brand damage

Oscars, PWC and reputational damage

We have seen a number of brands suffering reputational damage over recent years – BP, VW, Sports Direct, BHS – to name just four that spring readily to mind.

By comparison, the glitch at the Oscars is just an amusing sideshow. However, it brings into sharp focus the importance of attention to detail in everything a brand does. The bigger the brand the more small details matter.

Brands are about people – not only the people in the organisation, but the people with whom they interact. The brand exists at this nexus of interaction. The right brand values are shared throughout the organisation, so every point of interaction should reflect those values. That should include attention to detail in servicing customers and dealing with the world in general.

Mistakes happen, people are human. But often particular brands are chosen because among their perceived values are reliability and being a safe pair of hands. The brand has a reputation which has a tangible value.

For such brands, damage to that reputation can be costly.

Every brand loves to be involved in high profile projects as they have the potential for exposure and building that valuable reputation. However there is the very real danger of those human slips and errors, should they occur, happening in full public glare.

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Volkswagen embedded brand values

Volkswagen and brand contagion

A brand is a social construct and as such it does not exist in a vacuum.  It is socially and historically contextual. A brand narrative draws upon these contexts and informs our understanding and our emotional relationships that they engender.

The recent issues facing Volkswagen bring these connections into sharp focus. When we consider the brand values of VW, we see them as shared and deeply embedded in those of the German auto industry in general. They include technical and engineering expertise, quality of manufacture and attention to detail. These qualities we see shared and associated with other individual brands such as Mercedes and BMW.

If many VW values are shared and embedded in our perceptions of German car manufacture, they also draw upon what the world may see as German national values. These may include probity, rule-following, bureaucratic fussiness and openness.

It’s easy to see how VW has enjoyed and built its brand persona upon the wider perceptions of both the industry and national values.

However, just as the brand may suffer from any failure in the encompassing brand values – the converse is also true. VW’s apparent lapse in standards, running contrary to our perception of their values, also has repercussions for the German auto industry as a whole. We may question the brand values of the whole cohort.

As the ripples spread out, long-held impressions of German national principles and brand dimensions cannot avoid damage. This in turn may affect and cause us to questions those values as attributed to other businesses and brands closely identified with national characteristics.

It is a salutary reminder that no brand is an island and value it may acquire or inherit from a sector, industry or a nation is synergic. All may prosper or suffer damage from the actions of others.

Tesco and five kinds of brand damage.

Financial, sales-revenue and profit reversals usually correlate with brand damage, though not necessarily to a serious extent. The public is often sympathetic to market conditions and we have seen many retailers struggling through, without permanent brand damage.

Tesco_signHowever some forms of damage can be more serious and enduring, and recently we have seen poor Tesco stumble from one hole to another. Sales revenue damage was compounded by mishandling possibly questionable management activities.

It’s probably a good time to consider the five major categories of brand damage in the light of the benighted retailer’s problems.

1. Market environment damage

Sometimes no blame can be attached to the organisation for issues beyond its control. Particularly political and legislative changes can impact business and the brand and the company may be trapped in negative activity,

Cultural and technological issues can also have damaging impacts. However, it can be argued that a well-managed brand should be constantly monitoring the market environment to remain in touch and relevant.

2. Accidents, incidents and events

Traffic police often say ‘There are no accidents, only incidents’ – the inference being that all accidents are avoidable. Events can be seriously and often terminally damaging.

We can look at the brand damage following in the wake of BP’s catastrophe in the Gulf of Mexico, or Toyota’s string of recalls. These ‘events’ are rarely blameless and damage is inevitable – the distinguishing feature is how a brand faces up to such a catastrophe. Openness, acceptance and swift responses can do much to restore a brand’s reputation where denial, obfuscation and attempts to cover up will only compound the problem.

3. Neglect, complacency and hubris

This kind of brand damage often follows a period of undoubted success. It is where a brand sits back, assumes that it has arrived at its place in the sun and believes it has a right to its position. This often leads to the previous form of brand damage as complacency dulls the belief that ‘something might go wrong’.

