Risk Management

Brand Risk Soars in Today’s Social & Political Climate

Companies walk a fine line trying to protect brand value amid a starkly divided society.
David McCannAugust 15, 2018
Brand Risk Soars in Today’s Social & Political Climate

“The country is divided, and companies are not getting away unscathed.”

So says Peter Horst, a former chief marketing officer with several large companies, including Capital One and Hershey. His new book, “Marketing in the #FakeNews Era” (Advantage Media Group, May 2018), carries the tagline, “New Rules for a New Reality of Tribalism, Activism, and Loss of Trust.”

The book arises from the reality that the value of companies’ brands is subject to enormous risk in today’s social and political climate.

That type of brand risk stems from an unimaginably broad array of sources. They range from being on the receiving end of a Twitter tantrum, to activist consumers getting angry that a company didn’t take a stand on a dividing political issue, to employees opposing a company’s dealings with government agencies or political groups that they dislike, says Horst.

Almost any corporate executive would readily acknowledge that brand value is a vital component of most companies’ overall value. Yet, at least in part because companies are not required to publicly quantify the value of their brands, many don’t pay enough attention to it, according to Horst.

Actions to protect brand value “might be under-resourced, especially in the crush of short-term profit pressures,” he tells CFO.

Because of the brand risk factors mentioned above, that could be a damaging oversight. CFOs in particular should be vigilant, Horst stresses. “It should be more than just the chief marketer’s worry how to protect and steward that corporate asset in the context of all these crazy things going on,” he says.

And the risks clearly are not just theoretical. For Starbucks, a manager’s inappropriate treatment of two African-American customers at a single Philadelphia location ignited a global firestorm of outrage that cost the company — an iconic brand — many millions of dollars.

“In another time that would have been considered bad personal behavior by an [individual], but these days the wall between personal and corporate [responsibility] has disappeared,” says Horst.

Peter Thorst

There are also well-intentioned acts that fail to address the nuances and sensitivities of this era, he adds. The infamous Pepsi-Cola commercial starring Kendall Jenner, in which she stopped what looked like a Black Lives Matter protest by opening a can of soda, “was a tin-eared, ham-handed approach to a very sensitive and serious issue,” according to Horst.

As well, misunderstandings and misperceptions lurk around every corner. That was the case with Budweiser’s Super Bowl ad about how the company’s founder came to America.

The ad “had nothing to do with Trump’s immigration policies,” Horst says. “It was in the works long before he got elected. But by virtue of timing, it appeared to be an anti-Trump ad and caused a hashtag boycott of Budweiser by Trump supporters.”

Another potentially dangerous course is silence — “failing to step in, in a world where upwards of half of consumers want to hear from companies on the big issues of the day.”

A great example of that is the National Football League. When players began kneeling during the national anthem to protest police actions against African-Americans, “there was no collective voice, point of view, philosophy, or set of values” that caused the league to make a statement about what it would or wouldn’t do, notes Horst.

So, the NFL paused for 18 months while President Trump took over the narrative, calling the league weak and rudderless. When the league finally did announce a policy, “it was ill-conceived and the NFL had to backtrack, and it’s still working through it.”

Meanwhile, TV ratings for football declined substantially during the 2017 season. To be sure, other factors — growing concerns over the sport’s safety, continuing reports linking players to violence and drugs, a sharp spike in the popularity of soccer — likely contributed to the ratings falloff. But “there’s no question” that the league’s response to the kneeling phenomenon played a role, according to Horst.

Values, Purpose, Issues, Positions

How should companies deal with the realities of today’s political and cultural divisions?

There’s no cookie-cutter answer, Horst says. Companies have different issues, constituents, and business models that drive how proactive they can be on any issue of social or political importance.

But, he adds, there’s one thing no company should do: put its head in the sand and don’t even think about what the proper response should be, leaving it unprepared as the NFL was.

