoria.

In the recent history of running the Melbourne Cup, seven horses have been euthanized. The high fatality rate made the VRC two-mile handicap one of the world’s deadliest horse races. Matters came to a head when English Derby winner, Anthony Van Dyck was euthanized on the racetrack on November 3, 2020.

Prompted awareness of the euthanasia amongst the Victorian population was 69%. Furthermore, considering the stream of fatalities, 39% of race goers said they were less likely to attend thoroughbred racing.

Most troubling of all, in a subsequent enquiry it was found that the stallion was lame a month before it broke down during the running of the Melbourne Cup and had previously been administered a nerve block injection. The Victorian Government was under acute pressure to tighten its regulation of thoroughbred racing. Regulation that would impact all thoroughbred racing clubs in Victoria.

This situation falls into the ‘troubling development’ category.

Jumping off the slippery slide

Following a wave of media attention, Racing Victoria acknowledged there had been an increase in negative sentiment towards the horse racing industry. This change in public perception had the potential to threaten the social license of the sport. The peak body knew that the regulatory clock was ticking. Its first step was to quantify the relative importance of drivers of social acceptance of thoroughbred horse racing.

The next step was to develop and implement a comprehensive program and finally, ensure the market was aware of the initiatives and the successes. Initiatives included the requirement that all international horses undergo a CT scan of their distal limbs prior to each start in Victoria during the Spring Racing Carnival.

The treatment of horses beyond their racing career was addressed through the RESET (Racehorse, Evaluation, Support, Education and Transition) Program which provided direct support for those horses transitioning to a second career outside of racing.

In just 12 months, from 2020 to 2021, the public’s attitude to thoroughbred racing had markedly changed and the immediate threat of a loss of social licence averted. The lack of serious injury in 2021 Spring Racing Carnival also contributed to a more positive sentiment towards future participation.

Of note however, is the deterioration in performance over the subsequent years. Forethought likens this to throwing up a tennis ball. It comes back down and so; the ball needs to be continually thrown up. That is, Racing Victoria needs to continually communicate its portfolio of equine welfare activities.

Note: *indicates that multiple responses were allowed for this question, so these results may not sum to 100%. Q. Based on this year’s Spring Carnival at Flemington, how will your behaviour towards racing change, if at all?

All in all

Redemption can be achieved when the peak body managing the “voluntary code of conduct” moves to head off the loss of social license by taking full account of what is expected and implementing accordingly. It’s not the stuff-up, but the clean-up that matters.

The final part of the series is ‘Part Three – The full-blown crisis teetering on the brink.’ This part deals with dire breaches of trust where the brand is tone-deaf to the market’s response and seemingly oblivious to the consequences causing it to stumble on as though nothing had happened.

Just to recap so far, trust equals stored value in the form of forgiveness. Forgiveness is the consumer’s preparedness to regard wayward behavior as an aberration. Trust is built a penny at a time but can be lost overnight. To construct trust, you must first understand the consumer’s constituent building blocks of trust and always keep in mind, it is easier to build trust in steady state “peace time.”

Forethought has aided clients to identify the constituent drivers of trust and to then build trust by communicating about the performance on a single building block. We have measured statistically significant lifts in trust in organizations from even a single communication campaign. But, the chosen driver of trust needs to be communicated implicitly. Shouting “trust me” does not work.

It’s the subtlety in the communication and the singularity in the execution that is most likely to pass the consumers’ well-honed, cynicism filter to commence both the building and rebuilding of trust.