In the Tesco example, for decades the business was hardworking and innovative – a pioneer of online shopping, exploiting multi-channel trading and pushing the boundaries of a food market retailer. Did it grow fat, lazy and complacent? It has been suggested that part of the malaise was not being sufficiently sensitive to economic and market changes, and lack of clarity in its brand positioning – leading to shrinking market share.

In such a case, there is often an emotional disconnection – a complacent brand, like a complacent person, stops reaching out and the important emotional bond with the audience is damaged.

4. Incompetence and mishandling

It goes without saying that incompetence in brand management will be penalised. Well-meaning fumbling may not be taken too seriously if the brand has sound core values, however.

Mishandling is often the product of misunderstanding what is important. We have already looked at damage due to events and incidents. These are typical areas where a strong hand on the tiller is required to handle the aftermath.

We have recently seen the tragic events surrounding the Virgin spacecraft test-flight – we also witnessed the exemplary way Richard Branson responded. A stark comparison with Tesco’s response to falling figures.

5. Malpractice, malfeasance and dishonesty

This type of serious brand damage is the result of the actions of individuals or groups within a business. It may be rogue elements or it may be with the approval and complicity of management. We have seen examples of corrupt individuals in the financial sector – here swift action from the board can go some way to mitigate the potential damage. In other cases is may be institutional malpractice – here brand damage can spread beyond individual organisations to whole sectors.

Sometimes this can strike at the very core values of a brand and the damage may be terminal. The example which springs to mind is that of Anderson Consulting and the Enron scandal. The implied brand value of probity was brought into question and the result was the demise of a brand.

We wait to see if this type of damage was involved in the Tesco episode. If so, we can expect a costly and crippling degree of brand pain. Perhaps for a grocery retailer corporate rectitude is not a core value, but we can be sure other brands will be queueing up to fill the moral void.

Will the co-op’s problems lead to long term brand damage?

Co-op bank sign

Sadly, we have seen it all before, commercial blunders and personal… well, shall we say, misjudgments. Usually brands are stronger than people imagine and can come out of such mire with little more than a few bruises to the ego and a little embarrassment. The public understand that the brand is not embodied in an individual – in most cases.

tripodalcultureSometimes however, the damage can go much deeper. The danger is when the brand’s core values are threatened.

A brand’s culture is very much like any other culture, it is tripodal – at its heart are its core values and beliefs, around that are its actions, how it interacts with the world, and finally its products, the physical manifestations of the brand in terms of tangible artefacts and goods. Any one of these elements may be vulnerable to damage through the actions of individuals or groups. We have seen some spectacular examples over recent years. But usually the brand may survive so long as the core – the beliefs and values are not damaged.

The question for the poor old co-op bank is, are its values at risk?

I think it is a close call. One differentiator that separated the brand from other banks, and helped see it through the stormy waters of the banking crisis, was its ethical dimension. Although it may have been viewed as staid and perhaps parochial, it relied upon the heritage of the co-operative movement, distanced from the pure profit motive. It often took ethical stances in terms of investments structured its accounts and products accordingly. This a distinction which must have appealed to many customers whose values it reflected.

Are business ethics distinct from personal ethics? Does business probity stand separately from moral laxity in the bank’s officers?

I’m sure the brand has not suffered terminal damage, but it has been hit in a very sensitive spot, its valuable point of differentiation will take a good deal of reclamation.

Don’t blame retail brand slaughter on the internet.

HMVWe’ve seen quite a bit of brand trauma on the high street recently with big names such as Comet, HMV, Jessops and Blockbuster, among others, hitting brick walls.

It’s easy to jump to a lot of mistaken conclusions. Retail is very visible and as many manufacturing and service companies have also suffered – it’s just that their profiles are not so high.