“The very first thing I think all organizations should do, whether or not they ever plan to say a word publicly about what they believe, is to decide and articulate what they believe,” says Horst. “What are their values? What would they stand up for if suddenly they were called out by Trump or CNN or employees?”

Conducting such a values assessment provides an internal moral compass to guide in-the-moment decision-making by employees.

Horst points to the incident where a doctor was dragged bloody and unconscious off a United Airlines plane. The gate agent faced a stressful situation, needing to get the plane out while off-duty flight attendants needed seats. But “the script didn’t provide a good answer,” so the agent called the police.

“It’s hard to imagine Jet Blue finding itself in that situation,” Horst says. “It has a culture of customer rights and humanity in air travel. Those values would have told an associate in that terrible situation that anything would be better than calling the cops on a customer.”

The assessment of values that Horst describes represents the first tier in a four-tier construct of successively bolder approaches to today’s sensitivities, which he calls the “brand risk relevance curve.”

One step up, on the second tier, is establishing a “brand purpose,” a popular action taken by companies for many years. These tend to be evergreen and uncontroversial, like Unilever’s long-running “Real Beauty” campaign for Dove soap. “You’re not likely to have people storming the gates against real beauty, saying they want fake beauty,” Horst notes.

(However, the execution of such campaigns is hardly exempt from risk. Dove came under heavy fire last year for an ad that was widely viewed as racist.)

The third tier Horst calls “issues,” where the company “wades into something a little more touchy, current, and spiky, with more tension — not all the way to A vs. B, for or against an issue, but something that has the potential to drive more controversy.”

He points to Heineken’s “Worlds Apart” campaign, consisting of TV ads featuring pairs of strangers who meet for the first time not knowing they have opposing views on sensitive issues like feminism, climate change, and gender identity.

The pairs are shown bonding while working together to complete tasks in a warehouse. Then, at the end of the ad, they are shown a film of themselves stating their views on the issues — after which they continue to get along.

The ads “took on the issue of our loss of civility and the ability to have positive dialogue with each other,” Horst says. “It wasn’t a Trump-is-Great vs. Trump-is-Terrible point of view, but it was something real with inherent tension.”

The top tier of the brand risk relevance curve is “positions.” This is a true for-or-against approach. A good example is IBM’slobbying campaign to protect the DACA legislation. The highly publicized campaign, launched last October, included CEO Ginni Rometty and other IBM executives marching through the halls of Congress with 31 “dreamers” in tow to meet directly with lawmakers.

“IBM had no aspiration to be a highly political, polarizing company,” says Horst. “But its business model requires hiring talent from around the world. It was a central business issue for the company to step that far out.”

To identify the optimal brand marketing actions to take, he counsels, companies must pay attention to the attitudes of all constituents, including customers, shareholders, and business partners.

And don’t forget employees. Among very recent incidents, Google associates made it clear they wanted the company to stop selling artificial intelligence to the government. Associates at both Microsoft and McKinsey didn’t want their employers to do business with the Department of Homeland Security’s ICE immigration enforcement arm. And at workers’ insistence, several airlines have opted not to transport kids separated from parents at border crossings.

Importantly, though, not every instance of noise coming out of the social ecosystem merits a response. For example, when President Trump grumbled about Nordstrom dropping his daughter Ivanka’s shoe line, the company said nothing. “They knew they had made a valid business decision, so they let it go. And sure enough, nothing bad came of it,” Horst notes.

But making decisions on whether and how to respond to politically and socially driven brand threats can be extraordinarily challenging.

Horst says it requires asking: What’s the nature of the issue? Is it a one-off misunderstanding or misstep, or part of a longer narrative that will have ongoing life? Does it touch on a fundamental issue of values that are quite powerful and universal?

What impact is it having — just buzz on social media, or are core customers showing unhappiness? Are you a big, broad, middle America brand, or an edgy millennial fashion company?

“With the 24-hour news cycle, you’ve got to be fast but at the same time thoughtful,” Horst advises.

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