Issue: Does a funky new website point to the future of journalism?
Commentary by: David Vinjamuri

There’s something new, and distinctly odd, out there on the frontiers of the Internet.  The site Truemors aims to empower ordinary citizens to spread, well, rumor.  Ideally those that are true.  Anyone can contribute, and the rules are simple - write stuff that is actually true and don’t break the law.  The result is a very eclectic stream of information which users can rate, and thus sort.  What rises to the top is the stuff the most people believe - or like.

Whether Truemors will prosper remains to be seen. But the central idea behind it - that citizens can report information directly on a joint forum - is an intriguing step forward.  The success of blogs has proven that credible reporting need not come from the most established sources.  Even mainstream media like CNN and Fox have solicited and run video taken by eyewitnesses.  Truemors tries to take the process a step further, shoving the microphone directly into the hands of the average joe.
Part of the concept has already been proven.  Perhaps one of the most important developments on the Internet has been the rise of social bookmarking with sites like Digg, Del.icio.us, and Stumble Upon.  These sites allow ordinary people to organize the Internet by explicitly selecting and tagging sites they deem worthy.  It is a much stronger approach than Google search for finding contextual information when it works, and it is one of the core ideas behind the Web 2.0 concept.

Truemors, founded by entrepreneurial guru Guy Kawasaki (The Art of the Start)  along with Will Mayall and Kathryn Henkens faces a high hurdle (and indeed some initial skepticism from luminaries like Seth Godin).  The result of putting publishing power into the hands of absolutely everyone is chaotic (a recent scan of the homepage contrasted stories on Dora the Explorer and the Liberty bell with an expose on a couple charged in an identity theft case.

Beyond the marketing question of whether Truemors will catch on is the bigger question of whether unmoderated citizen journalism will degenerate into gossip and innuendo or whether a Wikipedia-like effect will raise the level of contributions.  Voting on posts creates a ‘greatest’ list which is placed above the running list of posts.  But ‘greatest’ may be more like ‘best of craigslist’ than a highly combed-over Wikipedia entry: it may be more about entertainment value than accuracy.

In truth, Truemors may have just reinvented the oldest network of all - the ancient marketplace where news, gossip, rumor and innuendo walked hand in hand.

Issue: The Hollywood writers strike may have unintended consequences
Commentary by: David Vinjamuri

This morning at 12:01 am, Hollywood writers went on strike for the first time since 1988. Most of the commentary around this strike has been focused on the earlier writers strike and its estimated $500mm cost to the industry.  Media critics and stock analysts are wondering how great the revenue loss to the industry will be and what burdens any eventual deal with the writers will place on the industry.

Instead of looking to the 1988 writers strike for historical lessons, pundits should reach a year further back, to the 1987 NFL strike.  In that strike, professional football players were replaced by scabs - mostly undrafted former college players willing to cross a picket line to be able to wear the uniform of an NFL team for a few weeks.  Although the interval was short - after a few games, pros began crossing the picket line and the season was not lost - those few weeks were interesting.  Fans saw a lower level of football, but also a lot of people playing for nothing more than passion.  Although most of the scabs disappeared immediately with the return of the regular season, a few joined the big league.

Hollywood is far too unionized for this scenario to play out on in the writers room for The Tonight Show, Desperate Housewives or Heroes.  But if the writers strike creates an extended dearth of new material on the big screen and televisions nationwide, new media may have its moment in the sun.  Sites like YouTube have already shown that American consumers are willing to watch consumer-created media.  If television content disappears - creating an extended summer break of sorts - the conditions might suddenly exist for a tipping point shift towards new media.

Hollywood knows that it has a lot to lose from the writers strike.  But the real loss could be much larger than anyone imagines.  When consumers become more expert at finding video on the web just as amateurs are getting better at delivering it, the advertising model behind network television, which depends heavily on the scale of the audience watching commercials, could vanish.  Then Hollywood writers could return to work and find the stadiums empty, the fans gone.

