Reputation Gurus

Red Bull has successfully sued several bars for substituting other energy drinks to patrons who ask for a mixed drink with Red Bull.  A Chicago court just awarded the company more than $500,000. 

Red Bull now runs the risk of hurting its own reputation.  Why?  The company that created the energy drink category looks like it is bullying competitors.  And, if that message is delivered by your friendly, neighborhood bartender, you’re pretty likely to believe it. 

Simply “being in the right” may not be enough to win in the court of public opinion if a company doesn’t aggressively manage its communications.  Red Bull must protect itself with consumers.  Failure to do so will harm its reputation and, likely, threaten sales.

A recent New York Times/CBS News poll reports that 81 percent of Americans believe “things have pretty seriously gotten off on the wrong track” in the U.S. Hardly a day passes without terrible news about an individual company or whole industry. Bankruptcies. Bailouts. Buyouts. Observers might call this an economic crisis.

Though unreported, a common thread in the downturn has been that many American companies have compromised their reputations. As the graphic here shows, a corporate brand or reputation is the product of customer interactions on eight factors – ranging from financial performance to product quality.

This means companies need to pay attention to how they are perceived overall. Unfortunately, some executives spent the last few years defining their companies’ reputations on the strength of financial performance alone.

When a brand is narrowly defined, risk increases because stakeholders have fewer factors on which to judge the brand. Failure to deliver on a brand’s more focused promise means that stakeholders lose faith or trust in the brand. Companies that defined themselves primarily on the basis of financial performance disappointed when they failed to meet financial expectations.

The tendency during challenging economic times is to trim spending on all “non-crucial” activities. But, companies must be careful in assessing what is really crucial. I’d argue that the corporate reputation or brand is at least as important – and valuable – as a few quarters’ performance.

Why do people prefer branded consumer products over no-names, but not a branded drug over its copycat generic?  Take the very popular iPod, for which there are cheaper alternatives, like Sansa. Or TVs – Sony and Panasonic come to mind – but there are plenty of cheaper alternatives, like Vizio and Olevia.  Yet, I don’t think anyone would suggest that the iPod or Sony TV will go away.But, when it comes to drugs – which affect your health and well-being far more than an electronic gadget – people overwhelmingly prefer the generic.  Payers clearly play a large part in this, but public sentiment still favors the generic.  A recent forecast of the pharmaceutical market (IMS Health’s 2008 Global Pharmaceutical Market and Therapy Forecast) shows global growth of 5 percent to 6 percent in 2008.  But it forecasts that generics will grow by 14 percent to 15 percent.

The apology that CEO Mark Zuckerberg of Facebook made yesterday on his blog is just the beginning of Facebook’s comeback from its kerfuffle over it’s latest adversting feature, which the company introduced last month.  I think that anyone who saw even one article about the feature at launch could have predicted that Facebook members were not going to stand for such over-commercialization of their online activity.  One expert was quoted in today’s New York Times (December 6, 2007) as saying “This is a bit of an example of Facebook being … out over your skis.”

I don’t know about Facebook and its skis, but there are some interesting elements to this story that would have been shocking even just a year ago.

First, it’s shocking that Facebook thought they could get away with this type of advertising program, and that they didn’t provide enough of a notice to allow users to opt-out.  In the UK, any type of direct-mail or direct-email campaign must allow consumers the opportunity to opt-out by law.  This is a refreshing change for an American living overseas.

Second, it’s shocking that Facebook … despite its apology and changes it has made to the system … still will not provide a universal opt-out option.  It seems as if the company still thinks that it has cracked the code of a viable online business model and won’t let go.  But, I predict that this will change in the near future.

Finally, perhaps the most shocking part of all — and, it’s really not all that shocking today, although it still surprises me — are the comments that Facebook users made about the system.  Outraged Facebook users largely commented on how Facebook created “private” space to share experiences … and therefore, expressed a sense of violation that Facebook sold personal information … This just smacks in the face of common sense. 

Private?  Facebook?  Since when was anything online really private?  Yet, even early 30-somethings insist that Facebook has violated their privacy … as if their privacy wasn’t already violated by putting their deepest, darkest secrets online for thousands to read.

I ordinarily keep my blog postings focused on corporate reputation management, but today is a bit different, so forgive the brief rant. 

Journalists cover controversy and scandal, and sometimes one has to wonder just who cares that Lindsay Lohan ran a red traffic light or that a senior executive at a publicly traded company had an extra-marital affair with a famous journalist.  Case in point … some of yesterday’s (and this morning’s) news in the US focused on the allegation that Democratic presidential candidate Hillary Clinton forgot to tip the waitress at a restaurant in Iowa.