One of the assumptions we hear is that e-commerce and the internet is ruining the high street. But the reality is simply that people’s shopping habits are changing. Online shopping, downloading music and movies, and digital technologies are part of the landscape. But these technologies are not that new. E-commerce has been with us for around 20 years. iTunes is part of life. Of course technology is rapidly evolving, but many retail brands have recognised and embraced change, adapted and are flourishing.

It is natural for brands to look outside for their nemesis rather than analyse their own shortcomings. Sadly, established and successful brands become complacent and only notice the changing landscape when it is too late and struggle to adjust. Change is no longer in their DNA.

There is nothing fundamentally wrong with many of these brands, just their strategic management lost direction.

A brand such as HMV has huge value, a history to envy and a unique place in the music landscape. The business model was just no longer robust. The management tried many tactical adjustments but more fundamental change was needed. Perhaps the cold light of administration will focus the thinking. This is a brand with real values that will be snapped up, I’m sure.

Similarly, Jessops. We saw how even Kodak lost its way and failed to come to terms with digital imaging. Jessops has a unique place in retail. Of course, the rate of change caught it out, and it needs the breathing space to reassess itself and re-position its offer. Again the brand has some strong core values and it’s little wonder there is a good deal of interest it – last Thursday, PwC confirmed that Dragons’ Den entrepreneur Peter Jones was among a number of buyers looking seriously into acquiring it.

Brand lessons from Starbucks, Amazon, Google et al.

Euro coinLesson #1: The brand is everyone’s responsibility including the CFO.

The recent furore and public backlash at brands which take UK tax avoidance to the extreme was wholly predictable, and avoidable. But how many organisations involve their senior financial people in brand management – how many CFO’s see the brand as part of their responsibility?

I don’t want to get into the rights and wrongs of the tax avoidance activities of these multi-nationals. A CFO had a right and responsibility to maximise post-tax profits for his or her shareholders. They may even be held liable if they do not act to avoid excessive tax burdens.

Boards must share brand values as part of their corporate responsibility. Many of the brands involved in the recent ‘scandals’ take their customer focus very seriously. They have made huge investments in their brands and would probably include such values as fairness, probity, honesty and fiscal responsibility as part of their brand ethos.

Brand leadership v finance.

There seems to be some disconnect here between the brand stewards and the financial stewards.

I’m not suggesting that anybody has acted illegally, but as with all brand issues it is a matter of perception. When the public see successful businesses apparently thriving, they take that as a positive brand virtue. When they hear of shadow companies and ‘management’ and ‘royalty’ fees from overseas that lead to minimal taxes being paid, they smell something bad.

When the tax advisors came up with a great scheme to minimise corporation tax, and when the FCO presented this to the board, did nobody say; “Hey, this does not square with our brand values – it looks bad to our public.”

The problem is one of brand leadership. If the brand is at the centre of corporate decisions it is a great safeguard and reality check for corporate responsibility.

We are already seeing the outcomes: brand aware customers are making their feelings known by using their consumer power. Perhaps the FCO’s will think again. Rather than saying; “I’ve done nothing illegal”, concentrate on explaining falling customer revenues at the next board meeting.

What will do the Google brand most damage – profit slump or communications bungling?

Google logoShare trading in Google was suspended for a while when its third-quarter results were published early by mistake.

The results revealed a 20% profit slump, but what was the biggest potential long-term damage to the brand – the figures or the bungling?

Business results matter, but all companies have ups and downs. Many traditional media companies have suffered reversals in the face of changing markets – areas where Google has benefitted in the past. CEO’s present to the analysts, explain the figures, make their future forecasts, and get on with job.

Share prices suffer for the company (Google was down 9% when shares were suspended) – but that is a business fact. Investors will take a long view of performance and projections and move on. It is a pragmatic decision.

Brand damage is another thing – it is an emotional dimension. We don’t have quantitative measures such as share prices, though all are interlinked. Crucially, the brand is more likely to be damaged by the apparent bumbling and fundamental errors in releasing the results early.