Issue: Over-Aggressive Retail Efforts to Avoid Shrinkage are Bad Branding and Worse Business
Commentary by: David Vinjamuri

Somewhere in Eddie Lampert’s offices in Greenwich, Connecticut (or possibly in the Sear/Kmart corporate offices in Illinois), a financial analyst has been hard at work figuring out the most efficient way to eliminate shrinkage. Shrinkage combines employee theft with consumer theft, and includes tag-switching and other scams which cost the retailer revenue. At Kmart and other retailers around the country, harsh anti-shrinkage measures have made a very small dent in the actual amount of shrinkage in stores (it only barely declined from 1.59% of total retail sales in 2005 to 1.57% last year), while increasingly alienating consumers and hurting their own brands. But the gross numbers ($40.5 billion of shrinkage last year) command attention and attract cost cutters like pie attracts ants at a picnic.

Efforts to improve the bottom line (revenue) by focusing on the middle line (cost) at the expense of the top-line (sales) are very typical in companies and industries controlled by managers whose primary training is in finance and accounting. Public companies, whose ability to raise capital may be dependent on the stock market (and thus dependent on the opinions of often brand-illiterate stock analysts) are very likely to pursue many middle-line business strategies with dubious medium to longterm value to the enterprise. Ask any corporate veteran who has survived a few rounds of layoffs about the experience and he will tell you that employment levels almost always return to the pre-layoff level in a year or two. In the meantime, morale and productivity usually decline, the best workers head for other companies and the most seasoned employees opt for early retirement. In the past few years, as more companies come under the sway of private equity, and thus the control of financial analysts, these various middle-line strategies have multiplied.

A Wall Street Journal article by Laura Landro today illustrates the very real danger for brands that pursue cost reduction while ignoring the damaging efforts on consumers. Shrinkage is difficult to combat because the perpetrators live little evidence. Only by catching someone who has just purchased items after switching or repricing the tags or who has just left the store can retailers stop the theft. Catching outright shoplifters caught on video only reveals the tip of the iceburg - for a store to get to the more common and higher value crimes it has to look for people switching tags or boxes.

The problem with this type of enforcement is that it requires behavioral targeting and - just like those security checks on last-minute ticket buyers at the airport - ends up netting innocents along with real criminals. Ms. Landro was one of those caught when she was unable to find a box for the flip-flops she was purchasing. When she grabbed a nearby box with the wrong items inside (children’s shoes) and assumed it was the correct box for the flip-flops and then proceeded to the register, she unwittingly became a victim of Kmart’s aggressive enforcement policies. She was detained by a security guard, questioned harshly and banned from the store. She was told she would be fined and her credit card and driver’s license were temporarily seized.

Most interestingly, from a branding point of view, nobody at Kmart apologized to Ms. Landro at any moment, even after learning that she was a journalist. In fact, the chain maintains it has ‘done the right thing’ - meaning that it did not break the law. Not breaking the law when dealing with a loyal brand user might be called ground zero for brand practices.

What did Kmart get for its zealous anti-shrinkage efforts? It may recover the $8 or so that Laura Landro deprived them of when she walked out the door. But even a short term valuation on this transaction reveals that Kmart made a mistake. Laura Landro purchased over $800 at the store that day. Even at Kmart’s anemic margins, the store will lose more that it has gained if she skips just one repeated shopping trip than if she had walked away unmolested. Unsurprisingly, Ms. Landro has vowed never to return to Kmart.

As Ms. Landro was a Wall Street journal feature writer, the damage to Kmart goes well beyond her isolated incident. Her story will be read by thousands of Journal subscribers, not just potential customers but bankers, suppliers and others who Mr. Lampert depends on for the livelihood of his business at Kmart. It is very difficult to calculate the damage that a simple act of overaggressive policing on Kmart’s part may have caused. It is impossible to calculate the cumulative damage to brand equity that thousands of these incidents a year cause to Kmart and other retailers.

