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.

The typeface is part of the message, so choose wisely

I was interested to read Suzanne Labarre’s Fast Company piece about filmmaker Errol Morris’s covert experiment with nytimes.com readers into the subconscious effect on believability that the use of certain typefaces made to a statement.
Essentially, different readers saw the same words but in different typefaces. The result was that Baskerville (a serif font not dissimilar to the classic Times) convinced readers more than four others, three of which were sans serif. Not by much, but it worked.
Labarre pronounces herself surprised, but to anyone used to working with fonts, as I did for more than 13 years as a newspaper sub-editor, it’s no surprise at all — some fonts have more authority than others.
Serif fonts, through their use by authoritative organisations and media in countries using Western script are associated with those bodies and the formality, reliability and authority of their messages. So their mood is formal, official, starchy.
Conversely, fonts like Helvetica, Arial and Trebuchet (without the formal serifs) look more relaxed, informal and approachable. So they’ve predominantly been used for less formal communications and stories.
Over time then, by association, we have come to associate each face with a degree of formality.
So how can you use this in your marcomms?
Simple – abandon the notion of having a standard font your company uses in all marcomms like press releases and choose one for each client which matches the level of formality in their brand essence, factoring in the need for a greater or lesser degree of believability based on its existing level of credibility with its target audience or the media through which the message/s will be communicated.
So for a bank you’ll want the solidity of a serif font, but for a fun, challenger, lifestyle brand like a theme park, a more relaxed sans serif font should be right, unless the message is formal, as with crisis comms.
But not Comic Sans. Except perhaps in a fun heading relating to children, or something childlike. No release will ever be readable, let alone taken seriously, in that font.

#London2012: #thegreatestBritishPR because it was and wasn’t about PR

After all the years of doubt, rows about the site, the budget and, more recently, security, who can now reasonably argue that the London 2012 Olympics have been anything other than a massive triumph for Britain on the international stage?
Aside from deliverables they couldn’t control down to the finest detail (like contractors failing to deliver on oversold promises), my experience of the organisation (shared by most commentators, including IOC President Jacques Rogge) was that it was excellent.
From the Get Ahead Of The Games transport website managing expectations about transport delays to nudge commuters to use alternate routes or not travel…in order to minimize problems (which worked in my experience), the Game venues signage on the Tube and the controversial Olympic Road Network to simple things like having more female spectator toilets than male and their excellent maintenance, the Games were a great example of how well Britain can deliver project-managed services — something we’ve always been good at but which the Games will have given a great taste of to top-level decision-makers from around the world. As Lord Coe & David Cameron have said, we showed the world we can earn the gold medal for delivering “right” on world-class projects.
A key part of that was harnessing the best of Britain in the energy and motivation of the volunteers, the rightly-named ‘Games makers’. It seems unanimous that, without exception, they smiled, welcomed and helped in the spirit of generosity that is a key part of what makes Britain great.
Would paid staff have delivered that as well? I’m not sure — research on what drives people suggests the altruism they were fired by is more powerful than simple pay. That said, the paid staff I met (from police and Armed Forces members to Tube staff) were just as polite, happy and helpful too. The ‘spirit of the Games’ infected them too and put a smile on the faces of everyone contributing. It was a contagious smile.
Some of that came from a key part of the British character — support for things that are good and right. That’s what made the crowd in the Olympic stadium applaud Saudi runner Sarah Attar for simply being there and other crowds for supporting the athletes who came to do their best though they had little chance of medalling.
Though none of the volunteers or staff provided their friendly service with future benefit in mind, this experience for overseas visitors to the Games (all round the UK, not just to London) is sure to benefit the country in terms of future tourism and inward investment. The ‘feelgood factor’ in London was amazing and anyone visiting will surely want to come back. If the other cities hosting events matched that, they’ll also benefit.
That intangible feature of the Games brought most of the nation together in joy at the performances of Team GB and admiration of the dedication, hard work and achievement of individual athletes. Just like the Diamond Jubilee (but without the political element that alienates the anti-Monarchists), the ‘feelgood factor’ put a spring in our step, a smile on our faces and helped us, at least for a while, focus on the good things happening rather than the economic gloom we’ll all have to face up to today. Which? found 10% felt better about life in general during the Games.
If brands can create initiatives to reproduce something even close to that, the PR and brand value to them will be huge. But to do so they must firstly be about genuinely helping people. Just like the Games, the PR value comes from something created for its own sake and not just a PR stunt purely about looking good. The PR value follows. People see straight through token gestures like G4S’s £2.5m Forces charity donation. It was good, but reactive and defensive and will largely be written-off unless they show deeper commitment to help those in need.
For me one of the biggest PR lessons from London 2012 is that the best PR events are truly authentic — things with intrinsic social value which have PR value as a secondary benefit. Only once brands can get that, as some have already done, will they be able to create truly great CSR programmes which deliver long-lasting PR value. Yes, we probably bid for the Games entirely for national PR reasons, but by making sure we did it right, the return has been way beyond a simple box-ticking exercise that would have been found out fast (compare with Delhi’s Commonwealth Games).
My favourite bit of the Games legacy? That it reminded us (and the world) that Britain can still be Great. That’s invaluable. If brands can do that they’ll reap huge rewards.

‘Sorry’ is the word that builds relationships

http://www.guardian.co.uk/media/greenslade/2011/jul/13/newsoftheworld-local-newspapers
In looking at your brand’s relationship with its customers, I feel it’s useful to think of how a decent person you know might react to some bad news.
If they’re in the wrong, any decent person will say sorry and offer to do something to make up for the wrong.
What’s the result? Probably a better relationship than there was before the problem.
You not only feel you can trust that person, you know it.
It’s a simple truth but one that many organizations still need to learn.
Even if it means temporary embarrassment, saying ‘sorry’ is the best thing if you’re in the wrong and you want to maintain the relationship.