Tuesday, 13 August 2013 00:55
When I heard about the Fonterra debacle on DCD in Sri Lanka, from the announcement from Fonterra (New Zealand) to the 100% safe advertising campaign in Sri Lanka and the subsequent advertising ban from the Consumer Affairs Authority to today’s media report that alleged tainted stock collected from the trade has been stocked in the warehouse but awaiting a decision for destroying, my mind just triggered one button. Every company will be faced with this challenge at some point of time. From Tylenol to Toyota; from Perrier mineral water to the famous beef issue in Europe.
The reason is that organisations are run by human beings and one can err. The challenge is that we must manage the situation at hand rather than having to get into confrontations with State authorities, laboratories and finally for Court orders and then agreeing to withdraw the product. Let’s accept it, when some companies catch a cold and sneeze, everyone gets pneumonia, meaning that it is a trendsetter in the business.
Similar to the Toyota debacle way back in 2010 with the faulty brake issue, now we see Fonterra up against this challenge. The impact can be greater on media if you are the market leader and trendsetter, which is all the more reason that you must be sharper to face any eventuality in business. But it’s very clear that both companies have grappled with the situation.
Toyota and Fonterra
If we take the two companies under discussion, Toyota hailed from Japan and is the pride of its super power nation that has mirrored the country’s post-war economic miracle. It is fair to state that Toyota together with Sony helped build brand Japan in the world stage. Similarly, Fonterra is synonymous with New Zealand. Some even say that Fonterra is more powerful than the Government in influencing consumer decision making.
The beauty about Toyota and Fonterra is that both brands have taken their product portfolio across the world. In effect Toyota has helped Japan touch the lives of people around the world, which is exactly what Fonterra has done. May be the only difference is that Fonterra deals directly with children, which makes the relationship very special and delicate.
How it impacts a brand
In the case of Toyota, when the faulty product was identified in their key market, the US, sales declined on the speculation that the company would be downgraded by organisations like Brand Finance due to poor management of the PR issue. In the case of Toyota, the company was at a rating of AAA and the fear was that a simple A rating could cost the company almost $ 7 billion dollars, which are the ramifications that a company will be up against when disaster strikes from a brand perspective.
I guess we will have to see what impact Fonterra globally will have on their brand due to the latest issue unfolding. In the case of the latter, fortunately, it’s only an organisation name that produces a generic and subsequently individual countries market their own brand with the product. So the impact will have to be seen from the end consumer brand end. But the fact of the matter is that there will be an impact and we will have to see how this unfolds.
Who is next?
The lesson for corporate Sri Lanka is that whilst we plan and develop multimedia communication campaigns, we must have our PR plans in place in the eventuality of a crisis. It can be just a prawn cocktail that goes bad that can result in hundreds of people having to enter hospital that actually happened to one of the top hotels in Colombo some years back but was very well managed and did not hit the media to such issues like what Toyota faced with a faulty brake system or in the case of Fonterra the DCD issue.
It is imperative for a company to have a well-orchestrated PR plan in the event of a disaster. If not like what we see with Fonterra there will debate, Court orders and finally having to comply, which is not healthy for the brand. In the case of Toyota, fortunately, the issue was confined to certain countries only and it did not impact Sri Lanka, but it was a real eye-opener for the corporate world.
What competitors do
It goes without saying that the business world of today is very ruthless. Whilst Toyota was battling the PR challenge, rival companies like Ford and Hyundai are tracking customers from the showrooms of Toyota with guerrilla tactics. Ford’s share picked up almost four percentage points.
From the information on the field this same thing is taking place in Sri Lanka. Locally produced milk powder brands are driving their claim to the trade as well as the consumer to chase consumers to their brands. In fact the decision to stop any form of advertising was a good move to avoid a brand war. But from a consumer end it was not positive as now there is confusion over what is safe.
