Archive for November, 2010

The Latest Brand to Bungle a Crisis: Notre Dame

November 24, 2010

We’ve all learned a lot about brands and crisis management in recent months. 

First, even the best brands can run into major issues.  Toyota, one of the world’s most admired companies, took a huge hit as stories surfaced about potential safety and quality issues earlier this year.  BP and J&J have taken hits, too.

Second, it is quite clear that the way to respond to a crisis is to be proactive, open, and honest.  Avoiding the issue doesn’t help.   Kellogg professors Adam Galinsky and Daniel Diermeier recently published a fascinating study highlighting the risks of saying “no comment.”  You can read about that study here:

http://insight.kellogg.northwestern.edu/index.php/Kellogg/article/the_sounds_of_silence

Third, the worst thing you can do is make light of the situation.  People quickly attacked BP CEO Tony Hayward for some rather inappropriate comments.

So it is astonishing to watch the fiasco developing this week at Notre Dame.

Notre Dame is a well known and respected brand.  The university has a long history and a reputation for educational excellence, grounded in solid and powerful values.  The school’s website proudly quotes its founder, Edward Sorin stating, “This college will be one of the most powerful means for doing good in this country.”

On Sunday the Chicago Tribune published a shocking story.  Earlier this fall a student from a nearby university claimed to have been sexually assaulted by a Notre Dame football player.  She reported the accusations.  Apparently her claims were not aggressively pursued.  She committed suicide. 

The Chicago Tribune story suggests that Notre Dame has done little to investigate the situation.  The university didn’t report it to the police.  The university didn’t communicate extensively with the student’s family.  Indeed, the family has now hired its own investigator to look into the situation.  The football player in question still plays every week for Notre Dame, proudly representing the school.

This is all a horrifying story.  But it gets worse.

At a recent news conference, Notre Dame football coach Brian Kelly joked about the situation.  He also made it clear that he takes no responsibility for anything related to the story.

Notre Dame’s leaders still haven’t officially commented. 

The story is now shifting, as people apparently try to duck responsibility.

You can read the latest disconcerting update from today’s Chicago Tribune here:

http://www.chicagotribune.com/news/ct-met-notre-dame-update-police-20101123,0,2775540.story

This is no way to manage a brand.  It is no way to handle a crisis.  It is also no way to run a university with a reputation for integrity and honesty.

Should Stores Open on Thanksgiving?

November 23, 2010

More and more stores are opening on Thanksgiving Day.  For many years almost every retailer closed on the holiday.  Then a few started opening on Thanksgiving.  This year the trend is clearly accelerating:  Sears, Kmart, Gap, Walmart and Old Navy all will be opening at least some of their stores.

Is this a good idea?

Personally, I don’t like it.  Thanksgiving has always been a rather unique holiday in the United States: a moment of peace before the holiday chaos.  On Thanksgiving, there isn’t a huge focus on opening presents or shopping; it is a quiet day of giving thanks.

For a retailer, closing on Thanksgiving has advantages, too.  It creates more excitement on Friday, as the stores reopen with fabulous deals.  It also leads to happier employees, at least in theory.  They have the day off to recharge and relax with family and then return to work recharged and ready to go.

In terms of the overall economy, having stores open on Thanksgiving isn’t likely to increase total retail sales and profits.  I suspect few consumers will spend more in total just because they can shop on Thanksgiving.  Indeed, opening on Thanksgiving might actually reduce retail profits overall; costs will go up with the incremental selling day, while sales stay fairly flat, reducing overall profit.

Nonetheless, it seems the days of the quiet Thanksgiving are almost over.  Stores are opening driven by the need to capture incremental sales.  And once the trend starts, it is hard to stop it; more and more retailers will join in as each one worries about protecting market share.  Eventually we’ll see huge Thanksgiving Day sales with incredible deals designed to get people away from the turkey, out of the house and shopping.

My advice:  don’t go shopping on Thanksgiving this year.  Enjoy the day, be thankful and relax.  Let the shopping chaos will begin on Friday.  The quiet of Thanksgiving won’t last long.

Sears Continues to Slide

November 19, 2010

This week Sears Holdings released quarterly results. The latest numbers suggest that the company hasn’t managed to slow the declines at Sears.

Overall results for Sears Holdings were poor, with revenue for the quarter ending October 30 down 5% from $10.2 billion in 2009 to $9.7 billion this year. The company lost -$215 million this year, substantially worse than the -$112 loss last year.

Perhaps most disturbing, same store sales for Sears were down by -8.2%. That is a remarkable number.

There isn’t any reason to think things will turn-around soon. The Sears brand continues to be caught in the middle, trapped between low-price retails and differentiated retailers. Sears has a fundamental positioning problem and no easy way to fix it.

