COMMENTARY: Wal-Mart’s Brand Karma
Issue: The brand impact of corporate reputation
Commentary by: David
Stories about Wal-Mart increasingly reflect one common element: municipalities, cities and regulators teaming up to thwart the Bentonville giant on different fronts while Target and other competitors slide through unchallenged. Two recent cases of this concern Wal-Mart’s attempts to get a retail banking certification in Utah and its ongoing difficulties in opening new stores in urban areas. In the first case, Wal-Mart is seeking to gain a charter that Target already owns, in the second we see story after story of Wal-Mart expansion being blocked while rivals traipse through unchallenged.
We are stating the obvious when we say that Wal-Mart’s bad reputation is keeping the company from pursuing its strategic goals and hurting the stock price, but we think the problem is deeper. Wal-Mart has failed to understand the core brand promise and in doing so has systematically undermined the equity of its brand by repeatedly violating the trust of its consumers. Now consumers around the nation and their agents are punishing Wal-Mart and this punishment hurts consumers as well as Wal-Mart.
What is this ‘brand promise’ and how does it affect corporate reputation? The brand promise is simple, but it has significant implications. A brand offers a value proposition. It promises the consumer that it will maintain this value proposition over time, and that the brand will enhance the consumer’s experience and reward the trust during the lifetime of the consumer relationship.
Wal-Mart executed extremely well against part of this promise. It did a great job of eliminating the ‘rural premium’ - the extra price for goods that people in less-populated regions of the U.S. used to pay.
But the brand promise has a second part and Wal-Mart missed it entirely. The brand promise is also about trust - gaining and keeping the trust of the consumer. It is impossible for a brand to maintain consumer trust when it is working against the interest of its consumers. This is where corporate reputation comes in.
This advertising blog cannot judge the reality of stories that Wal-Mart employed ruthless business tactics to put local suppliers out of business (initially working with a local florist, for example, then becoming the largest customer and driving out the other business then finally sourcing elsewhere to elimate the supplier and Wal-Mart’s local competition), or the claims that Wal-Mart has treated employees poorly. It is clear that Wal-Mart is no Starbucks when it comes to employees (recently announcing that it will increase part-timers as a percentage of its workforce), as it tries to get more out of its labor force and reduce health care costs.
So while Wal-Mart’s brand offers excellent selection and low prices it also seems to hurt the community and harm the social infrastructure of the communities it serves. At best this is terrible PR management, at worst it is bad business and bad branding. But clearly this situation emerges from Wal-Mart’s lack of understanding of the brand promise. Wal-Mart CEO H. Lee Scott has tried to speak directly to consumers with what he calls the ‘unfiltered truth’ at WalMartFacts.com. But Scott is not thinking like a brand manager and the actions he is taking show little sensitivity for the brand relationship that Wal-Mart should be building with consumers.
Which is a shame, because the retail banking license could be a major boon for consumers in the long-run. While community banks could suffer if Wal-Mart tries to create a middle-class megabank, the lower-income Wal-Mart customer is dramatically underbanked. Many of these people do not have checking accounts and pay dramatic fees to cash checks (more on this here). Wal-Mart could and should serve these people better than the predatory lenders who take their money now.
Beyond this, Wal-Mart is making other moves which may benefit consumers and the environment. Their packaging reduction initiative promises to initiate a green revolution among retailers and suppliers. And by cutting prescription drug prices (albeit for a limited number of drugs at the moment) and opening cheap, efficient health clinics in stores they may do more for the state of health care in America than Washington has in the past decade.
But Wal-Mart efforts may founder because in their single-minded focus on lowering prices, they have forgotten to take care of their corporate reputation and uphold the brand promise to their consumers. Which is bad brand karma for everyone.
October 27th, 2006 at 6:33 pm
Obtaining brand loyalty is difficult for any company trying to find their niche. Wal-Mart found their’s in low prices. They didn’t forget or misunderstood what brand promise was, there was just no other way for them to successfully carry their inventory at those kind of prices. Wal-Mart decided what their goals would be and was, and still are, forced to sacrifice a piece of that consumer trust. Not one person would argue that they could have a far better relationship with Target, but most would continue to do their shopping at Wal-Mart, simply for the selection and cost.
Wal-Mart has been successful for a long time in the are of brand awareness. When someone asks a friend where they can get a tire for their bike at eleven at night, or a birthday bag for the present they have to deliver in fifteen minutes, the answer is almost always the same - Wal-Mart (that’s success).
If you cross a few lines, upset a few people, even make enemies, that’s business. That’s also why Wal-Mart is trying to make those same people happy again with their green campaign and health clinics. It’s not that they actually wanted to break certain trust issues, it’s that they had no choice.
May 15th, 2007 at 7:27 pm
Wal-Mart baits and switches its customers (that advertised price is for a “burrito warmer” microwave, not one you can reheat a plate in), it shuts out quality suppliers in favor of inferior goods (ever had a blender motor wear out before?) and it employs hourly workers much as a proctologist employs a glove (briefly, dirtily, disposably). What’s not to trust?
Letting a Wal-Mart into your neighborhood because they promise to process their own sewage or generate wind power is you flunking a pass/fail intelligence test. Read my lips: nobody in a Wal-Mart makes a living wage, the price advantage is a myth, the revenues leave your area and never come back. The only person who makes out is the sad sack of sick who leased them the land to build on.
Montgomery Ward, now *there* was a retailer you could trust!
June 4th, 2007 at 1:31 am
[…] The most recent article on Third Way is a discussion/commentary on the way Wal-Mart’s been managing their brand and their image. It’s a fascinating explanation of why Wal-Mart is so successful and yet so unpopular, and frankly, it’s probably one of the more honest and realistic looks at the megacorporation i’ve seen in a long time–rather than making blanket statements about how Wal-Mart is or isn’t something, Third Way discusses the things that it’s doing that have the potential to be good (low-cost, non-predatory check cashing and low-cost, in-store medical clinics) but why it still is having problems with its image. […]
September 17th, 2008 at 10:04 pm
My sheppard dog loves the brown kibbles and bits dog food. I use to buy Alpo and she would barely eat it. she is 12 years old, i finally tried another brand which she love to eat, and now i can’t get it at Walmart. Was there a recall or did they stop getting it in. I live in small town Esterhazy Saskatchewan, driving to Yorkton is an hour away. I would greatly appreciate to know whats going on. My poor dog sash is back to not eating. Thank you…..