If you haven't seen by now, Progressive has a problem and their public relations efforts have only served to make it worse. Here's the story from the Wall Street Journal:

Progressive Corp. was trying to save $75,000. Instead, it unleashed a flurry of social-media rage against the company... 

The car insurer found itself in the middle of an online firestorm last week after a blogger named Matt Fisher took to his Tumblr page to complain about the way Progressive treated his family as they sought to collect on his deceased sister’s insurance policy.

Fisher’s story went viral, and four days later, Progressive agreed to settle with the family for an undisclosed sum. Whatever the settlement amount, the total cost of the incident will be much higher, with a tally that will include those people who made good on their Twitter threats to switch their insurance away from Progressive, as well as those who won’t consider Progressive for their insurance in the future.

This is exactly what is meant by the statement that customers using social media have the power to influence millions where they used to be able to tell just ten. It all started with a blog post that Fisher posted. This is the latest unfortunate example of the ability for stories to go viral in an instant leaving your traditional marketing and public relations efforts in the dust. Follow me below the fold for more of the social media outrage.

Moxie Pulse has more about the tone deaf response on Twitter and other new media plaform:

As Fisher’s story quickly spread Progressive showed that they did not have a working PR crisis strategy in place. Progressive’s Twitter account used the social media app Twitlonger to push out 16 automated tweets with a repeated PR statement. This gave @Progressive a human-less, robotic tone instead of a voice that cares about its consumers.

 As if the initial situation wasn't bad enough, their response only compounded the problems.  Back to the Wall Street Journal Article:

The uproar is a cautionary tale for insurance companies. Even Fisher said in an interview Tuesday he was surprised by the furor his blog post created, but the incident shows that in the era of Twitter, Tumblr and Facebook, any customer who doesn’t like how his claim is being handled could potentially become the next policy holder to go viral.

Even when a company’s actions are legal and done with the blessing of regulators, it can suffer reputational and financial harm when exposed to harsh cyber-invective.

“In the court of public opinion, no one cares that it’s legal or if the regulator approved it,” said Robert Hunter, the director of insurance at the Consumer Federation of America. “If it can’t pass the smell test, that’s enough to spark something.”

The Wall Street Journal story say it's a cautionary tale for insurance companies, but I think it is actually a larger message that all businesses and organizations should hear loud and clear. The Social Media Management Blog summed the situation up this way:

Social media is difficult, especially in a crisis situation. Unfortunately, that is the time that you have to be the most careful and do the right thing since you are under a virtual microscope. It will be interesting to see how Progressive bounces back from this from a social media perspective; it’s a good lesson to learn though. Social media needs to be genuine and not automated – sincerity can go a long way, but it needs to be genuine and transparent. Every company needs to use these real-life examples as a talking point within their company and have a concrete social media plan for this type of situation. It will happen to every company, on some level, at one time or another, and it’s best to be prepared.

Business need to make sure they factor the potential public perception of an issue when weighing the costs and benefits of the decisions they make. No longer are businesses communicating directly with a customer, those communications are subject to distribution among their network of contacts. They also need to consider whether there truly is a benefit to the automated response or if they should ensure there is genuine communication on these new media platforms. No doubt Progressive will pay closer attention to this balance in the future. You can see more of the discussion from the Wall Street Journal in this video by clicking here.