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The post How Do Lawsuits Impact Brand Image in The Market? appeared first on The Total Entrepreneurs.

In today’s competitive marketplace, your brand’s image is not only its face but also its most valuable asset. It stands for consumer perceptions, trust, and ultimately, financial success.

Gone are the days when a brand was just a logo and some colors. Forbes states that your brand represents who you are, what you stand for, and the tone you set for your audience.

However, the carefully cultivated reputation of your brand can take a severe hit by legal battles—one that is not easy to recover from. Lawsuits, whether stemming from consumer grievances, regulatory non-compliance, or internal disputes, have the potential to inflict lasting damage on a brand’s image.

In this article, we’ll explore how lawsuits impact the image of your brand in the market and its long-term consequences.

What Kind of Lawsuits Affect Brands?

Are you ready to delve deeper into the impact of lawsuits on your brand’s image and reputation in the market? But wait a second.

Before moving forward, we’d like to familiarize you with the kind of lawsuits that can be filed against a brand. It’s important to cover the basics before building up on it.

Consumer Lawsuits

As is clear by the name itself, these lawsuits are filed by the customers of a brand in relation to a product or service they’ve bought from it.

The most common consumer lawsuit witnessed in the market is product liability. These lawsuits typically involve cases where a product has defects, causes harm, or has side effects that weren’t included in product warnings.

The NEC baby formula lawsuit serves as a perfect example of a product liability case. TorHoerman Law notes that some baby formula brands were linked to causing fatal gastrointestinal issues in premature babies.  As a result, many parents filed a lawsuit against these brands – namely Similac and Enfamil.

In a recent NEC lawsuit update, Mead Johnson – the manufacturer of Enfamil – had to pay a settlement of $60 million to the parents suing it for product liability. The jury found the brand to be negligent, and it failed to warn the victims about the product’s toxicity.

Other consumer lawsuits involve:

• False Advertising – filed for the creation and promotion of misleading advertisements.
• Breach of Warranty – filed when a certain product didn’t meet its warranty terms.
• Privacy Violations – filed for the misuse or mishandling of consumer data.

Employee Lawsuits

When a current or former employee of a brand or company takes legal action against it, that constitutes an employee lawsuit. Harassment is the most common issue for filing lawsuits among employees nowadays, with the recent SpaceX lawsuit serving as an ideal example.

Eight SpaceX employees filed a lawsuit against Elon Musk in the California State Court. Before taking legal action, they had detailed their complaint in an open letter to the management, which resulted in getting them all fired.

The former employees have now sued the company for being fired over challenging the “hostile work environment and sexual harassment” culture of the company.

The case also involves wrongful termination, which is another employee lawsuit. Others include:

• Discrimination Claims – filed for unfair treatment based on race, gender, or age.
• Wage and Hour Disputes – filed in concern of unpaid wages, overtime violations, and improper employee classification.

Environmental Lawsuits

Environmental lawsuits are any lawsuit filed against a company with concern for its hand in any environmental issues – including pollution, sustainability practices, and resource management.

The case of the people of the state of California vs. Big Oil is an example of a massive environmental lawsuit. The lawsuit is filed against the biggest oil companies in the world – Shell, Chevron, BP, Exxon, and ConocoPhillips – and their subsidiaries.

The lawsuit alleges that these companies have knowingly hidden the dangers of the fossil fuel they produce for over 50 years. The large-scale consumption of fossil fuel globally – which is their doing – has led to rising global temperatures and damage to air, water, and land.

If successful, the lawsuit will lead to the companies being prohibited from engaging in further pollution.

Examining The Impact of Lawsuits on Brand Image

Lawsuits influence a brand’s image intensely, triggering a cascade of effects that extend far beyond the courtroom. From short-term impacts to long-term consequences, we’ll explore them all below:

Social Media Backlash

There’s no denying the fact that social media has become an important medium for “humanizing” your brand today. Your presence on these platforms is vital in raising awareness, building a community, and retaining your customers.

In a world as interconnected as ours, it’s no wonder that news of lawsuits spreads rapidly across social media platforms. Here, a single legal action can cascade into a torrent of commentary, memes, and hashtags that amplify the story far beyond its original context. Criticism spreads virally, shaping public perception and potentially tarnishing a brand’s hard-earned reputation among a broad audience.

Your consumers also have the power to organize boycotts, launch petition drives, or initiate protest campaigns. And such movements can have an irreparable impact on your brand image, which is much worse than the lawsuit itself.

Loss of Consumer Trust

Trust is a cornerstone of building consumer relationships, influencing not only purchasing decisions but also brand loyalty and advocacy. When your consumers perceive your brand to be involved in legal disputes, it can have detrimental effects on your brand image.

The first effect to worry about is trust erosion. It is natural for consumers to question your brand’s integrity and reliability following a lawsuit. This is because it suggests you have either failed to meet expected standards or engaged in unethical or irresponsible practices.

Moreover, a loss of trust typically results in reduced customer loyalty. Your loyal customers might feel disillusioned or betrayed when legal controversies arise. They might also choose to switch to competitors perceived as more trustworthy. This leads to a decline in customer retention rates and overall lifetime customer value for your brand.

Negative word-of-mouth also plays a critical role in exacerbating the impact of a loss of consumer trust.

Disappointed consumers are likely to share their grievances with friends, family, and online communities. Because of the interconnectedness of today’s world, a negative sentiment can quickly escalate. This escalation ultimately amplifies the fallout from a lawsuit beyond its initial scope.

As you can gather by now, the loss of trust is bound to have direct financial implications. A lower consumer trust translates into reduced sales and revenue. Prospective customers might hesitate to make purchases from a brand they no longer trust.

On the other hand, existing customers will reduce their spending or stop buying altogether due to concerns over your brand’s integrity or reliability.

 

Frequently Asked Questions (FAQs)

How can I file a product liability lawsuit?

The first step to filing a product liability lawsuit is consulting a personal injury attorney specializing in product liabilities. They can walk you through the process of writing a complaint and negotiating with the defendant’s insurance company to get a justified settlement.

What’s the first step in salvaging your brand image after a legal crisis?

The first step to salvage your brand image after a legal crisis is to issue a transparent public statement acknowledging the situation. Communication is the key here. Address the concern, apologize for any harm caused, and outline immediate actions being taken. This demonstrates your accountability and willingness to rebuild trust.

Does your brand image impact your market shares?

Yes, it does. A positive brand image enhances consumer trust, drives higher sales, and increases your market share. On the other hand, a negative brand image can deter customers, leading to decreased market shares and potentially impacting overall business performance.

To sum things up, the damage your brand image suffers from a lawsuit extends well beyond the courtroom.

Legal battles ignite social media storms, undermine consumer trust, and lead to significant financial consequences. In order to rise above the effects of the lawsuit, you must be proactive in mitigating damages and address the legal issues responsibly.

The post How Do Lawsuits Impact Brand Image in The Market? appeared first on The Total Entrepreneurs.