Expect the Unexpected - Issue and Crisis Management

transcript

Managing Communications in a Crisis

Expect the UnexpectedThree exemplificative cases of crisis:Perrier, Johnson & Johnson, Mercedes “A-Class”

byCammarata Vincenzo, Kurucz Veronika, Maj Valentina, Salgirli Seda, Schulte Jan

Master of Science in Communicationand Economics

Issues& Crisis ManagementSE 2006

UniversitàdellaSvizzeraItaliana

Expect the UnexpectedThree exemplificative cases of crisis:Perrier, Johnson & Johnson, Mercedes “A Class”.

What is a Crisis?

‘A crisis is a major occurrence with a potentially negative outcome affecting an organization as well as its publics, services, products, and/or good name.’

Two different views of Crisis:

> Traditional view:

‘An event that can destroy or affect en entire organization.’ (Mitroff et al.1996)

> Strategic view:

‘A decisive moment, a turning pointfor a better or worse.’

Crisis are not unusual…

1982 Deaths caused by Tylenol

1990 Benzene in water

1996 Suspect for poisoned candies

1997 The A-Class failed the moose-test

1993 Syringe hoax

1997 Woman discrimination

2000 Privacy & Security on the web

2000 Deaths caused by Baycol/Lipobay

Common elements to all crisis

> A rude awakening

> The rapid speed an escalation of an event

> The presence of panic

> The tendency to act irrationally and preciptiously

when feeling intense emotions

> Chaos in internal commnications

(even if they have a crisis communication plan)

> The omnipresent press

> A threat to the company’s reputation

Crisis Management

- Strategic planning to prevent and respond

during a crisis or negative occurrence

- A process that removes some of the risk

and uncertainty and allows the organization

to be in greater control of its destiny

- Dynamic and enduring process.

Three exemplificative casesin Managing Communications in a Crisis:

1990 Negative approach

1982 Positive approach

1997 A well-known case

1989 – Leader in the sparkling water market> High reputation – 13% of the Market share – 1mio bottle sold

’80s High Health Consciousness(Hot spot among consumers)

1990 – Benzene scandal> Presence of the chemical Benzene at levels above standards

Perrier & Benzene - Facts

Perrier & Benzene - Actions

- 7mio bottles recalled from North America> Ronald Davis’ (Perrier America President) declarations

problem limited to North America

Cleaning Fluid on a production line machine mistakenly usedDeclaration done before identifying the source of contamination.

Three days later… discovery:

- 6 months’ worth of production affected- Not only North America but also Global Market

Perrier & Benzene - Actions> Frederik Zimmer (Perrier’s International Division President)

“Perrier water naturally contains several gases,

Including Benzene.”…

“The Benzene entered the water because

of a dirty pipe filter at an underground spring

at Vergeze in southern France.”

It means that “Natural” Perrier was in reality processed.

Perrier & Benzene – Effects on the market

> Financial effects

- Perrier’s stock price declined- Market share declined (13%>9%)- Price to consumers declined

> Plans to restructure

- Management structure and bottom lineFiring of Gustave Leven (CEO & Founder)

Perrier & Benzene – Analysis 1/3

Lack of internal communication and coordination> contradictory explanations

> convey misinformation

(credibility & reputation damaged)

> no centralized approach

Surprise effect & Panic> Irrational behavior > loss of control

Rely on media for communications 2C

> Media controlled the information

> Defensive behavior (rather than offensive)

> Lack of proactive and clear communication towards customers

Scandal became a big media event

> Rapid widespread of the news > global level

> Emotional component

(People scared > betrayed > bad reputation)

- Inability in gathering information without loosing control

- Bad relationship management with stakeholders

- Lack of a Crisis communication plan

1982 – Deaths caused by Tylenol capsules> Seven people died in Chicago

1986 – Second case of death> A New Yorker died

Johnson & Johnson - Facts

- Multinational of health care

Johnson & Johnson - Actions

- 31 mio bottles ca. of Tylenol recalled(a retail value of more than USD 100 mio)

- Offered to exchange all Tylenol capsules with Tylenol tablets (other million dollars..)

- Production Suspended(until the company could innovate its tamper-resistant bottle)

Johnson & Johnson - Actions

- Toll-free telephone hotline

- Cancel all Tylenol ads

- Immediate Nationwide warningnot to use Tylenol(Transparency and honesty towards customers)

Johnson & Johnson – Analysis

- Proactive approach(Opportunity to consolidate the relationship with Stakeholders)

- Timely PR campaign based on honesty (Ads, videos to newspapers and TV Networks)

> Keep the public informed

- “Customer-oriented” > Customer safety first(than company profit and other financial concerns)

Johnson & Johnson – Conclusions

- How handled J&J the crisis situation?

Offensive - Proactive – recalling the product

Saving the brand

Responsability – care for its consumers

Johnson & Johnson

Take care not only the crisis, but also the EMOTIONS.

"We believe our first responsibility

is to doctors, nurses and patients,

to mothers and fathers and all others

who use our products and services."

Mercedes Benz – “A-Class” case

Daimler Benz AG - facts

1997 - Mercedes Benz subdivison of Daimler Benz AG (now DaimlerChrysler)

> annual turnover 124 billion DM - 180 000 employees

> Market share 24,4% - on the European luxury car market(BMW 20,7% and Audi 20,5%)

- High reputationtechnological innovations, safety and high prices

Baby Benz - facts

> First-ever Mercedes for middle market segment

> Goal: reaching new customer groups (young, women)

> Risk: weaken Mercedes-brand

> Central values: Quality, Technology & Safety !!!