Ms. Landro is not the typical consumer and it is true that most of Kmart’s actions may prevent real and intentional theft. But the value to the brand of such enforcement past the obvious is dubious, and the cost is potentially huge. The culprit is this middle line thinking. And it is pervasive in the retail sector. Consumers owe the worst packaging in the world to middle-line thinking - the hard plastic containers that encase high price items in supermarkets and electronics stores. Why are these items so hard to open? So that thieves will find it harder to remove security devices from them. To stop this type of pilferage, even respectable chains like Best Buy and Circuit City routinely injure their own loyal customers (this packaging is difficult to open even with good scissors, and often results in cuts for the consumer). They never stop to consider the added revenue they might realize from being known for easy returns, great packaging and unsuspicious customer service.

Kmart may rightly say that its shrinkage prevention policies prevent millions of dollars in losses to the company. Yet the enduring damage to the brand done to Kmart by enraged customers like Laura Landro costs tens of millions in lost sales. Some retailers know better. Nordstrom long ago realized that a looser approach to returns (another area commonly used to defraud retailers with mis-returns) netted them positive ROI as customers were more willing to risk larger purchases and might even purchase again when making a return. Indeed, Nordstrom has accepted tires for refund, even though the chain has never sold them.

The lesson here is that incomplete analysis can be worse that common sense or gut-level instincts. Chains can quantify the cost of shrinkage, but they cannot easily quantify the cost of apprehending customers who have unintentionally cheated the company for small amounts of money. Or even completely innocent customers who merely engage in some behavior that looks suspicious to the retailer. So these retailers choose to minimize the costs they can measure. In doing so, they ignore common sense (would any mom-and-pop shop have detained a customer over an $8 mistake on an $800 purchase?). It is bad branding and bad business.

Issue: Allstate tests dynamic ad serving to television sets with Video-On-Demand
Commentary by: David Vinjamuri

Just a few years ago, the advertising model was simple.  Marketers engaged advertising agencies to create 60,30 or 15 second spots for television, print ads and radio spots.  We dabbled in small volume projects like outdoor advertising and had special groups to place banner ads on the Internet and explore new media.  But we could all be certain that the only way to get on Friends or E.R. was to buy time from the television network.

Suddenly, life is a lot more confusing.  Lost, 24, Heroes and the other big cultural series can be found in multiple places.  We can watch them live, record them on our DVRs, stream them on the Internet from network websites, purchase individual episodes on iTunes (at least until NBC yanks its shows as it promises to do soon) or watch them on video-on-demand.  And increasingly our marketing budget is moving away from the simple :30 second spot that we grew up with.

It’s good news that forward-looking marketers like Allstate are trying to make sense of this mess by exploring new advertising options as they emerge.  Brian Steinberg at Advertising Age reports this week that Allstate and its agency Ogilvy have been testing dynamically inserting ads into video on demand shows in the St. Louis market.  The agency has chosen to use direct response ads, because they offer the best chance for measurement (because they ask the consumer to take a specific action which can be measured in addition to overall viewership).  Not surprisingly, Allstate has found that shorter spots work better, and more entertaining ones are more effective as well.

What’s more important is that marketers like Allstate are actively engaging with new media opportunities and trying to understand how they work.  Video on demand is a significant opportunity because it allows the cable provider to dynamically insert ad units which could eventually be targeted to a home based on viewership patterns.  Much like the opportunity of digital video recorders, few marketers have really scratched the surface of this technology.  It is not surprising, given the rapid development of the media model and the bewildering number of options available to marketers.  But this creates opportunity, and daring marketers have a unique chance to create new forms of advertising with modest investments of money and larger investments of time and creativity.

