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Tough week for Progressive Insurance Thanks to the Power of Social Media

August 18, 2012

Social media virality  is often seen as a holy grail for marketers.  However, it can also be a beast when it comes to bad customer service outcomes.

Progressive’s advertising spokesperson, “Flow”… doctored up in as part of the viral negative reaction.

Here in the USA, a sad story went viral and, yet again, social media brought about a PR disaster for a big company.  There have been many in recent weeks.  We were first alerted to the situation yesterday, when popular marketing blogger Seth Godin penned a thought provoking piece, Corporations Are Not People.   We will let Seth explain what happened:

You may have read Matt Fisher’s story about the tragic death of his sister and the response of her insurance company. My heart goes out to his family.

She had Progressive insurance and they refused to pay. Instead, the company paid to send a lawyer to coordinate a defense with the other driver–in other words, they paid their lawyers to go to court to prove that Matt’s deceased sister, their client, was at fault. They went to court against their client even though there was significant evidence to the contrary and even though the other driver’s insurance company (Nationwide) had already paid her family $25,000. The amount at stake: just $75,000.

Progressive’s weasely first response is here.

You can read Progressive’s more nuanced, but still doublespeak update here. They could have done the right thing from the start, or almost anywhere along the way, but never did, and they used fancy language to disguise that fact. Of course it’s not against state law for them to settle a case. And of course losing a jury trial is not the same as settling with the family.

If Progressive is proud of their tactics, they should say so. “We fight against claims to keep our costs low, saving you money.” But if they’re not proud, they should tell the truth, learn from it and apologize.

Later in the day, Progressive did reverse course and agree to pay the claim.  But the damage of a week of horrible social PR has taken its toll and the company, like so many others recently taken through the social media whirlwind, has a lot of image rebuilding to do.  As one Tweet put it,

Progressive had to lose a trial, weather a media firestorm, and risk the loss of customers before paying a claim.

Just search #progressive on twitter and see for yourself.  Check out their facebook page.  Do a google search.  None of it is pretty.   The situation is summed up well by a Wall Street Blogger covering the story and its possible impact on Progressive’s image and its pocket book (stock).  In this excerpt he speaks like a true social media pro:

Progressive seems not to have learned one of the key lessons of the social-media age. There is no privacy anymore. Every move a company makes can, and given the public’s endless need for stimulation, inevitably will, be broadcast on the huge Jumbotron that is the internet. Corporate decision-makers would be well-advised to behave as though their every move were being played before a capacity crowd at the Rose Bowl. The distance between in-house and viral is exactly two mouse clicks, the time it takes to send an angry blog post into the cybersphere. Caveat venditor: let the seller beware.

This is a sad story with a sad ending for all involved.  The big lesson learned- hopefully for Progressive- and for all social media students/practitioners:  Embrace social media in good times and in bad. Be authentic.  Do the right thing.  In this fishbowl/jumbotron we call social media, you can’t fool people.  Decades of Brand-value creation can come toppling down in days.

For ‘extra credit’ reading, here is a very interesting post by somebody in the insurance industry offering up Progressive’s behavior as something NOT TO DO.

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