K-Mart, at least, has a clear place to play: a low-price retailer battling Wal-Mart and Target. This is a tough fight, but at least there is a big chunk of business to fight over.

Without some huge investments in the brand, Sears will continue to decline. The only real question is this: when does it end? Retailer brands come and go. How much longer will Sears be around?

Sara Lee’s Disaster in Bread

November 10, 2010

This week Sara Lee announced that it was selling its bread business to Mexico-based baking giant Grupo Bimbo, for $959 million.

The sale is an embarrassment for Sara Lee.  According to the Financial Times, Sara Lee acquired the baking unit in 2001 when it bought Earthgrains Corporation for $2.8 billion, making this a fine example of the buy high and sell low approach.

This is not a good way to build company value.  Not surprisingly, Sara Lee’s stock has performed poorly for a very long time.  Ten years ago you could buy a share for about $20.  Today you can buy a share for about $15.

So what went wrong?

I suspect the problem was simple: optimism.  Back in 2001 I’m certain Sara Lee executives thought they could turn Earthgrains bread into a profitable, growing business.  As a result, they paid a generous price to acquire it.

The reality of the situation soon became clear: bread is fundamentally a very difficult business.  It is capital-intensive and very dependent on operational excellence, getting the right amount of bread to the right stores at just the right moment.  Profits are slim; apparently the Sara Lee unit recently had an operating margin of just 1.4%.

Faced with a difficult, low-margin and slow-growth business Sara Lee elected to give up and sell it off.

Of course, the Sara Lee team should have taken a hard look at the bread business before paying a generous price to buy it.

After this transaction closes, Sara Lee will be down to meats and coffee; the company will use the proceeds of the bread sale to buy back stock.  Unfortunately, meats and coffee are tough businesses, too.  A couple more sales and Sara Lee will simply vanish.

Sara Lee’s bread experience is an important lesson for anyone considering an acquisition.  Never assume you can dramatically improve a business; the fundamentals may well be the fundamentals.  Optimism can cost you a lot of money.

Chevy Runs Deep

November 5, 2010

Chevrolet is out with its long-awaited new advertising effort; the campaign began running at the end of October.  The effort is apparently the work of Chevy’s new advertising agency, Gooby, Silverstein & Partners, and head of marketing, Chris Perry.

You can see the TV spots here:

http://www.autoblog.com/2010/10/27/the-why-behind-chevy-runs-deep-slogan/

So how is the new campaign?

I’ll begin with two positives.  The best news is that the campaign is for Chevrolet; the GM brand is nowhere to be found, even in the fine print.  This is very positive.  In recent years, the GM brand has played a greater and greater role in much of the company’s advertising work.  This was a mistake, of course, presumably driven by a need for efficiency and cost savings.  GM is not a strong consumer brand.  Adding GM only weakened the individual brand messages.  This new campaign is all about Chevrolet.

The other piece of good news is that the campaign is very focused on brand building.  Chevrolet is a somewhat tarnished brand; rebuilding the equity of the business is critical.  GM’s prior campaign, built on the line “May the Best Car Win” was a bit of wishful thinking.  The best car doesn’t always win.  The winner is the car that people think is best.  You can sell the world’s most reliable car under the brand name Yugo and people won’t buy it.  So the team at Chevrolet is right to focus on fixing the brand.

Unfortunately, things go downhill from there.  The campaign, in both print and film form, builds off the idea of heritage.  The print campaign features old photos with the line, “Chevy Runs Deep.”  One of the TV spots notes that the company has been around for one hundred years.  The ad begins with old film clips and the voiceover explains, “This isn’t just any car company, this is Chevrolet.”  It then discusses safety, fuel efficiency and technology.  Another one of the ads features scenes of trucks and dogs, concluding with the line, “A dog and a Chevy.  What else do you need?”

The problem here is simple.  What people really need is a reason to buy a Chevy.  And that seems to be missing from the new campaign.  The line “Chevy Runs Deep” isn’t necessarily bad, but it doesn’t connect to anything that matters.  What is the implied benefit?  Seriously, why would someone buy a Chevy?

Marketers should always be careful with a heritage messages.  For established brands, this is always easy place to play.  The brands have been around a long time.  This is a clear and undisputable fact.   But heritage is usually a trap.

The problem is that heritage isn’t a benefit.  Most people just don’t care that GE began in 1892, or that Apple started up in 1976.  Or that Stella Artois can trace its history to 1366.  The fact that Chevy has been around for a long time is good but it isn’t a reason to buy one.

It is great to see Chevrolet building its brand but the initial spots lack a compelling reason to buy.


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