Photo: Song Dandan promoting Youkadan medicine. Via: SCMP

By Xie Liangbing (谢良兵)  
Issue 606, Feb 4, 2013
Nation, page 14
Translated by Zhu Na
Original article: [Chinese]

On Jan 21, a Weibo post about Renhe Pharmacy (仁和药业) quickly plunged the company into a reputation crisis.

The Jiangxi-based company’s share price fell 10 percent in the ten days following a post about its product Youkadan, a children’s cold medicine, resulting in a one billion yuan loss of market value.

On Jan 17, the PR firm Ogilvy & Mather and the Chinese consulting agency CIC jointly issued a White Paper on crisis management in the Weibo era. The report says that while China’s microblogging platforms have become an important medium for brand marketing and communication, they have played a more significant role in the outbreak, spread and aggravation of crises. Research found that the first eight hours after a public relations crisis breaks out are a critical window that companies must use to respond.

A Crisis from 140 Words

On Jan 21, a doctor at a Beijing hospital, who only went by the surname Meng, noticed that many children under one-year-old were taking Youkadan medicine. The doctor recalled a document that had apparently been issued by drug regulation authorities before, so Meng posted a message of less than 140 words on Weibo to remind people. 

“Youkadan and Haowawa medicine have been proven toxic to children’s livers,” the message said. “Children under one year should absolutely not take it. Children under six should take it with caution.”

He then asked, “Why are their advertisements still in the media? Celebrities, please spread the message and have these commercials withdrawn.”

Although the doctor had less than 2,000 followers, his or her Weibo identity as a pediatrics doctor gave the message authority. The doctor also mentioned celebrities like sitcom actress Song Dandan (宋丹丹) and actor Wen Zhang Zhang (文章) when posting the message. On the evening of the 21st, Wen Zhang reposted the message to his 26 million followers and ignited Renhe Pharmacy’s PR crisis.

On Jan 25, Song Dandan, who has done advertisements for Youkadan, threw gas on the fire by making a public apology on Weibo for endorsing the company.

It turned out though that the doctor had been misinformed. Youkadan later released a statement, corroborated by the Jiangxi Food and Drug Administration, saying, “The medicine is safe for children from age one to 12 and won’t cause harm to liver. Children under one should not take it due to the lack of empirical statistics on safety and effectiveness - but not because it harms the liver.” 

However, the damage was already done.

Chu Wen (褚文), a partner at Ogilvy & Mather, said that research has been done in the United States that shows, on average, if a public relations crisis is handled properly, then the company’s share price will be up 7 percent after six months. If mishandled though, the share price will still be down 15 percent.

On many occasions, as in the case of Youkadan, harmful reports against companies turn out to be false. But if the response is mishandled, market value will be difficult to salvage. 

The Chinese company BaWang Group, for instance, had a PR crisis in July 2010 when a magazine reported one of its shampoos contained dioxane - a substance known to cause cancer. However, it was later shown that the amount contained in the shampoo poses no threat to humans and dioxane is in fact found in many shampoos. 

Nonetheless, BaWang’s share price tumbled. The annual report showed that sales in the second half of 2010 dropped 63.2 percent compared to the same period of the previous year.

Eight Key Hours

Through a statistical analysis of 50 domestic and international case studies, the White Paper discovered that issuing a response within eight hours shortens the duration of a crisis. If the first response comes more than a day after the crisis breaks, then it will significantly extend the duration of the fallout.

Chu Wen said that if a company’s first response is within eight hours, the average duration of the crisis is six days. If it comes between eight and 24 hours, the crisis will last seven days. Waiting between a day and a week to respond will draw the crisis out to 15 days, and waiting more than a week will result in a 19 day crisis.

On Jan 23, two days after the crisis began, the first article about Youkadan was published in the traditional media. It wasn’t until that evening that Renhe Pharmacy issued a clarification.

The company was still using the classic public relations approach by waiting to respond to a traditional media report.

Chu Wen says brands that have already established official Weibo accounts before a crisis can reduce their response time by 12 hours and shorten the average duration of the crisis by two days.  

The most successful case among the companies that suffered a Weibo crisis in 2012 was that of McDonalds. At 8pm on Mar 15 last year, CCTV reported that McDonalds was using food past its expiration date. The report was picked up by many microbloggers, and less than two hours later at 9:50pm, McDonalds issued an apology on its official Weibo account.

According to Chu, McDonalds’ success in handling the crisis lay in the speed of its response, the sincerity of its attitude and the authority that came from communicating through its established Weibo account. Had the company not been on Weibo, it would have had to wait until the next day to speak to the media and get its message out.

Opinion Leaders

The White Paper revealed that when “opinion leaders” participate in spreading a message on Weibo, the average amount of discussion increases 37 fold and the duration of crises extends by six days.

Chu advises brands to reach out to opinion leaders in the industry, make them loyal fans and maintain a day-to-day relationship with them. “Opinion leaders cherish their feathers, and will be relatively cautious to speak,” Chu says. “[A brand] needs to establish a mutual trust relationship with them.”

After actor Wen Zhang reposted the doctor’s Weibo message during the Youkadan crisis, it was shared more than 20,000 times. And Song Dandan’s apology for endorsing the company was reposted more than 10,000 times.

The importance of a company having a Weibo presence can’t be ignored. During the McDonalds crisis, the message containing the company’s apology was reportedly shared 8,400 times within the first half-hour. But that doesn’t mean issuing a timely response on the platform guarantees a crisis will be fully mitigated

Chu says that Weibo is often a platform for emotional expression. Therefore, Weibo users tend to prefer reposting messages with negative conations. “Compared to the relative neutrality of traditional media, Weibo has personal likes and dislikes, and strong emotions.” Chu said.

Many of the clarifications issued by Renhe Pharmacy during the Youkadan crisis were of no use. The doctor who posted the original message even apologized and clarified several times that he had posted “without adequate fact checking.” However, popular Weibo users lacked the same enthusiasm to repost these clarifications and none of the corrections received anywhere near the same amount of re-postings as the original message had."

Mei Qiang (梅强), the chairman of the board of Renhe Pharmacy, says he’s worried the crisis will bring a “psychological shadow” over investors and consumers.

Links & Sources
South China Morning Post - Pharmaceutical company loses 1b yuan after 140-word Weibo message