By Laura Jaffee, Director of Business Development at Status Labs
By now, you’ve heard that US prosecutors charged 10 people, including Adidas’ director of global sports marketing, James Gatto, with bribery, wire fraud, and conspiracy in connection with college recruiting. Allegedly, Gatto used hundreds of thousands of Adidas money to bribe elite high school athletes into attending Adidas-affiliated colleges.
The investigation is ongoing and is likely only the tip of a destructive iceberg for Adidas, the N.C.A.A., and other athletic brands like Nike and Under Armour, who could be next in line for a federal investigation.
Although the government didn’t name Adidas directly, the brand’s share price dropped 2.5% immediately after the scandal was made public, and may continue to fall as more details unfold.
In addition to unhappy shareholders, Adidas’ employees are likely confused and frustrated by the scandal and the subsequent negative press coverage, and company morale is low. Not to mention the emotional trauma felt by the student athletes and their families who were manipulated by their coaches, and the millions of Adidas customers who may question their own brand loyalty, and start buying from competitors instead.
Adidas’ immediate and long term crisis strategy will determine if the brand sinks or swims moving forward.
Starting immediately, in addition to cooperating with authorities, the Adidas’ executive team should be as transparent and honest as possible with its employees, customers, and the media.
Rote “corporate-speak” statements tend to backfire and can lead to an even bigger PR crisis when the public is left unsatisfied. Adidas can get ahead of a potential apology circuit by being genuine and human in its communication both internally and externally.
From a digital perspective, negative press coverage will be ongoing as the investigation continues, burying any positive content that appeared in Adidas’ search results before the scandal broke. Left unchecked, these negative stories will permanently populate the first page of Adidas’ Google search results, where over 95% of people go to learn about the brand.
Studies show that businesses risk losing as many as 22% of customers when just one negative article is found by users considering buying their product. Given that Adidas is a multi-billion dollar company, this damaging crisis could cost the brand billions in lost revenue.
If they aren’t already, Adidas executives should consider working with an experienced PR crisis manager, a digital reputation management firm, as well as competent legal counsel to balance the conversation happening around the brand. Maintaining a positive reputation will be vital to Adidas’ long term success.
If Adidas prioritizes these things, it should be back to “running” the world in no time.
Status Labs is the premier digital reputation management firm, with offices in Austin, New York, Los Angeles, London and São Paulo. For more information visit StatusLabs.com or sign up for a Free Consultation.