Red Bull executives probably wished that they could have flown away last week when serious doubts were raised about the safety of the clubber’s favourite liquid refreshment. The top-selling energy drink that “gives you wings” faces the prospect of an international consumer backlash after it was linked to the deaths of three Swedish adults who had mixed the product with alcohol.
Like so many companies before it, Red Bull is staring a potential marketing disaster in the face. It is to be tested in the art of crisis management, or as one commentator puts it: “Managing and responding to a serious threat to the company, its brands and its stakeholders”.
How corporations have reacted to the challenge of potential brand wipeout is the stuff of legend. Translated to the classroom, top of the class would probably be Johnson & Johnson. Coca-Cola and Unilever would be near the bottom, and mineral water brand Perrier would be told it could do better. Hoover would probably get the dunce’s cap and be made to stand in the corner, while Gerald Ratner, who infamously labelled his gold jewellery as “crap”, would be kept back a year. The bullied child, unable to fulfil his potential, would be the Millennium Dome – taken out of the school after a year.
We have yet to see how the school’s new pupil, Red Bull, performs.
The Austrian company, which sells more than a billion cans of the taurine-and-caffeine-fuelled drink in about 30 countries every year, has started to fight back. It insists to the world’s media that Red Bull is safe and has armed sales teams with what it says are the real facts. Product withdrawal is not on the agenda.
Red Bull has called on Sweden’s National Food Administration to conduct a swift investigation, confident that the Red Bull brand, with its distinct silver and dark blue packaging, will be vindicated.
Red Bull UK spokeswoman Fiona Mollet believes the story is already a witch-hunt. She says: “Red Bull is a global brand and the accusations are very serious. But there’s a fine line between a brand getting itself into trouble and then becoming the victim.”
Zenith Media soft drinks expert Richard Hall agrees that it is a sensitive issue: “Red Bull cannot rubbish medical opinion. It has to wait until the scientific results are published. That could be weeks or months away. In that time consumer confidence could be badly damaged.”
Losing the fizz
Perrier is a brand that knows all too well the damage such an incident can cause. It happened to the company in 1990 on the back of a benzene scare in the US. The incident led to the withdrawal of 40 million bottles in the UK and 160 million bottles worldwide. In the US, Perrier was out of production for six months. This gave competitors the opportunity to muscle in on the market and consumers time to try other brands.
Perrier’s annual global sales prior to the scare were 1.2 billion bottles, now they stand at 700 million. Last year Perrier, bought by Nestlé in 1992, made its first profit since the benzene crisis.
So, what constitutes a marketing disaster?
It certainly isn’t a cock-up, which can be easily rectified. In the early Eighties Pepsi started marketing its products in China. It used the catchline: “The choice of a new generation”. In Chinese it translated as: “Brings your ancestors back from the dead”. This was a glitch that was smoothed over with a new catchline.
Hall believes a disaster is distinguishable by being either a serious marketing misjudgment or a serious media scare. A marketing misjudgment, a mistake made by the company concerned, can happen because of lack of resources.
In the case of Hoover’s free flights promotion of August 1992, it was flawed research. Consumers were promised two free flights to the US if they spent more than &£250 on Hoover products. Research suggested a response of around 50,000 applicants. But Hoover was overwhelmed with a response of 200,000. Demands for compensation and threats of legal action by disgruntled punters followed. Hoover never recovered and the European arm was sold to Candy for &£106m in 1995.
The Sun’s former marketing director Ellis Watson believes the catastrophe made the promotions industry wake up and take note.
“Acceptable risks were being taken but this was a blatant error. The mechanics were all wrong. Insurance was hopelessly inadequate. Hoover handled the publicity badly, especially the formative stages of the disaster,” he says.
But a serious media scare is usually out of the hands of a corporation, and it becomes an exercise in damage limitation. To deal with one seems simple: tell consumers the truth and come across as human. The brand has a better chance of escaping the incident unscathed or at least surviving.
Ensuring a rapid response
Britvic marketing director Andrew Marsden says reaction has to be both swift and sympathetic. He says: “Brands ‘live’ for years and years. We are privileged if consumers choose to buy our products – if that trust is eroded the brand will start to die.”
Johnson & Johnson built a relationship of trust with its consumers. Then in 1982 seven people in Chicago died after its product, Tylenol, was found to contain cyanide. Investigations revealed that the substance had not been added at the point of manufacture. The FBI advised against a
roduct recall but Johnson & Johnson chose to ignore the advice, recalling over 31 million bottles at a cost of $100m (&£71.4m).
The company said at the time: “Our first responsibility is to the doctors, nurses and patients, to mothers and all others who use our products and services.”
Johnson & Johnson’s product recall has been described as one of the greatest business decisions of all time – setting a precedent in crisis management. Consumers did not blame Johnson & Johnson, which had dealt with the problem emphatically by alerting the public to the danger. Such honesty gained the public’s trust and meant that sales of the company’s other brands were unaffected by the scare.