> Mercedes strategic and technological bet - Extention of the luxury brand into a lower segment- Implemention of new development process and production plant(2.5 billion DM and 47 month of realization)

18.10.1997 - Launch after an 18 month-marketing campaign ‘A-Motion’(200 mio DM) and 100 000 pre-booked sales

“This is what our future customers want.We are working on it.”

The moose-test - facts

‘How to create Crisis out of an Issue?’

a. Detection

b. Prevention/ Preparation

c. Containment

From Issues to Crisis

a. ‘Mis’- Detection1. PRODOME:Date: 23.09.1997Location: Tannishus/ Denmark, selection ‘Car of the year’

During the test two wheels of the Baby-Mercedes, a clear favourite, lost contact with the road at theaverage speed

Mercedes sent engineers and The PR Manager to the crimescene!!! Some eyewitnesses claimed the vehiclesdisappeared overnight and returned back in the morning.

Statements that came from PR manager:“These are claims that cannot be proven!”

a. ‘Mis’- Detection

2. PRODOME:Date: 21.10.1997Location: Sweden,Test Drive for “Teknikens Vaaerd” magazine

The A-class failed the moose-test,more than failingit was topped over at 60 km/h. Journalist Robert Collinsand three collegues suffered from minor injuries.

The Mercedes Headquarters were in Tokyo Motor Show and only statement from Mercedes was:

“…it is not necessary to provide an officialstatement, simply because somewhere a car has topped over.”

b. Preparation - Prevention

Mercedes:> Failed to see all the prodomes .

> Missed out all the opportunities for prevention.

> No plan of preparation at hand.

Journalists (left in the dark) started to conduct moose-tests:

Baby-Mercedes lifted two tires and topped over once gain in Auto Bild’s test.

FOR JOURNALISTS IT WAS A TOO GOOD OPPORTUNITY NOT TO MISS.

Humor break :-)

“Honestly, we haven’tdone anything!”

“Super, the A-class is passing the moose test!”

‘How to Prepare in Advance a Crisis’

> Brainstorm Ideas (Include the Senior Managers into BS process)

> Assess Your Risk

> Set Communication Objectives for Potential Crisis:

(Flow of Communication at all the times!)

> Consider Your Constituencies:

(Find out constituencies effected by the crisis)

> Analyze Your Channel Choice:

(It’s important to find the right channel)

> Assign Different Teams to Each Crisis:

(Different problems require different kinds of expertise)

c. Containment - Actions> Jürgen Hubbert (board member – resp. Private Cars)

Legal action against “harebrained” journalist > image damaging

- Negation of the problem

> 29.10.1997 (First press conference and first admitance)

- “We have a weakness!”(Goodyear tires – not appropriate test condition in Sweden)

A-class would carry on with changed tires and instalation of ESP

Auto Zeitung replicate the test with new tiresbut results were the same…

c. Containment - Actions> 09.11.1997 (Welt am Sonntag pondered A-Class production

stop by CEO Jürgen Schremmp) > Mercedes denied again

- “No comment on speculations.”

> 11.11.1997 (Press conference by Jürgen Schremmp)

- “A-Class stopped for three months.”(He admitted mistakes and the process would be reviewed)

Evasive and dishonest communication tactics abondened.(no communication tactic)

Admission of the problem > Coming up with the solution

‘How to Communicate during a Crisis’> Define the Problem

(reliable info and S.M.A.R.T. communication objectives)

> Gather the Relevant Information(Managing many sources of information)

> Centralize Communications (The need of a crisis center)

> Communicate Early and Often: (Say whatever you can as soon as possible)

> Get Inside the Media’s Head(Media looks for a good story with villains, victims and visuals.

> Communicate Directly with Affected Constituencies(Internal and external)

> Keep the Business Running (The show must go on!)

> Make Plans Immediately to Avoid Another Crisis (To be prepared)

‘How to get out of a Crisis?’

d. Recovery

e. Learning

d. Recovery> Delivery stop of A-Class

strong corporate image > positive impact on media

(technical problems of the Baby Benz immediately solved)

> 19.01.1998 (workshop with journalists on driving dynamics)

- Now I really like this car! ”(R. Collin, Berliner Zeitung)

> 28.02.1998

Relaunch of the A-class

(Extensive marketing campaign including humor and celebrities)

Humor break :-)

“We have reinvented safety. The new A-Class”

e. Learning

A more timely, open, honest

and coherent approach to communication

saves both face and money.

“The A-class has passed the moose test.

We have learned from it.”

ADV Campaign

“Strong is the one who does not

make mistake. Stronger is the one

who learns from his mistakes.”

“I have learned more out of my throwbacks than my triumphs.”

“What happened after”

The Crisis cost for Mercedes

- 300 mio DM (ca. €154 mio)

A-class best selling new car in 1998.(16th overall, best selling Mercedes)

Expect the UnexpectedThree exemplificative cases of crisis:Perrier, Johnson & Johnson, Mercedes “A-Class”

Thank you for your attention

byCammarata Vincenzo, Kurucz Veronika, Maj Valentina, Salgirli Seda, Schulte Jan