Issue: The Audi Driving Experience shows the opportunities and challenges of building a brand experience
Commentary by: David Vinjamuri

Your advertising blogger recently had the opportunity to attend the Audi Driving Experience at Sebring Raceway in Florida. The program is called an ‘advanced handling course’ and as such it falls somewhere between the teenage netherworld of driver’s ed and the high thrills, high dollar sport of amateur racing. The goal is to teach adults how cars handle in real-world situations and give them practical experience in recovering from ice-induced skids, sudden road obstacles and other road hazards. The program is run by experienced professional race car drivers; at Sebring it is a team led by Grand-Am Cup racer Nick Fanelli through Panoz Racing School. About a dozen adult males (and the adult daughter of one) turned out for the opportunity to drive Audi TT coupes around various configurations of cones and on a wet/dry skidpad with Nick Fanelli’s team.

The Audi Driving Experience is an enjoyable weekend for the participants, and a nice add-on to race car training for Fanelli and Panoz, but it is deadly serious business for Audi. It is a very rare chance for Audi to indoctrinate its most loyal customers in the brand and to turn them into brand advocates. As we all know, those consumers who are most passionate about a brand recommend it. These brand advocates (or brand evangelists) have a huge effect on long-term brand strength. In some brands, we can see over half of all new users being influenced by a brand advocate with a personal recommendation.

The Audi Driving Experience is a well-run program, but it misses huge opportunities to position and build the Audi brand with enthusiasts. The Audi marketing team seems to have little connection with the school and they did not turn the Audi Driving Experience into a step behind the velvet rope for the participants. Among the missed opportunities:

1. Brand Connection - There was good Audi signage and Audi vehicles as well as instructors who had tested other Audi products and spoke highly of them. However the school didn’t either sell or distribute Audi branded material (students seemed uniformly disappointed not even to be given a t-shirt or hat to commemorate their weekend). Beyond that, nobody from Audi USA corporate attended the event. This would be a golden opportunity for marketers to connect with the base and more importantly to give these consumers a sense of being included in the Audi family by discussing upcoming vehicles, challenges, etc. Instead the experience seemed very removed from the brand.
2. Sampling - The majority of the adults in this class were high-net worth individuals, many with a stable of cars. Given that, it was surprising that Audi only supplied the school with 2006 model Audi TTs, and none of the high-end Audis that the participants would be more likely to buy upon returning home. This obviously springs from a cost reduction focus (flogging a $70,000 A-8 or RS-4 on the skidpad is more expensive than a car costing half as much and makes maintenance trickier as well). On the other hand, Audi could have sold a few cars immediately (perhaps getting a return on the higher equipment and maintenance costs) and it certainly would have generated more enthusiasm with these brand faithful if they had let the students drive their premium products. BMW appears to understand the importance of high-end sampling as they routinely use M-5’s (one of their most exclusive cars) in their own driving school.
3. Relationship Building - Running a branded experience should be the beginning, not the end, of a relationship. While Panoz, the company running the training understood this, Audi did not. Ironically, at the end of the course students walked away with materials on other classes from Panoz but nothing from Audi.

All of this goes back to a theme that the ThirdWay Advertising Blog has been harping on for most of the past three years - execution. It’s not enough to have a good idea for your brand and to construct a decent strategic plan to execute it. You have to get the details right, all of them. The Audi Driving Experience is a great example of a brand getting the big idea right, but fumbling on the execution. While senior management can dismiss the impact of these programs because they reach relatively few consumers, the impact of these consumers can be significant. Just try Googling “Audi Driving Experience” in a week or so. You’ll likely find these words up near the top of the list, next to Audi’s.

Issue: Hyundai sales lag in spite of high quality, reasonable prices
Commentary by: David Vinjamuri

Last month at the Jacob Javitz center in New York, Hyundai introduced the Genesis sedan.  This $35,000 sport sedan is an ambitious and impressive challenger to such auto industry heavyweights as BMW, Infiniti and Lexus.

More impressive than the styling of this new car (which looks far less like the odd panoply of competing design themes that defined the Hyundais of the 1980’s) is the expected quality.  In fact, in 2006, J.D. Power’s rated Hyundai #3 in initial quality - above both Toyota (#4) and Honda (#6).  In addition, Hyundai models in the past several years have been regularly recommended by Consumer Reports for reliability as well as value.