The logic being even competitor brands like Nespray purchase milk powder from Fonterra and it is written on the rear side of the pack. If advertising was allowed, may be the consumer would have been clearer at the retail end. Maybe it’s a lesson for authorities when faced with a similar issue in the future.
As mentioned before, organisations are managed by human beings; it is human to falter even though the paradigm in countries like Japan is zero defects. The essence is that there must be fallback plan in the event of a crisis. One of the best ways of reassuring customers in the event of a major disaster is for the CEO to get into the fray.
This was the biggest drawback in the Toyota PR campaign post the news hitting that there was a product issue. Some Japanese reporters tracked the Toyota CEO to the Davos conference that was staged and demanded an interview in which a brief apology was given that had no impact on the troubled customers.
The golden rules in handling PR post a disaster: Be open. Do not hide. Do not ignore. Acknowledge, listen and provide a detailed ‘next steps’ on what a customer should do. In this context the Fonterra boss coming out from New Zealand very vocally was a good move. So was the Sri Lankan response, but the issue was the advertisement claiming 100% safe and the fallout of this initiative. Today the news report is that the alleged tainted stock has been stored in a warehouse, awaiting a decision to destroy. This does not augur well for the company.
The golden rule in the event that an apology is made is that is that consumers must feel that the apology is genuine to the mistake made. The best example that the world saw in the recent past was by Ford Company. When it had to recall faulty Firestone/Bridgestone tyres, the then CEO Jacques Nasser appeared on prime time US television to reassure customers on the action that would be taken. He was personally there in the garages inspecting the implementation at the ground end. I guess it’s a lesson for corporate Sri Lanka in the future.
Get political support
Another important dimension when dealing with faulty products and subsequent action is that you must get political support, especially in the world of today where in many countries a political economy exists.
For instance, Toyota initiated a four million dollar campaign using lawyers, lobbyists and PR experts to get support from the US congress so that there would be a set of godfathers to support the company as it sailed the troubled waters. When it came to Fonterra in New Zealand and Sri Lanka, we can see that this was not in sync and that is one of the reasons why the media hype is strong on print and electronic and especially on social media.
What a company should do
The priority for a company is to ensure that a customer is safe. The best response is to publicly explain the issue at hand and ask the customers’ help to identify the faulty product. This can be publicly displaying batch numbers, etc.
If a customer is a recipient of the mistake, then what are the next steps that one must take? Very clear instructions must be given to the trade on what to say when a product is returned. The chances are that customers will go to their favourite store, than call a hotline. This is very true in Sri Lanka. In the case of the most recent debacle, most supermarket assistants were not aware what to say to a customer when asked why the brand of stocks was still on the shelves.
If replacing the stocks, reward the customer. Customers have been inconvenienced and they need to be comforted.
Be very clear to communicate what action will be taken on the faulty products so that competitors cannot create viral stories on your brand. This helps the brand rebuild credibility.
Acknowledge the mistake and explain to customers how you intend fixing the problem and that it will not happen again.
Get the Government and political authorities on your side. If not, the media continues to dramatise the issue and it becomes a political issue between the Government and powerful organisations.
The company must develop a new positioning in an aggressive manner. In the case of Toyota, what was proposed was the green marketing positioning where the company was asked to take the high ground by a worldwide initiative of where ‘Green Showrooms’ were to be opened across the world on an eco-friendly platform. This was Toyota’s promise. I guess Anchor needs to think through this proposition.
What history has revealed is that great companies always make mistakes just like great people. The difference is that the brilliant learn from them and go on to achieve greater heights. What the world requires is not brilliant leadership but corporate athletes is the new thinking, as you must get up every time you fall.
[The author is a Board Director on many public sector organisations on an honorary basis, whilst being the Head of National Portfolio Development for Sri Lanka and Maldives in the United Nations Operations (UNOPS). He is an award-winning marketer, business leader and respected corporate personality. The thoughts are strictly his personal views.]