The Google brand has ridden quite high, displaying sound judgement and competence, where other internet brands have skidded from error to error.

The general public is often unconcerned with corporate performance so long as the brand is comfortably between the extremes of insolvency and excess profits.  PR disasters are likely to inflict more lasting dents.

This blip for Google is unlikely to be an enduring or terminal issue. It should be a warning to all of us however not to take eyes off the details of process, especially in corporate communications, however big and successful we grow.

How to learn from what Toyota learned.

Image of Toyota LogoToyota have had another recall issue to come to grips with. This should be no big deal. Most manufacturers have a number of these each year. Toyota’s always seem to come under a rather brighter spotlight which may be a reflection upon their reputation for process, reliability and build-quality. So, when an issue arrises, the media is quick to jump upon it.

You may remember the previous recall of 2009 that received a lot of high-profile press comment. One of the things that characterised that event was the surprisingly bumbling way that the company seemed to react. By comparison, this latest event was an object lesson on sound press relations and crisis management.

What can the rest of us learn from this?

  1. If it can happen, at some point it probably will. Don’t assume it can never happen to you no matter how sound your practices. Be prepared.
  2. Have your ‘spill-drill’ in place – know how you will deal with a media storm in practical terms. Who will handle what and how.
  3. Identify spokespeople in advance. There is nothing worse than journalists calling various different members of staff for comment. Some may have no experience with the media, others may know nothing of the problem. The result  can be conflicting, ill-informed and clumsy stories. Nothing looks worse. Get your spokespeople in place in advance: make sure everyone knows who they are and directs any questions to them.
  4. Don’t hide – nothing makes journalists more curious and antagonistic than, ‘No comment.’
  5. Act fast – in today’s digital world news flies! Deal with one story straightaway and you won’t have to deal with 100 ones in the morning.

Virgin rail behaving true to brand values.

We have all noted the recent farce with the government back-pedalling rapidly over the franchise process – probably with a mixture of incredulity and eye-rolling.

Aside from the political issues and outcomes, I was quite heartened with how the Virgin brand comes out of this. Whether you consider it creditable or not, the brand acted true to its values. Much of the personification of those values is embodied in Mr Branson, and the way he goes about his business. But in this instance he and the brand acted in a way we would have expected.

I’m not getting into an argument over whether it was right or wrong – just that the brand behaved authentically.

If we look at the long brand narrative, from selling imported vinyl, to taking on the high street, launching airlines and digging in its toes against BA, it has always behaved in character.

I suggest this little chapter will not reflect badly on the company. One thing the public likes from its brands is consistency, and Virgin certainly seems to demonstrate that trait.

Legal victories may be bad for brands

JusticeWhen your brand wins a legal battle it may be good for the company but can damage brand values and engagement.

Apple have been smugly congratulating themselves after their court victory over Samsung. We can all understand – when your success is built around product innovation, protecting your intellectual property must be at the front of your corporate mind. But perversely, the public may not share in the jubilation.

Legal confrontations are not particularly edifying. Especially if you are a powerful, brand leader, there is always a reaction to feel sympathy for the underdog. I’m sure many of us remember the reputation Microsoft earned by their eagerness to rush to litigation.

Nobody likes to see dirty washing done in public. Facebook’s internal conflicts did little to endear the management to its public. All of these actions reflect upon the brand values and can be internally damaging.

The discourse within organizations that are involved in litigious processes is indicative of lawyers’ confrontational culture. The metaphors are about battles, about fighting, winning, victories and defeats. The dialogues are adopted throughout the organization. Staff understand who the ‘enemy’ is. The brand ambassadors begin to use the discourse of street-fighters. The ‘battles’ become part of the brand narrative and define its values.

Of course we must protect our IPR and be prepared to stand up for our brand. But it is also important from a brand leadership standpoint that we don’t allow the corrosive and hostile attitude to damage our values.