In spite of this good news, Hyundai is in a pickle.  BusinessWeek reports that “last year the Korean automaker’s earnings fell 34% … and its operating margin was halved … Hyundai’s sales bank [of unsold cars] has gone largely unnoticed.”    The appreciation of the Korean won against the dollar has neutralized much of Hyundai’s pricing advantage and the brand is under pressure to sustain premium pricing.

Hyundai’s marketing chief, Steve Wilhite (COO of Hyundai Motors America) is struggling to find a recipe to make Hyundai a premium brand.  The current plan of the company lies with an upcoming advertising campaign intended to position the brand as the choice for rational, clear-headed buyers unaffected by marketing hype.

This plan might or might not work in the long-run, but it is an expensive and unlikely way to solve the brand’s woes.  Wilhite’s thinking is one-dimensional, and his impressive resume (helping to lead turnarounds at Volkswagen, Apple and Nissan) points to the reason - he has primarily worked in single-brand environments.

Faced with the same challenge, a packaged-goods marketer might think differently.  Instead of trying to reinvent a failing brand with a stable of good products, why not create a new brand for those good products.

Hyundai consumer research seems to bear this out.  As Businessweek points out, consumers exposed to concepts for new Hyundai models were actually less likely to express purchase interest than when the concepts had no brand attached.  Instead of being a sail for the brand, the Hyundai name is currently an anchor.

Of course, there are good examples of brands which have repositioned themselves in the automotive industry - and Mr. Wilhite has worked on two of them.  Volkswagen was in a brand netherworld before re-emerging with the “Drivers Wanted” campaign and the New Beetle.  Nissan was virtually a commodity when Wilhite helped reinvigorate the brand.

Unfortunately for Mr. Wilhite, both of those brands had underlying heritage which made refreshing the brand more achievable.  Nissan was beloved of a generation of drivers who remembered it bringing real sports cars to the masses with the 240Z - and these drivers were now of an age and family size to require a Maxima.   Volkswagen captured the hearts of the masses with the original Beatle.  Repositioning it as the brand that cared about drivers was more like reintroducing the original concept than arguing with consumers.  (Nissan does of course have a second brand, Infiniti, but more on that later.)

Hyundai’s problem is that it has no brand heritage to look back on.  Hyundai came into the U.S. market much as Yugo did - as a cheap car, cheaply made.  The early Hyundai Accent was a dreadful tinny little car that did not engender much love.

To be fair, there are at least two examples of automakers with questionable initial offerings and poor brand reputations turning into automotive powerhouses - Toyota and Honda.  The first Hondas were also tinpots known more for their propensity to rust than anything else.  Toyotas had a similarly undistinguised brand as an inexpensive Japanese car.

These brands, however, were saved by a divine intervention that Hyundai and Mr. Wilhite can hardly hope for - the OPEC oil crisis of the seventies which forced consumers to re-consider small cars.

These same two companies do offer a more useful model of dealing with entrenched consumer opinions about their automobiles, however, with their Lexus and Acura brands.  Both Toyota and Honda (along with Nissan) faced the difficult question of how to move upscale as their consumers aged.  They also saw a brand opportunity as no domestic or foreign carmaker was able to deliver “reliable luxury” to the U.S. consumer.  They understood that their brand names did not connote luxury to U.S. consumers and might never do so.  So they chose to build new brands at huge expense.  It was an investment well worth making.

For Hyundai, rebranding would be well worth the effort.  Merely renaming the company and the dealerships would be difficult, and consumers might see through the effort.  It might be smarter altogether to launch a new brand and begin to put updated versions of the smartly designed, reliable and clever new cars into this brand.  Over time, the Hyundai name could be retired.