But Tylenol, which in September 1981 was market leader with a 35 per cent share of the $1.2bn (&£857m) analgesic market, saw its market share in the weeks following the scare drop to seven per cent. The company embarked on a massive advertising campaign soon afterwards. The product was put back on the shelves with the first tamper-proof packaging. A year later Tylenol held 30 per cent of the market.
Craig Smith, associate professor of marketing ethics at the London School of Business, says: “It came out of this situation, not just with its reputation intact, but enhanced.”
Sometimes brands manage to walk on water. Take Audi for example. In February last year, Audi announced it was to spend about DM300m (&£93m) fitting its TT sportscars with an electronic stability programme (ESP). This was a reacion to the deaths of five owners and complaints about the car’s bad handling at high speeds.
Others have not been so lucky. Unilever was desperate to gain control of the European detergents market from Procter & Gamble. In 1994, it launched Persil Power which contained a special ingredient that was supposed to make it more effective at removing stains. But it wrecked some fabrics and the company’s reputation. P&G went on the attack with an advertising blitz using creative work that placed a picture of a rotting pair of boxer shorts washed with Persil Power next to a pristine pair cleaned with P&G’s brand, Ariel.
Professor Simon Knox, professor of brand marketing at Cranfield School of Management, says: “Unilever lost a lot of consumer confidence – it took 18 months just to claw that back.” According to its own figures, P&G remains the overall market leader in the UK. Ariel, Daz and Bold together have an overall market share of 49 per cent.
But according to figures by Nielsen, Persil itself is now way ahead of Ariel, achieving &£240m sales in 2000 compared with Ariel’s &£185m. And when Persil launched its detergent tablets in 1998 the product was a resounding success.
The bigger they are the harder they fall
Big brands tend to make big mistakes. Their blunders end up as case studies in text books on how not to get ahead in marketing.
In 1984 Coca-Cola’s global margin over Pepsi was down to 2.9 per cent. Pepsi, in its taste challenge ads, gave the impression that its cola tasted better. Coke got paranoid. It launched New Coke on April 23 1985, withdrawing original Coca-Cola. In blind taste tests people preferred New Coke, but it proved to be a flop. By July 11 the prodigal son had returned.
Coca-Cola’s then chief executive officer, Donald Keough, conceded: “The simple fact is that all the time, money and skill poured into consumer research on the new Coca-Cola could not measure or reveal the deep and abiding emotional attachment to original Coca-Cola felt by so many people.” By early 1986 original Coca-Cola had regained its crown as the number one cola drink.
British Airways made a similar marketing faux pas. It came in for heavy criticism four years ago when it scrapped the Union Jack tail fins on 100 of its 338 planes. The Union Jack was replaced with vibrant and colourful “world designs” that aimed to reflect the company’s global market. In May, BA announced it was to claim back its “Britishness” by using red, white and blue designs – a process that could take two and a half years.
But, it’s difficult to tell if the Millennium Dome was a marketing mistake or merely the victim of media frenzy.
There are always exceptions to the rule.
Dome marketing director Sholto Douglas-Home says the attraction couldn’t shake off its tag as a political project. A survey by media agency Walker Media estimated that the Dome received &£100m worth of bad publicity during its operational year. The attraction had a &£15m marketing budget with which to fight back. It won numerous accolades and was by far the most visited paid-for attraction in the UK.
But awards and statistics sometimes don’t count for much. In the end every product meets its fate in the market. It’s the risk every innovator takes.
Ford Edsel – a ‘revolutionary’ mid-priced ‘hi-tech’ saloon car launched in the US in July 1957. Ford hoped to sell 200,000 in the model’s first year, but by the end of the year it had sold just 30,000. The project, which was later deemed ahead of its time, lost the car giant an estimated $350m (&£250m).
Ford – at the beginning of this year it had replaced 13 million Firestone ATX and Wilderness AT tyres on its Explorer models following 174 deaths and 80 injuries involving the world’s most popular 4X4. It cost the company $3m (&£2.14m). Firestone and Ford are still in dispute over the cause of the accidents involving the Explorer.
Mercedes A-Class – launched in 1997 but a design fault made it topple over. About 3,000 cars were recalled, the fault was rectified and the model is now a success.
Charmin – Procter & Gamble was forced to change the thickness of the toilet paper following pressure from those that feared that it could block UK sewer pipes (MW May 11, 2000).
Alta Vista – the US Internet service provider (ISP) in March 2000, said it would provide “free access” and not charge Web surfers according to time spent online. But it later withdrew the offer after claiming that market conditions prevented it from providing the free service.
Coca-Cola – reacted to a contamination scare in June 1999 of its bottles in France and Belgium by recalling products worth $75m (&£53.5m). It was the biggest recall in its history.