Rest easy, CMOs: Brand fails do little damage

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In the wake of Subway's Jared fiasco, it's worth remembering that GM sales rose in 2014

Jared Fogle became Subway’s pitchman by famously losing 245 pounds in a year eating two of the chain’s sandwiches a day. After an FBI raid last week over child pornography, though, it was Subway that shed some weight — about 200 pounds.

The chain broke ties with Fogle even though the feds were primarily investigating a business associate of his and there was nothing (besides the raid) implicating Fogle. Still, any association with child pornography is too much when it comes to a celebrity pitchman. 

But while the Fogle saga put Subway in a harsh national light last week, history suggests the damage will likely be short-lived. Despite the media’s fascination with disgraced celebrity spokespeople and brand "fails," the truth is such scandals almost never inflict lasting damage. Consumers disgusted with Tiger Woods' behavior never transfered their feelings to Nike, and Is anyone buying less Jell-o Pudding this week because Bill Cosby let us down?

Even in extreme cases that go beyond celebrity scandals, like General Motors’ string of recalls last year affecting Chevy Cobalts and Saturn Ions that were linked to more than 300 deaths, consumers tend to react with angry tweets rather than their wallets. Last year, when the federal government hit GM with the maximum fine of $35 million for its slow response to the deadly ignition-switch defect, the company's sales actually rose.

In the case of disgraced pitchmen, modern consumers are savvy enough to know the difference between an individual's behavior and a company's values, say branding experts (despite the doomsday progonstications of 24-hour talking heads). More generally, the size and structure of such brands protects them from serious damage in the face of an isolated public-relations disaster, says Robert Plant, an associate professor at the University of Miami. 

"The scale and size of companies such as Toyota, Subway and GM builds on the stability of their consumer base, their ability to support those customers, protect the brand legally and partition problems by geographies," he said, "and this dampens the volatility of the brand equity."

Look at Target. A cyberattack at the chain affected up to 110 million consumers’ data, but the company’s stock is at an all-time high as of this writing. Toyota had its own string of recalls in 2010 and some more last year, and the company’s stock price also recently hit an all-time high.

Drew Kerr, a rep for YouGov’s BrandIndex, says that online publications and social media’s obsessive focus on breaking news gives a skewed perspective of how damaging such incidents are. "Sometimes the press blows [these incidents] up far more than their real impact is, and the ‘buzz’ about it lasts a day or so and goes away," he says. "It usually takes a good deal more to move the meter for a significant amount of time."

A perfect recent example of this phenomenon is Bud Light. The brand caught flak in social media for putting the slogan "the perfect beer for removing ‘no’ from your  vocabulary" on its bottles. Within a few days, the brand removed the offending phrase. Kerr says that BrandIndex data – which is based on polling 5,000 people a day online – showed that Bud Light sunk to its lowest perception level in four years after the incident occurred in April. "And then the next four weeks, it bounced back to higher than where it was before the controversy broke out," he says.

Target’s admission of security breaches in late November and December 2013 were much more damaging to the brand. BrandIndex data showed consumer perception of the brand fell sharply after that and stayed at lower levels for a year or so. Target seems to have taken the hit for other brands; subsequent breaches at JPMorganChase, Neiman Marcus and The Home Depot didn’t hurt those brands nearly as much, indicating that consumers have become inured to such announcements.

Even though such brand fails are almost always inconsequential in the long-term, Plant says that the media will continue to play them up, if only because it’s "easier to dramatize failure," he said. "An incident like an angry passenger on the airline complaining about legroom is something we can all relate to."

For consumers, the opportunity to Monday-morning quarterback a bad business decision — particularly from the soapbox of social media — is too much fun to resist. "We have used the products and think we understand the brand dynamic," Plant said. "‘They should have moved to streaming video,’ ‘offered healthy chicken,’ or ‘digitized the camera.’ They are train wrecks, and we can’t stop watching."

A troubled celebrity spokesman can also add a sexy narrative, but in such cases, brands invariably escape unscathed. Henry Schafer, EVP of The Q Scores Company, which assigns ratings of likeability to celebrities, says even casting his memory back decades, he can’t recall a single case in which a famous pitchman’s fall from grace killed a brand. Even when the celebrity is the brand – like Martha Stewart or Michael Jordan – Schafer says that consumers are able to compartmentalize the brand and the person. "The general public does separate the perception of her and the brand," he says. Stewart is "extremely polarizing as an individual, but the products she has get great respect."

One exception may be Livestrong and Lance Armstrong. After 2012, when the former Tour de France champ admitted to doping, donations fell. In 2013 — the most-recent year the foundation has reported financials — Livestrong raised $23.3 million. That was down 38% from the previous year and well below the $42.3 million in revenues the organization raised in 2010. Reps from Livestrong could not be reached for comment, but Ellen Barry, a company rep, has told The Chronicle of Philanthropy that the charity raised $20 million in 2014. In September 2014, Livestrong CEO Doug Ulman also stepped down after 14 years at the helm. In March, Chandini Portteus, a former executive at the Susan G. Komen Foundation, replaced him.

As a charity rather than a for-profit brand, though, Livestrong was especially vulnerable. Schafer says brands survive scandals related to their endorsers by quickly dumping them, as Subway did with Fogle. Even when they don’t, they can survive and even thrive. For instance, after several other brands including Accenture, Gatorade and AT&T dropped Tiger Woods after tawdry details of his 2009 domestic drama played out in the media, Nike Golf stuck with Woods anyway because he was so aligned with the brand, Schafer says. Did Nike sell fewer golf clubs because of the scandal? "I don’t think it really affected them," he says. In 2014, Nike reported golf revenues of $789 million, up from $638 million in 2010.

All of which goes to show that ultimately, no matter how bad the train wreck, brands almost always emerge intact, "Terminator"-style. So what does it take to kill a brand? As Plant points out, some brands do die; not everyone is coated with Teflon. The cause of death, however, is usually a combination of factors in which marketing is just one element.

Says Plant: "Brands die through lack of executive leadership, or the short-term [obsession with] stock compensation and Wall Street reports that leads to bad decisions" and kill innovation."

In the case of Subway, that means that even though he’s the public face of the brand, Jared Fogle is a lot less important than Fred DeLuca, the chain’s cofounder and CEO. When Jared screws up, it means a week or two of bad press. A few bad decisions by DeLuca, and Subway can go the way of Kenny Rogers’ Roasters or Chi-Chi’s.


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