This begs the question of dealer networks.  The U.S. auto market is, unhelpfully for consumers, largely driven by distribution issues.  Most dealerships still distribute only a single brand and consumers are reduced to driving all over town to shop for a new automobile. (Imagine doing the same thing to shop for a dishwasher and the absurdity becomes clearer.)  This is justified by the service end of the business, but at the end of the day it does no favors to anyone.

Hyundai should look at partnering with another car manufacturer needing to penetrate the U.S. market.  This model is already common at the high end where brands like Aston Martin, Ferrari and Lotus lack the sales volume to support independent dealer networks.  Renault might make a good partner as it is gearing up for a re-entry into this market.

There are reams of data to support the fact that consumers don’t like to be argued with.  The path Hyundai is pursuing with rebranding will be expensive and might fail.  Which would be a shame, because the automaker is finally producing some vehicles worth considering.

Issue: As Wal-Mart’s Investigation Practices Hit the NY Times, Wal-Mart Pays a PR Price for Authoritarian Policies
Commentary by: David Vinjamuri

Last Summer, an epic struggle for control of the board of Hewlett-Packard exploded when it was revealed that HP Board Chair Patricia Dunn had authorized pre-texting to investigate its own outside directors. The news cast a cloud over the comeback story of Hewlett-Packard, and the scandal was far worse in PR terms than the leaks the investigation was intended to uncover. As this advertising blog commented at the time, the real lesson of the scandal was that any corporation should understand that treatment of (and trust in) its own emloyees is directly connected to the equity of the brand with its consumers. By that we meant that if a company does not trust its own employees, it should not expect consumers to trust them. Some employees will always misbehave and either break the law or the company’s code of ethics. But when the company fosters an atmosphere of mistrust, it ensures that this mistrust will be transferred down to consumers, either through employees or the media.

Today, a scandal brewing for the past four months hit the front page of the New York Times, virtually ensuring a publicity nightmare for Wal-Mart. The source? In January of 2006, Wal-Mart hired marketing star away from Chrysler Julie Roehm to lead the push for a new agency and new image for the Bentonville giant. On December 7th, Wal-Mart publicly fired her, stating that she had violated company policy by having a relationship with a subordinate, accepting unethical favors from agencies vying for agency-of-record status (most famously a ride in Draft FCB chairman Howard Draft’s Aston Martin) and broke expense rules.

It is unusual for the departure of a senior executive to be positioned as a ‘firing’ (even former HP CEO Carly Fiorina had to insist that her termination be made public as such) and much more unusual for the corporation to reveal the reasons behind the dismissal. To do so courts negative publicity and a lawsuit. In this case Wal-Mart got both - Roehm sued and the story was picked up by the business press.

Wal-Mart has one of the best publicity teams in the World, (run by Edelman PR) but it’s difficult to understand what they thought they might accomplish by treating the termination of Roehm as a war. Certainly any financial loss to Roehm in a lawsuit (or any gain in a counter-suit) will be dwarfed by the negative publicity surrounding the case. Wal-Mart does not carry the presumption of innocence in the public mind, so this kind of story weighs even heavier on them than it might on other brands.

The very public battle over Roehm’s termination created an even bigger risk for Wal-Mart: that it would reveal a pattern of behavior on the part of the retailer that could make for more interesting and more mainstream story for the press. That happened today with the New York times expose piece on Wal-Mart’s surveillance practices.

Whatever the truth of this story, the damage has now been done. And it is clear that what invited this story was Wal-Mart’s aggressive approach to ending its employment relationship with Julie Roehm. Whether or not Ms. Roehm merited this treatment, whether or not Wal-Mart was ‘right’ in factual terms, it has certainly hurt the brand. When senior Wal-Mart employees consider their everyday actions in light of whether they are ‘adding value’ they should consider the health of the Wal-Mart brand and not just the shelf cost of the products.  And, as with the Hewlett-Packard incident, the suspicion of employees - even when justified - hurts the brand far worse than their misdeeds.

