Lance Armstrong & the ‘plastic’ apology. (Or how not to turn ‘sorry’ into a PR fail.)

Do you believe Lance Armstrong is truly sorry? Or does he just want to be able to compete again and maybe earn more money?

What you believe will partly be influenced by what he said, where he said it and how he said it. And your opinion of why he said it will also be influenced by them, as well as the opinion of other commentators.

Before I look at his case in detail, it’s worth looking at what I think it’s fair to say is a good example of apologies which don’t really work from the PR perspective – those ones issued by football clubs when headstrong players have tweeted something controversial.
Put simply, does anyone believe the player genuinely regrets his action at all? Or only just the consequences, if at all?
For obvious commercial reasons clubs and sponsors need and have to at least go through the motions of having a statement issued by them and the player and they need to take the position that they believe them. But does anyone else other than their most dedicated fans? [This said, I’m sure at least some of these are genuine on both parts.]
The problem with too many of these is that organisations usually feel they have to be limited in form and content by the potential legal and financial risks of admitting liability. But the collateral reputational damage created by such ‘plastic’ apologies is a PR fail, which in its own way can inflict financial damage through the effect on key stakeholders. How much will depend on each organisation’s reputational elasticity of demand.
What you need to be able to do is be as transparent as possible about what has happened, in simple, non-legal or technical “weasel words” language (otherwise it looks ‘plastic’ and just about limiting damage and liability).
A TV interview or YouTube statement by the person responsible is best — so people can see from all your non-verbal communication (89% of what people perceive) that they/you mean it.
Briefly, best practice crisis PR starts well before any event, with planning for probable internal and external crises by putting in place an emergency communications process including preparation of agreed holding statements and a media relations strategy.
Moving back to Lance Armstrong’s Oprah Winfrey interview, there were, IMHO, both PR wins and fails in it.

Wins

• Doing it at all and not limiting or agreeing Oprah’s questions, if we believe what has been said.
• Admitting, in simple words, the main accusations.
• His non-verbal communication —throughout most of it he looked, IMHO, as if he meant what he said. Media commentators and other stakeholders have made their comments, but many have their own agendas. You can only make your own judgement by watching the interview yourself, but I’d say he’d have to be a very good actor to fake what we saw.
• Admitting to having an untrue ‘perfect story’.
• Admitting “that guy” was still inside him i.e. he is still fighting the urges which led to his failures.
• Taking full responsibility for his actions. 
• Accepting, at least verbally, (almost all) of the consequences.
• Being frank about his reasons for doing the interview — wanting to compete again.
• Showing his upset at letting his son down. For someone so controlled and controlling that will have been hard.

Fails

• Choosing to give an exclusive interview — it may be negative as no matter what was said on-air it leads to reasonable suspicion that some kind of pre-recording agreement, if only informal or psychological, was made about how hard the questioning might be and that gives him more control and hits the credibility of the interview and Oprah.
  A media conference would have been a bear pit, but perhaps get better media coverage if he could be as controlled in reaction to the tough questions as he was here. Oprah had flack for ‘missing’ and leading questions — “In your opinion, was it possible to win…without doping?” That’s a defence counsel question. That wouldn’t have happened in a media conference. Sometimes you have to relinquish some control to give the best impression through transparency.
• Saying he had used “Only EPO” — Cheating is a digital issue – you either did or didn’t, there are no degrees.
• Blaming his “character” — As Jean-Paul Sartre says in Being And Nothingness, it’s no excuse. Our actions define our character, not vice versa. A coward is a person who does cowardly things. It’s a plea in mitigation, not an excuse.
• Saying his most humbling moment was the reaction of his foundation — why not his family’s? It made it look like achievements and kudos mean more to him than them. But if that’s his honest feeling, then best to say it.
• Choosing to start his ‘humbling moment’ answer with his ‘$75m day’ — As the WW1 phrase put it, “Self-inflicted wound — expect no sympathy.” Why did he mention it at all?
• Describing his punishment as a “death penalty” — we understand what he meant, but over-dramatising it like this wins no fans or acceptance.

