How much abuse can a brand put up with?
The case of Gerald Ratner should serve as a reminder to every owner, president or CEO intent on hurling abuse at their brand
One of the characteristics of strong brands is a resilience to abuse by their stewards. At some stage, of course, there must be a breaking point, but what is it? Several brands in the news offer plenty of scope for speculation.
At the minor end of the scale, we have Marks & Spencer. Last week, its chief, Sir Stuart Rose, won a vote of confidence among shareholders which by City standards was a pretty close call – 40% voted against him.
Despite his reputation as a gifted retailer, Rose encountered stiff opposition when he took on the combined role of M&S chairman and CEO. It’s just not done these days, for which we can thank the 2003 Higgs Report on corporate governance. That set out a code of conduct in the boardroom which, while not mandatory, risks alienating one of the brand stakeholders – the investment community – if it is flouted.
The campaign against Rose must have been a wearying distraction at a time when M&S has also been under considerable trading pressure. Yet is he bothered by the close result of the vote? I shouldn’t think so. There are two reasons – first, because the effective outcome has reinforced his own hunch that there is no foreseeable alternative to himself; and, more importantly, because this is an issue about which the average M&S customer knows little and would care even less.
Ordinarily, I’d hesitate to draw any kind of comparison between Rose and Bernie Ecclestone. But it cannot have escaped readers’ attention that Ecclestone – even more integral to Formula One than Rose is to M&S – has been meting out some rather more serious brand abuse of his own; the sort which would have seen any FTSE 100 CEO kicked out within hours of uttering it.
In an unguarded and seemingly inexplicable interview with The Times, Ecclestone let it be known he had no truck with the shilly-shallying of democracy; admired strong autocratic leadership; and, more explosively, the early rule of Adolf Hitler when (according to Ecclestone if few others) the Nazi dictator confined himself to building motorways and restoring full employment to Depression-ravaged Germany.
Interesting timing in itself, this interview, since the German Grand Prix was about to take place at The Nurburgring, forcing German officialdom to publicly condemn his behaviour. Holocaust denial, which Ecclestone’s un-PC tirade just stopped short of being, happens to be a criminal offence in Germany, as it is in 11 other European countries.
Opinion is divided as to whether Ecclestone acted out of naivety or was using an act of extreme provocation to demonstrate his awesome omnipotence to other increasingly mutinous stakeholders in motor racing – ranging from restless shareholders in holding company Delta Topco to breakaway constructors such as Ferrari, BMW and Mercedes.
Whatever the reason, the public face of F1 suddenly found he was persona non grata and was forced to issue a humiliating public apology.
Ecclestone’s extraordinary faux pas comes in the wake of a tsunami of scandal, corruption and organisational infighting threatening to swamp F1. Not the least part of which is the expulsion of Ecclestone’s long-time collaborator, FIA president Max Mosley, in a cloud of acrimony.
It might be thought that the cumulative effect would be disastrous for the brand. Surely, even the most politically naive fan or the most cynical sponsor would be having doubts by now over their continuing commitment to the sport? Not so, to all outward appearances. The emergence of a new rule book is making it more difficult for the big teams like McLaren and Ferrari to dominate the rankings as they did in the past, creating a more exciting and open competition.
In short, I’m not saying Ecclestone won’t be quietly sidelined at some point in the near future; I am saying his behaviour is unlikely to have a lasting impact on the brand.
F1’s teflon brand qualities are not unique. Another brand steward who constantly hovers on the line – while never actually transgressing it – is truculent Irishman Michael O’Leary, CEO of Europe’s largest and least loved airline, Ryanair. He was at it again last week, taunting us with the possibility of standing room-only aircraft and coin-slot toilets – the ultimate customer experience at 35,000 feet.
Ecclestone’s extraordinary faux pas comes in the wake of a tsunami of scandal, corruption and organisational infighting threatening to swamp F1. Not the least part of which is the expulsion of Ecclestone’s long-time collaborator, FIA president Max Mosley, in a cloud of acrimony
As ever, O’Leary is keeping us guessing over whether his intentions are serious. For what it’s worth, neither sounds like a goer. The G-force involved in flying militates against one; and I wouldn’t be surprised if health and safety regulations rule out the other. What’s interesting is the self-assurance with which O’Leary parodies the meanness of the Ryanair brand offering. It’s almost as if he takes a sadistic pleasure in reminding us of our masochistic compliance with his cult of cheapness. And we’re only too happy to prove his judgement right.
Should we conclude from this that brands are immune to any amount of abuse hurled at them by their owners? I think not. The case of Gerald Ratner is a salutary reminder. Ratner, it will be remembered, built up a highly successful chain of jewellers based around the idea of cheap bling. His mistake was to tell his customers exactly what he thought of them.
Here is an extract from the speech delivered at the Institute of Directors on 23 April 1991 that virtually destroyed his business overnight: “We also do cut-glass sherry decanters complete with six glasses on a silver-plated tray that your butler can serve you drinks on, all for £4.95. People say ‘How can you sell this for such a low price?’, I say ‘Because it’s total crap’.”
Stuart Smith is consultant editor at Marketing Week