Issue: Consumers learn that expensive and store brand pet-food are not very different
Commentary by: David Vinjamuri

One of the most disturbing aspects of the national pet food recall is the illusion of superiority it has shattered for buyers of expensive pet-foods. Processor Menu Foods not only makes store brand petfood for stores as diverse as Wal-Mart, Winn-Dixie and Wegmans but also premium brand pet-foods including two Procter & Gamble brands, Iams and Eukanuba. In all, 53 brands of dogfood and 42 brands of catfood are affected.

Why is this so disturbing to consumers? Not just because Fluffy or Sparky might die from kidney failure. The other bad news from the consumer point of view is that the premium food that they have been lovingly feeding to these extended family members is no different from generic store brands.

How did this happen? A combination of greed and laziness was to blame. For much of the petfood industry, co-packaging (or producing generic products using a third party manufacturer alongside branded products with identical ingredients and a higher pricepoint) has been a fact of life for years. This is greed plain and simple, and the brands engaging in this practice surely deserve the fate they will experience

Procter & Gamble is a slightly different case, however. AdAge quotes a Procter & Gamble spokesperson as noting that “Iams and Eukanuba dry products are not manufactured at Menu Foods and are not affected by this recall. Only a small portion of our wet canned and foil-pouch products for dogs and cats are affected by this recall.”

Iams was popularized by Clay Mathile who purchased the company from its founder in 1970. The brand was sold through veterinarians who promoted it as a scientific solution to pet diets. This vastly increased the strength and credibility of the brand, so much so that it attracted the attention of Procter & Gamble, who purchased Iams in 1999.

The Iams brand survives on the belief that it is the best brand for pet health and further bolstered by the P&G introduction of Eukanuba, which is sold through veterinarians.

All of this has been endangered by the news that the brands are co-packaged with generic pet foods. The question is, why did Procter & Gamble, one of the worlds pre-eminent brand companies, allow this to happen?

Most likely, a brand manager recommended that a wet-food line extension for Iams and Eukanuba be subcontracted out to Menu Foods to spare cost and manufacturing complexity. Nobody watching the brand asked the question - is this manufacturing practice consistent with our brand promise for these premium pet-foods? And now, even though the majority of Iams and Eukanuba branded products were not packaged by Menu Foods, they are going to be tarnished by the same brush.

Issue: Bono’s Red Campaign Has Not Burst
Commentary by: David Vinjamuri

AdAge set off a firestorm this week by suggesting that the RED campaign has yielded just $18mm for the Bono charity which benefits the Global Fund to Fight AIDS, Tuberculosis and Malaria. RED CEO Bobby Shriver fired back that the total number was now $25 million, that there were a lot of other publicity benefits for the charity and that the promotional partners also saw incremental profit and sales from the campaign.

From a brand standpoint, the much more interesting question is this: Why did a campaign with six huge corporate sponsors, dozens of celebrities and an enormous amount of publicity get beat by a simple yellow band promoted by one athlete?

That’s right, that simple yellow band brought in over $50 million for LiveStrong, the Lance Armstrong foundation which benefits people affected by Cancer. One celebrity, one SKU, twice the results.

This advertising blog doesn’t think that is any accident. Lance Armstrong did four things right:

1. Simple - The LiveStrong campaign was easy to understand - pay a buck, take a stand, fight cancer
2. Shareable - The LiveStrong campaign had a shareable message - wear the yellow and join the fight
3. Self-Reinforcing - When a consumer became aware of the campaign, every yellow wristband reinforced the message.
4. Sustainable - With simple execution, low manufacturing costs and no need to keep multiple partners on board, this campaign has been easy to maintain.