So who are his audiences with this, what are his messages and will this get what he wants from them?

• The General Public (for the benefit of him, sponsors & other business contacts) – “It’s true and I’m sorry”. He wants acceptance of his apology so it’s ok for him to be involved with sport again and maybe brands who might help him recover some revenue. Only time will tell. Socialmention.com shows that so far most people are still on the fence in terms of sentiment about him.
• Sports bodies (who already said he has to submit to their processes to gain some relief on his punishment) – same messages. He clearly wants to compete again. Who knows how far this will go to helping. Likely some way — it can’t be ignored.
• Commercial partners – same messages, plus ‘here I am doing the right thing’. This will should lead to them being at least be open to working with him in time, entirely dependent on the public reaction. But those who might want to work with him will be pleased his reputational clan-up is under way.

Only time will tell if he’s done enough, in the right way at the right time to get what he wants in PR and other terms.

Jessops – some lessons for SMEs

To a keen photographer it was temptation incarnate, an ocean of exciting products printed on both sides of a very large sheet of paper in very small print.
Reissued with updated listings regularly, the Jessops product list was a must-have for anyone who loved their photography in the 1970s and ‘80s. And visits to their stores was akin to stepping into Ali Baba’s cave — lined with objects of tech lust and often some far-off wish for a pools win to make their purchase possible.
Ever since Jessops opened in Edinburgh I have been a regular customer with them and, given its place in my photographic life, I was deeply saddened to read of its fall into administration yesterday.
So what when wrong? Looking over the coverage, here are the main factors and lessons for SMEs:

• Its core market had been eroded from both ends of the price range – high megapixel smartphones being chosen instead of lower-end digital cameras while top-spec cameras were being bought online from specialists with better ranges based on reviews.
  Lessons:  1) If a new trend or technology is threatening your market, you need to be in it, not fight it like King Canute or you’ll only be washed away by Schumpterian forces of “creative destruction”. Jessops should have offered at least a range of the best cameraphones, but didn’t; 2) You need to find a way to price-match or get close to the price leaders on at least the key products, like John Lewis does. Linking with other independents (through groups like Euronics & Nisa) to gain buying muscle to match the big boys’ prices is one way for smaller retailers.

• Its core marketplace was down overall – you can’t do much about the overall market but you could fight better for a share of what’s still there (see below).

• It hadn’t made the “profits it planned” – it maybe needed to look harder at costs, store locations and alternative ways to do its back-end services (e.g. sharing distribution services with other High St chains). But were its targets too high? Given the debt for equity swap with HSBC in 2009, were they pushing for an unrealistic turnaround timetable? We don’t know, but word on that may emerge.

• Timing of rent payments – this hits all High St retailers equally unless they own their premises. Cashflow is always hard at this time of year for retailers and combined with the importance of Christmas for so many and fiercer price competition, it will have been one of the tipping point factors that forced it into administration.

• It lost the confidence of its suppliers – this is a clear strategy fail. You have to retain credibility and the relationship. This will have been one of the reasons why Canon didn’t go forward with a rumoured cash injection (to help maintain their own High St sales). If Jessops marketing had been better, this, and sales, might have been better.

• It was a victim of 'showrooming' — In economics a distinction is made between ‘experience goods’ (things you have to try to know their quality) and ‘search goods’ (things which are identical commodities for which you’ll typically simply seek the lowest price as you know the product will be the same e.g. branded goods).
  In the early days of e-tailing it was thought that experience goods couldn’t be sold online, but once ‘showrooming’ (where customers sample a product in-store and then buy it online) emerged, it meant experience goods were being tried on the High St but bought online like search goods. So unless a shop can afford to price-match, or at least get close in price, like John Lewis, they will often lose the sale.
  A survey showed 24% of all UK shoppers ‘showroomed’ in the lead-up to last Christmas (39% for 18-39s, 18% for over-40s). You might worry that if that carries on the only winners will be the big chains with ‘clicks & mortar’ offers including collect-in-store, online-only retailers and the postal and courier services, but don’t panic yet as showroomers only represent 10% of overall shoppers and only 40% of showroomers bought items from a competitor after trying in-store.
  The lesson could be, if appropriate in your market, to focus more marketing spend on older non-showroomers via appropriate channels and, if possible, use in-store wi-fi to track what showroomers are searching for and offer them a time-limited ‘have it now’ discount voucher on the in-store price if they check-in to secure the sale. There are lots of occasions when you need something TODAY, so ensure you maximise the stock of key items that are urgent purchases.
  Also, once the last date for online delivery for dates such as Christmas is past, you can target your marketing messages on the ability to get it NOW in-store in time for the big day.

