Branding

This article was originally posted at BrandStruck 

It’s hard to find a big, global brand which hasn’t been through a reputation crisis. Having analysed more than 200 of the world’s biggest brands, we’ve come to a conclusion that crises can be divided into two major groups. The first group includes mainly communication mishaps, that is, situations when a brand said something it shouldn’t have or simply was tone-deaf in its communication. Two recent examples of such relatively innocent blunders include Dove’s recent Facebook ad, which clearly wasn’t watched in its entirety by the people who wrote about it (seriously, there was nothing racist there) and a Pepsi ad with Kendall Jenner, which probably had good intensions but was poorly executed. Both communication crises were overhyped by marketing and advertising media, but neither has done any harm to either brand’s equity, or more importantly, revenue. Consumers simply didn’t notice.

The second group comprises much more serious crises. Their scope is much broader and not limited to the brand’s communication activities. A serious crisis is often the result of the fact that the problem is related to the product, customer service or severe misconduct of one or more key company executives and, as such, can in fact affect the brand’s performance both in the short and the long term.

The three brands we are writing about today have experienced far-reaching crisis situations and have survived them. Read why.

1. Subway

In 2000, Subway hired Jared Fogle as its spokesperson after he had become famous for losing 200 pounds, eating only Subway sandwiches. He was such a success story that the company worked with him for 15 years. He evolved into a public persona starring in Subway’s ads and being featured on the brand’s website. In 2015, he was sentenced to almost 16 years in prison and pled guilty to distributing and receiving child pornography and engaging in illicit sexual conduct with a minor. It was a huge blow for Subway. The company cut ties with Fogle immediately but it’s not an easy task to make people forget the company’s face of 15 years.

After the scandal, Subway put emphasis in its communication on reminding customers that its history began much earlier than its cooperation with the disgraced spokesperson. The brand attempted to add an element of heritage to its image by introducing Subway’s founders: Fred DeLuca and Peter Buck in its advertising. Latterly it has undertaken a range of initiatives to further strengthen the healthy brand image – i.a., improved the quality of its meat (e.g., an antibiotic-free rotisserie chicken sandwich) and got involved in sports marketing. In 2017, the company rolled out a new logo, whose role was to emphasize these changes.

Today, Subway’s bigger problem seems to be competition from more modern, healthier fast food chains than its associations with Jared Fogle.

2. Samsung

In 2016, Samsung went through a huge crisis, which for other organizations might have meant bankruptcy. Samsung Galaxy Note 7 devices were reported to be bursting into flames. The company reacted with an exchange programme to remove the faulty phones from the market. The replacement phones, however, turned out to have the same problem. Samsung Galaxy Note 7 was not allowed on planes, which added another layer of unwanted publicity to the crisis. Samsung had to recall over 2 million devices and stop the production of the explosive model. Forbes estimated the recall to have cost Samsung $5.3 billion.

It took Samsung a while to find the cause of the problem. The company had to set up a new test lab and hire 700 researchers to understand what had really happened and why Galaxy Note 7 devices were exploding. It created a battery advisory group and designed an eight-point battery safety system. However, we believe that this information didn’t reach the end consumer. The company was given the benefit of the doubt because people simply liked Samsung smartphones.

In September 2017, Samsung released Galaxy Note 8. It is reported to already be breaking Samsung sales records.

3. Uber

There are few brands which have gone through as many reputation crises as Uber. The company was blamed for promoting a chauvinist culture and creating a toxic work environment. It was also accused of not doing thorough checks of its drivers, which is believed to have resulted in a number of sexual assault crimes committed on its passengers.

The escalating crisis didn’t end well for the company’s management. At the beginning of June 2017, 20 people were fired as part of an internal investigation and sexual harassment accusations. Two weeks later, Travis Kalanick, one of Uber’s founders, was forced by investors to leave the business.

In the meantime, in London, where Uber has lost its license (probably temporarily), more than 600,000 people have signed a petition to save the company, proving again that if a product is relevant, consumers can turn a blind eye to the brand’s other “shortcomings”.

Some may argue that the reason these scandals didn’t put these three brands out of business was because they handled the PR crisis well. This is probably partially true. However, in our opinion, there are two more important reasons why these companies have survived.
– It is highly exaggerated to what extent consumers are aware of crises like the ones mentioned above. Every marketer knows how much time and money is required to inform consumers about something new (a new product, a new brand etc.) and the same holds true for bad news, even though it spreads much quicker.
– Consumers are able to forgive a brand a lot as long as what it offers is relevant to them. If a company offers a great product or service at a good price (Subway, Samsung, Uber) and has a loyal base of consumers, people often choose to turn a blind eye to other failings. They will find “rational” arguments to stay with the brand because they don’t like changing their habits.

Like it or not, it’s the lack of relevance to consumers that is more likely to put a company out of business (Kodak, Nokia etc.), than a one-off scandal.