The RED campaign hasn’t surpassed the Yellow campaign for just one reason - Execution. RED sounds like a brilliant plan and when it hatched in Bono’s mind, it probably was. But it was compromised in several ways in its execution:

1. What is RED and what is just red? - Because the RED campaign had multiple partners, it was harder to distinguish at a glance which products were RED sponsored and which merely sported a similar color. This created consumer confusion and cost the campaign valuable momentum.
2. Commercial motives - To entice partners, 60% of profits were retained commercially with the remaining 40% going to RED. This compromised the integrity and authenticity of the movement and made it a promotion instead. A movement (as LiveStrong was) has much stronger brand equity than a promotion.
3. Too much noise - Multiple partners and multiple products also racheted up the noise. To understand the promotion, consumers had to pay attention and investigate. The extra work required of the consumer made the campaign much less appealing.

We believe that RED is pursuing noble goals. Unfortunately, the meager results have left the ground open to critics from the nonprofit sector who claim that this is the inevitable result of the privatization of charity. The hurt feelings created by the Gates Foundation stealing the limelight from more established players are resurfacing in this debate. But a privatization of charity and more stringent application of business principles to keep charitable giving effective are desperately needed. The lesson of RED is that it has to be smart business, and strong branding.

Issue: Taco Bell’s insufficient response to rat video compounds earlier e-coli woes
Commentary by: David Vinjamuri

Taco Bell owner Yum Brands this week has found itself on the wrong end of another public health crisis, this one stemming from a video filmed at the Greenwich Village Taco Bell/KFC showing a swarm of rats scurrying around the restaurant. Kate MacArthur at AdAge reports:

No crisis is just a local crisis. The rats running amok at the Greenwich Village eatery were first reported on early-morning TV news by a New York station, WNBC-TV, following a consumer call to its tip line. But by the time Yum Brands put out a statement addressing the issue on its home page and media wires — 2:06 p.m. EST — the stomach-churning video had already raced over the internet and made it to numerous other TV stations.

Taco Bell & Yum’s response to this crisis highlights the problem we have previously addressed with modern crisis management plans: they don’t account for the speed of the Internet and the visceral impact of viral video. The seven hours that passed between the early-morning airing of the video on WNBC and WCBS and Taco Bell’s response allowed the story to run nationally without any expression of regret from the company and made the whole mess look worse.

The response itself was not much more helpful, crafted as it was to stress the isolated nature of the incident and the safety of Taco Bell and KFC cooking in general.

Now, Yum will face further dropoff in Taco Bell business (already down since the e-coli crisis) and continued erosion of the brand. Why? Because Yum has not demonstrated that it really passionately cares about consumers or safety. Showing passion in the response means going beyond dealing with the immediate health issue caused by e-coli or rats and addressing the breach of trust created by this type of adverse event. Taco Bell should have made a more heartfelt statement of distress and then thought carefully about compensation for consumers - what about making the restaurant free for a weekend after reopening?

Just to be absolutely clear, this is our four-step primer for dealing with crises - rodent or otherwise:

To respond effectively to a crisis, brands need to have a plan which can be implemented in a matter of hours. It should include the following steps:

1. Accept Responsibility - Even if events subsequently prove that the brand was blameless in an outbreak or tainting scandal (think of the finger found in a Wendy’s salad which was planted by a customer, for instance), stonewalling will hurt the brand. It is far easier to act as if it is a problem you’ve created and take responsibility for making it right. If later events prove the brand was blameless, its ethical reaction to the problem will increase brand loyalty. If it was the company’s fault then the brand will retain consumers with its forthright, straighforward acceptance of responsibility.
2. Protect the Consumer - Closing restaurants or recalling the product early can limit the damage done to the brand. Stubborn refusal to immediately recall their contact lense solution almost cost Bausch & Lomb its entire ReNu franchise.
3. Find the Truth - Getting to the bottom of the problem is critical, even if it is not always possible.
4. Prevent a Replay - Tylenol returned to the market not when the person who had adulterated the product was apprehended but when Johnson & Johnson could be sure that another person could not do the same thing. This is the best standard for knowing whether its time to step back into the water, and one that Taco Bell has likely failed.

To these we would add “Make Reparations.” Taco Bell needs to clean up and think of a creative way to erase the horror from the minds of its consumers.