So how else can local and independent High St retailers fight back?

• Make good use of PR and social media – they work just as well for you as the big boys. Yes, they have dedicated teams of experts, but with the key knowledge, the help of people like me, some creativity and some dedicated time you can make it work for you too. It’s all about content and that’s a level playing field where your David can beat the chain Goliath, especially if you can offer the product today.
• Reassess your basic business model, including location to ensure you’re doing everything you can to make the most of your offer & USPs.
• Make sure you’re communicating your USPs regularly — I was amazed to find a local computer supplies shop in Forfar is cheaper for my printer ink than anywhere in Dundee, but I haven’t seen them advertising it anywhere. Shout about your strengths!
• Look into linking up with other local independents to help each other – like the retailers in chain-averse Totnes. Their solidarity is said to be one of the factors behind their success.

There are, sadly, no panaceas for all High St retailers, but if you undertsand your business well you can maximise your chance of not being the latest victim of its tranforming character.

Given my long and happy relationship with it, I hope PWC can find some way of saving Jessops. 

How elastic is your brand’s reputation? Find out with this metric.

In my last blog post I looked at the recent Instagram Terms of Service debacle as a case study of how getting the balance wrong between satisfying your shareholders versus your other key stakeholders can lead to major reputational damage and, ultimately, lost shareholder value.
At the end I introduced the term Reputational Elasticity of Demand (RED). Anyone who’s studied economics will be familiar with the concept of price elasticity of demand — the idea that demand for some products decreases as their price rises (referred to as being elastic, with a price elasticity of demand score above 1), while for others demand is less affected, if at all (referred to as being inelastic, with a price elasticity of demand below 1).
It’s easily seen that usually non-essential goods (like expensive cameras or world cruises) have a higher elasticity than basic needs, such as food. Although I would add the caveat that elite luxury goods appear to be fairly inelastic as the kind of people who buy Bentleys and Impressionist paintings are less bothered by price increases than most buyers as their wealth stays constant enough to allow more consistent consumption of such things.
Applying this notion of demand being influenced by a factor, it’s also easily seen that a company’s reputation can have an influence on its sales. You only have to look at past examples of major PR failures to see how a reputational hit can influence revenue, profitability and sometimes the whole existence of the company. Think Ratners, Arthur Andersen and The News of the World.
More recently, we’ve seen Starbucks change its UK Corporation Tax policy after an outcry over its perfectly legal but unpopular use of international transfer charges to minimize its UK tax bill and comedian Jimmy Carr pulling out of a controversial tax avoidance scheme, again because of the public reaction when his involvement was revealed.
They clearly feel their services are reputationally elastic (Starbucks may have seen its sales fall), but other companies clearly think theirs are reputationally inelastic. Amazon and Google were also named as UK tax dodgers by the same parliamentary committee that named and shamed Starbucks, but they didn’t respond in the same way. In fact, the reaction of Google chairman Eric Schmidt was to say he was “very proud” of their tax avoidance scheme — “It’s called capitalism.” He’s clearly been taking PR lessons from Michael O’Leary of Ryanair!
So why can one company’s demand be more resilient to dents in its reputation than those of another? The simple answer is each will have their own Reputational Elasticity of Demand (RED).
So how do you measure yours and allow it to inform your future decision-making?
First you have to understand the factors which influence how elastic your RED is and how they can be measured.
I would suggest the following factors and metrics can be used in calculating your brand’s RED:

• Market share — the higher yours is, the more inelastic it’s likely to be if the barriers to switching are also high and/or your industry has low competitiveness e.g. Google in search.
• Competitiveness of your market — measured by its concentration ratio and/or Porter’s Five Forces.
• The importance of reputation in your industry — high in art auctions, universities and used car sales, lower in petrol or gas sales where the product is closer to being an identical commodity. Measured by quantitative market research.
• The importance of ethical behaviour to your key customers (an idealism score) — measured by qualitative market research.
•  Likelihood of your key customers to act on core ethical values — measured by qualitative market research.
•  Your brand’s rhetoric on the importance of ethics to your company — everyone hates a hypocrite more than an honest stonewall capitalist e.g. Starbucks and Apple versus Ryanair, banks, oil firms, arms companies. Measured by an ethical rhetoric score.
• The expectation of ethical behaviour in your industry — more so in charities, but less so in the arms industry. Measured by quantitative market research.
• Barriers to switching from your brand to a rival, including transaction costs (hassle) to do so — i.e. coffee lovers in cities can easily use another outlet, but someone in a village with only one bank will find it harder to switch. Similarly, Facebook enjoys a high barrier in terms of the time and effort it would take a user to move all their friends and content to another social network.

Depending on your industry, there may be more, but this is a basic list to start with.
So once you have your RED figure, is it elastic or inelastic? That can be worked out by measuring the RED of a number of companies like Starbucks and Google which clearly enjoy elastic or inelastic RED figures and finding which you are closest to. With enough comparisons you should be able to find the figure which represents the point of transition from reputational elasticity to inelasticity.
Once done, you would need to monitor your RED score regularly as the factors which make it up will vary over time.
So how can you use it to inform your management decision-making?
You could use an equation to do scenario analysis to weigh up the effect of the future options being considered on sales, but to do so would be make the same fundamental reputational error that Ford in America made in the 1970s with the Pinto — where management calculated the cost-benefit of recalling and fixing the fault on the car which caused fires in accidents over versus the cost of potential lawsuits. It would be a PR own goal if found out, more likely in the increasingly transparent online and socially networked world we live in.
Whatever you do, you need to take into account two factors:

• How personal the proposed unpopular conduct is to customers — e.g. Instagram seemed to be threatening to sell users own pictures, while Starbucks was not paying the Government, not us directly, and Apple’s use of Chinese workers with comparatively bad pay & work conditions to make its products seems more distant.
• How unpopular the proposed conduct is with your customers — measured by qualitative market research.

So what’s the solution? I’d say that you need to set out your ethical stall in line with your RED, communicate it clearly via your marketing communications to manage the expectations of your current and future customers and then act accordingly.
If you’re going to be a hard-nosed capitalist, say so. For example, no-one any longer acts surprised when Ryanair takes a tough legal-contractual line over an unpopular policy because they have a long and well-publicised history of being that way. So, for various reasons including the price sensitivity of their customers, their RED is clearly inelastic.
Conversely, don’t project ethical whitewash and then act otherwise, especially if your RED is highly elastic. Brands like Apple and Co-operative Bank have seen the reputational damage of failing to live up to their ethical rhetoric.
Ultimately, using your RED to influence your brand management is about using your judgement, informed by the knowledge of your brand’s RED elasticity, to make the business decisions which will help maintain a high reputation and in the medium and long-term maximise the returns and value to your shareholders.

Instagram: a case study on one of the PR lessons from 2012.

