Mumbai: It’s lead paint used by a Chinese supplier for Mattel Inc., batteries supplied by a Japanese one for Nokia Oyj, and an unseemly trademark dispute with the American Red Cross for Johnson & Johnson (J&J).
These are a string of global iconic brands that have been under fire recently and their spin doctors are adopting different strategies to prevent a worldwide erosion to image, consumer relationships or sales, and the all-critical brand value itself. Each case presents a crisis management challenge in itself:
—McDonald’s Corp. has to deal with potentially damaging survey findings released by Lucille Packard Children’s Hospital from Stanford University Medical School that children vastly prefer fast food wrapped in multicoloured branded packaging (McDonald’s) over white paper.
—J&J has unwittingly moved into a public relations firestorm when it sued the hallowed American Red Cross for using its red-cross logo. The latter seems to have cleverly turned this into a charity-versus-greed debate. “For a multibillion-dollar drug company to claim that the Red Cross violated a criminal statute that was created to protect the humanitarian mission of the Red Cross—simply so that J&J can make more money—is obscene,” American Red Cross president and chief executive officer Mark Everson told the international media.
—Nike Inc.’s endorser, Manchester United star Wayne Rooney, had a third foot-related injury. Nike dismissed clai-ms that its Total 90 Laser boot was the cause of his injury.
—Recently, Mattel Inc. and Nokia Inc. recalled lines globally for problems related to a product (lead paint in certain toy lines for Mattel) or a component (leaking batteries for Nokia).
Brand value at stake
“CEOs and boards need to be wary about the risk in the form of brand collapse (sudden, dramatic) as well as brand erosion (slow, more subtle) that such incidents can have on brand and business value. This is an increasing trend among especially powerful and proud iconic brands like Ford, Nokia, Shell (and), Sony, which have impaired significant brand value over the years due to a variety of brand as well as PR management issues,” says Unni Krishnan, managing director, Brand Finance India Ltd, which does brand valuations globally.
He estimates that Ford lost 63% of its brand value, which dived from near $36.4 billion (Rs1.5 trillion) in 2000 to $11.1 billion in 2006 after a spate of tyre-related accidents.
In 1995, Shell was embroiled in a public dispute over the decommissioning and disposal of the Brent Spar, a redundant oil storage installation in the North Sea. At the time of the crisis, Shell’s brand value dropped by 20%. Nokia’s brand value has dropped by 15% between 2000 and 2006, he says, due to various reasons including product errors.
Krishnan narrates how after the Firestone-Explorer crisis struck Ford in 2000, it quickly spun out of control and catalysed a series of brand and marketing crises including the decline of its Taurus brand, downgrading of the firm’s debt and a line-up of cars which took increasingly large discounts to sell.
The most valuable auto brand is now experiencing a free fall in brand value and hawking precious brands such as Land Rover and Jaguar.
The lessons are simple, says Krishnan: One, come clean on any product or service problem without trying to “spin” a story. Two, evaluate the impact on the brand and business value and assess the brand risks that this might trigger off and cascade into a larger problem. And three, get to the root cause of the problem, as such incidents are sometimes symptomatic of larger brand and business challenges.
Both Nokia and Mattel are not only recalling problem product lines globally, but are also issuing reassuring advertisements and taking steps to help consumers get help by setting up help lines, kiosks, issuing messages/apologies on their websites, and so on.
Cadbury India Ltd also took the “communicate and act” route when it faced an infestation issue in 2003. Its director of marketing Sanjay Purohit explains that in the crisis phase, they reassured consumers that Cadbury Dairy Milk continued to be safe for consumption. The firm also established that infestation could never occur at the manufacturing stage and that it was a storage-linked issue, while striving not to alienate retail trade.
During the recovery phase after that, actor Amitabh Bachchan was used in advertisements to restore confidence among consumers and rebuild credibility for the brand. He was seen to embody the same values as Cadbury Dairy Milk chocolates—timelessness, enjoying the trust of millions and universal appeal, adds Purohit.
Most companies today either ignore or deny a problem, and that spells clear brand dangers, say crisis management experts. However, when some charges seem potentially true or could cascade, it’s better to ignore the charge and change the battlefield, says Ramesh Thomas, president and chief knowledge officer for Equitor Consulting, a partner of Interbrand.
McDonald’s diverted consumers’ attention by not taking on a children’s hospital, even if there were possible flaws in the research. Instead, it shows its concern for kids overseas by advertising only Happy Hour meals that are healthy and low-calorie such as its chicken nuggets. “If McDonald’s raised the level of debate when the findings ‘seemed’ true, then it would be on thin ice,” says Thomas. In such cases, the attackers can also be given credit for inspiring positive change, say crisis managers.
Some crisis managers feel that J&J could have taken the ignore and silence route, rather than attack a venerable body.
How much a brand is affected by a crisis depends on how much its key driver, or basis of its reputation, is affected. Nokia is about innovation first, and it would be impacted long-term if its capacity for creating design was attacked.
Similarly, when Pepsi and Coca-Cola faced the issue of pesticide in their colas, the brands’ key driver was their thirst-quenching ability and not clean water. So, they could issue ads reassuring people that their colas were safe to drink, adds Thomas.
In contrast, personal driver safety is a key driver for the Ford brand and hence the damage went deep. The blame couldn’t be put in Firestone’s court, since this was a supplier chosen by Ford.
“Again, Arthur Andersen very rapidly went from most valuable to zero value in the consulting market after the Enron episode, as the integrity of its key driver—its signature—was suddenly questionable,” cites Thomas.
The key learning is to not play with the uniqueness of a brand’s character or with relationships.
In the case of Red Cross, J&J can take it on head-on as it doevn’t have a leg to stand on, say some brand consultants, who reckon this is a cut-and-dried case of trademark infringement. And in the Rooney issue, Nike could talk about the 75 other body parts and Nike’s role in keeping them fit, adds Thomas.
As for the Red Cross, keeping the negotiation door open with J&J wouldn’t be a bad idea either, since it is fighting a huge donor, too.