Regardless of your political leanings, this is simply not news.  Of course, Hillary should have tipped her waitress, but one can imagine how that might be an oversight when you’re running for president.

And, that’s why I say, “Hooray for Anita Esterday.”  Anita is that waitress who got stiffed by Hillary.  She’s a waitress at the Maid-Rite diner in Iowa.  And here’s how she responded to the media questions about her lack of tip:  “There’s kids dying in the war, the price of oil right now — there’s better things in this world to be thinking about than who served Hillary Clinton at Maid-Rite and who got a tip and who didn’t get a tip.”

Amen.

I read today that Les Echos, the leading French financial newspaper (owned by British company Pearson, which also owns the Financial Times), will not print this morning because its journalists voted to protest its sale to LVMH. 

I have to secretly cheer for the idea of journalists banding together to fight off an unwanted owner (one wonders what Wall Street Journal journalists might have accomplished if they did something similar when Dow Jones was up for sale), but I also wonder how much impact it really will have.  After all, this is a time of dwindling newspaper circulations.  If Les Echos doesn’t print, and nobody minds because newspaper circulation is getting smaller each day, then what does that say for need for Les Echos?

I’m sure that there will be many comparisons between Stan O’Neill’s dismissal from Merrill Lynch and Chuck Prince’s departure yesterday from Citigroup.  Both men tried to change very distinct and strong cultures, both men tried to broaden their respectives globally, and both men fell to the credit crisis that is gripping the United States, if not the world.  Both men also ended up making a lot of enemies, removing executives who challenged them.

I have to wonder, though, what the long-term fall-out will be of letting such high profile CEOs go, particularly in the wake of poor financial earnings.  With shareholders demanding the ouster of CEOs based on one or two bad quarters, who in their right mind would want that job? 

 One wonders who’s next to go …

With so many reputational gaffes that occur, it’s nice to see a company taking a pro-active stance to their reputation management – and getting it right! 

Earlier this year, the Grocery Manufacturers Association and the Chocolate Manufacturers Association, together with 10 other trade groups, filed a petition with the FDA that would allow chocolate manufacturers to use cheaper vegetable fat instead of more expensive cocoa butter, yet still call their products “chocolate”. 

Now, I’m no chocolatier, but I am a chocolate eater, and somehow calling something “chocolate” when it really has nothing in it that makes it chocolate seems like … well, it seems like going into a restaurant, ordering crab, and then being told that white fish disguised as crab is just as good. 

So, I was pleasantly surprised when Mars (maker of M&Ms, Snickers, Milky Way and Three Musketeers) “broke the ranks”.  Based on the huge outcry from consumers, Mars has decided that ”
U.S. consumers do not want their chocolate changed”. 

Even if the FDA denies the petition, ensuring that chocolate manufacturers’ products continue to adhere to the “100% cocoa butter” rule, Mars still comes out a winner by staying true to what consumers call chocolate.

On Sunday, October 7, nearly 36,000 people ran the Chicago Marathon, despite record temperatures.  By noon, the race was suspended, one runner was dead, thousands were overheated and tens of thousands were dehydrated because the race ran out of drinking water.  On Monday, runners were waiting for an apology.  They’re still waiting.  Race organizers, apparently concerned about reputations and a backlash that might harm
Chicago’s bid for the 2016 Olympics, broke a basic rule of crisis communications:  They failed to acknowledge a problem.  They blamed hot temperatures everyone had predicted for several days before the race.  And they blamed runners who prepared for months to run the race.   Executives who hide their heads in the sand during crises also bury their companies’ reputations.  Unless they get it right fast, the Chicago Marathon’s executives will learn that lesson painfully.

In yesterday’s blog posting, I pondered a bit why companies with women at the top have delivered better financial results, according to the US organization Catalyst.  I don’t want to turn this blog into a treatise for the feminism movement, but, interestingly, the FT filed a story this morning that posed the same question.

According to the FT, McKinsey presented research yesterday at the Women’s Forum for the Economy & Society in Deauville, France, which finds that there’s a strong link between the number of women at the top and a company’s financial performance, showing that these companies do better in than the average company in their sector in terms of return on equity, operating result and share price growth.  The study took it further by finding that companies around the world where a third or more of the senior team are women score higher on organisational excellence — accountability, innovation and work environment.

The article does ask why this is true, but there are no real conclusions.  For us as reputation managers, I believe that we should be looking at these types of factors and how to play them up with key internal and external stakeholders.