It all started with what could and should have been a fairly reasonable change to their privacy policy…if you believe their explanation.
On December 18 Instagram announced via its blog that it was proposing changes to its privacy policy and Terms of Service which would take effect on January 16 2013. Briefly, it said that unless users deleted their account by then they had by default agreed to allow the company to share information about them with Facebook, its parent company, as well as other affiliates and advertisers.
So far, so fairly usual in the online world. The problem was what they wanted to share and on what basis.
The terms proposed Instagram being able to send on users’ username, likeness, photos (along with any associated metadata), and/or actions they had taken for use, “in connection with paid or sponsored content or promotions, without any compensation to you”. Basically, passing on their personal photos and dats for possible use in conncetion with ads without being given a penny.
The backlash wasn’t long coming and was vehement. Here’s how the BBC website reported it. Before long there were threats of mass account closures from regular users and, importantly, power users followed by many others, especially celebrities for whom control of their image is a major financial and PR consideration. So basically it was an online PR firestorm of their own creation.
Within 24 hours Instagram had seen the furore and realised it needed to try to reassure its users or it would have a lot fewer of them to monetise. So co-founder Kevin Systrom posted this fresh blog post saying they aren’t planning to sell users’ photos, anyone who thought that had unfortunately misread the legal language, but it was Instagram’s fault that it wasn’t clear from the start.
Importantly, he also said they were listening to the feedback and were going to modify specific parts of the terms to make it more clear what would happen with users’ photos. He went on to detail their intentions and the reason for them.
Did this extinguish the firestorm? Sadly not. Why? By now users’ mistrust of the company was so high that the reaction of many key players, including power user National Geographic, was to say ‘fine, but we want to see the detailed changes before we trust you again’. Some, including National Geographic, suspended posting their accounts as a sign of their continued unhappiness.
So Instagram went away again to have another think. Sooner after it announced that it was reverting to the original terms of service and if in future it planned to change them it would consult with users about the proposed changes before putting them in place.
So everybody’s happy now? No, not really. Why? Because their trust in the brand has been seriously dented. And, as we all know, trust, like reputation, is easily lost and rebuilt slowly and with difficulty.
Instagram, of course, wasn’t the only brand to suffer reputational damage in 2012. Barclays, RBS, HSBC, Starbucks, Amazon, Apple and Google were among the high-profile companies affected by events entirely of their own creation. Self-inflicted and entirely avoidable injuries.
Instagram’s was one of the worst because they failed to take sufficiently into account how personal the service they provide to their users actually is — its place on what marketers call the ‘my continuum’ (i.e. a hairdresser provides such a personal service that you refer to them as “my hairdresser” while, say, an online retailer is more distant and impersonal, so not referred to as “my”).
Users trust Instagram with their personal photos, some of them very personal — like shots of their newborn baby or wedding — so in threatening to hand on these photos to third parties it was inadvertently making a threat to very personal possessions of its users.
It also failed to take into account quite how competitive its market had become and how low the barriers to exit are for users. Though clearly the dominant player, it quickly found how loosely tied users felt to it (compared to,say, Facebook versus the threat of Google+) and how quickly they were prepared and able to take their custom to rivals. 
I suspect this misjudgment may have been by Facebook managers, who are used to the cosy notion that without the ability to easily download and move the data and friends Facebook users have spent years adding to the site they feel compelled to stay simply by the thought of the massive ‘transaction costs’ (hassle) of shifting it all to a rival).
It was a similar sudden appreciation of how competitive its market was and how low the barriers to exit (switching) were that forced Starbucks in the UK to change its policy on paying UK Corporation Tax. 
A Parliamentary Committee named and shamed it among several international companies which generated large revenues in the UK but didn’t pay much, if any, Corporation Tax because of their use of indefensible transfer charges to export profits to jurisdictions with lower rates of tax on them.
The root cause which links these and all the other PR disasters cited above is an imbalance in their perception of the correct balance between meeting the needs of shareholders (who they have a corporate fiduciary legal duty to) and their other key stakeholders, in particular their customers, who perceive that they are owed a moral duty extending beyond any legal-contractual one.
Balancing their often-competing needs is not always easy, but it’s easily seen that if you work exclusively in the interests of shareholders (i.e. by maximizing profits) you can easily be working against their long-term interests as customers may defect to rivals, reducing sales and ultimately profits. Equally, if you only do what customers want, your profits may be few and far between and shareholders will take their capital elsewhere.
So how to find a balance?
Part of the answer, I suggest, is in discovering what your Reputational Elasticity of Demand (RED) is and how far that allows you to consider your shareholders versus your customers.
So what is RED and how is it made up and measured? That and more will be in my next blog post.