Week - 12 Applied Brand Management

Brand Crisis Management

• Crises are unavoidable.

What is a Crisis?

• Definition: "The perception of an unpredictable event that threatens important expectancies of stakeholders and can seriously impact an organization's performance and generate negative outcomes" (Timothy Coombs).

Examples of Brand Crises

• Coronavirus and Corona Beer (2020):
  • Misconception that the beer was linked to the virus led to negative perceptions.
  • 38% of American beer drinkers reported they would not buy Corona beer due to the association in a survey.
  • Corona Beer had to halt production amid the coronavirus outbreak.
• 2014 - A Year to Forget for Malaysia Airlines:
  • Likely refers to the MH370 and MH17 disasters, which severely damaged the airline's reputation.
• Volkswagen Emissions Scandal (2015):
  • Volkswagen (VW) paid $25 billion$ for 'Dieselgate'.

Importance of Brand Response

• Things will go wrong, so the key is HOW the brand responds.
• Example: United Breaks Guitars (Dave Carroll's song about United Airlines' poor handling of his damaged guitar).

Threat Levels in Crisis Management

• Crisis Management - What Happens?
  • The impact and spread of crisis information vary across different media.
  • Timeline: Initial conversations, first appearance, rapid sharing
  • Threat level increases over time across different platforms (Internet, Mainstream Media).
  • Threat Levels over Time:
    • Initial conversations: Moderate threat, Low frequency, 0 hours
    • First appearance: High threat, Moderate frequency, 5 hours
    • Rapid Sharing: Extremely high threat, High frequency, 8 hours
    • Mainstream Media: Extremely high threat, High frequency, 15-24 hours

Effects of Brand Crisis

• Negative brand awareness (bad publicity).
• Destroys brand relationship.
• Brand equity declines (Customer-Based Brand Equity (CBBE) & Firm-Based Brand Equity (FBBE)).
• Brand dies.
• Warren Buffett quote: “If you lose dollars for the firm by bad decisions, I will be understanding. If you lose reputation for the firm, I will be ruthless.”

Situation Crisis Communication Theory

• Crisis Response Strategies by Posture (Coombs, 2014):
  • Denial Posture:
    • Attacking the Accuser: Confront the accuser, possibly with legal threats.
    • Denial: State that no crisis exists and explain why.
    • Scapegoating: Blame another person or group outside the organization.
  • Diminishment Posture:
    • Excusing: Minimize responsibility by denying intention to harm or claiming lack of control.
    • Justification: Minimize perceived damage by claiming no serious damages/injuries or that victims deserved it.
  • Rebuilding Posture:
    • Compensation: Provide money or gifts to victims.
    • Apology: Take full responsibility and ask for forgiveness.
  • Bolstering Posture:
    • Reminding: Tell stakeholders about past good works.
    • Ingratiation: Praise stakeholders.
    • Victimage: Explain how the organization is also a victim of the crisis.

Crisis Responsibility Level & Intensifying Factors

• Step 1: Identify Crisis Responsibility Level & Intensifying Factor

  • Victim Crises: Minimal Crisis Responsibility
    • Natural disasters: Acts of nature.
    • Rumors: False and damaging information.
    • Workplace violence: Attack by employee.
    • Product Tampering/Malevolence: External agent causes damage.
  • Accident Crises: Low Crisis Responsibility
    • Challenges: Stakeholder claims of inappropriate operation.
    • Technical error accidents: Equipment failure causing accident.
    • Technical error product harm: Equipment failure causing harmful product.
  • Preventable Crises: Strong Crisis Responsibility
    • Human-error accidents: Industrial accident caused by human error.
    • Human-error product harm: Defective/harmful product due to human error.
    • Organizational misdeed: Management actions that risk stakeholders or violate the law.
  • Intensifying Factors:
    • A history of similar crises
    • A negative reputation

Crisis Communication Strategies

• Step 2: Choose Crisis Communication Strategies
  • Minimum crisis responsibility & no intensifying factors:
    • A) Instructing information (e.g., recall) to all victims (or potential victims).
    • B) Care response to all or potential victims (sympathy, corrective action info, trauma counseling if needed).
  • Minimum crisis responsibility & intensifying factors OR Low crisis responsibility & no intensifying factors:
    • ADD excuse and/or justification to A & B.
  • Low crisis responsibility & intensifying factors OR Strong crisis responsibility:
    • ADD compensation and/or apology to A & B.
  • The compensation strategy is used anytime victims suffer serious harm.
  • The reminder and ingratiation strategies can be used to supplement any response
  • Denial and attack the accuser strategies are best for rumor and challenge crises.

Case Studies

• Case 1: Biden's Dog Biting Incident

  • President Biden's dog, Major, bit a staff member.
  • Biden explained it as Major being protective and not knowing the people.

• Case 2: United Airlines Dragging Incident

  • Video of a passenger being forcibly removed from a United Airlines flight.
  • The incident led to public outcry and significant financial losses for United Airlines.
  • United Airlines' stock prices went down as a result of the incident.
  • CEO initially backed employee actions, then apologized.
  • Total losses initially estimated at $255 million$.

Key Principles of Brand Crisis Management

• PR is key; get it right the first time.
• Assess the situation and use appropriate strategies.
• Be sincere; tell the truth.
• Always put consumer welfare first.
• Actions, not words.
• Recovery can be a great source of brand equity.

Course Recap: Brand Management

• Week 1: Defining a Brand
  • “A brand is a customer experience represented by a collection of images and ideas; often, it refers to a symbol such as a name, logo, slogan, and design scheme. Brand recognition and other reactions are created by the accumulation of experiences with the specific product or service, both directly relating to its use, and through the influence of advertising, design, and media commentary.” - American Marketing Association
• Week 2: Brand Equity
  • Customer-Based Brand Equity (CBBE) Pyramid (Keller):
    • Identity (Who are you?): Salience (Awareness)
    • Meaning (What are you?): Performance & Imagery (Associations)
    • Response (What about you?): Judgements & Feelings
    • Relationships (What about you and me?): Resonance
• Week 3: Brand Positioning