Branding in Chaos


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This white paper explores how chaos has affected specific brands and what the company or brand did to survive or even thrive after the chaos.
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Branding in Chaos

  1. 1. Can You Survive?Branding in a world of chaosWhite paper | September 2012
  2. 2. Shikatani Lacroix is a leading branding and design firmlocated in Toronto, Canada. The company winscommissions from all around the world, across CPG, retailand service industries, helping clients achieve successwithin their operating markets. It does this by enabling itsclients’ brands to better connect with consumers through avariety of core services including corporate identity,naming and communication, brand experience, packaging,retail, wayfinding and product design.About the AuthorKaren Tsoutsos, Account Director at Shikatani LacroixKaren has more than a decade’s worth of experience as anaccount director and design manager for top CPG brandson both the client and agency side of the business.With a background in visual arts and design, Karen hasoverseen a number of successful packaging redesigns andnew product rollouts. She has worked for such notablenational brands as Kraft, Quaker and Life Brand.White paper | September 2012 | Can You Survive? | 1
  3. 3. IntroductionWhen a company or brand faces chaos, no matter howsevere, the first question that usually comes to mind is:“How will the company or brand recover?”The dictionary definition of chaos is “a state of utterconfusion or disorder; a total lack of organization or order.”A notable example of chaos that has heavily affected theprosperity of brands is the recent recession. It was a timewhen consumers really thought about their purchases,bought in bulk, and relied on private label brands, whichgreatly affected national brand sales.Brands can also be affected by chaos of a different nature,like natural disasters such as Hurricane Katrina, the 2011earthquake and tsunami in Japan or the H1N1 crisis, orexperience chaos of their own doing such as faultyproducts causing product recalls.This white paper will explore how chaos has affectedspecific brands and what the company or brand did tosurvive or even thrive after the chaos.More specifically, this white paper will cover:• The impact chaos can have on a brand• How a crisis can improve brand perception• How chaos can positively affect your brand• What can happen if you do not react• Insights on how to survive and thrive in chaosWhite paper | September 2012 | Can You Survive? | 2
  4. 4. The impact chaos can have on a brandThe Costa Concordia disaster, which killed 32 people whenthe cruise liner sank off the coast of Tuscany in January, hasundoubtedly instilled fear in the minds of many cruise-goers. The ship tragedy has either prevented vacationersfrom taking cruises altogether, has delayed them fromtaking vacations until the uncertainty has passed, or hasdirected their attention to Costa Cruise’s competition.Either way, cruise lines are forced to rethink their marketingstrategies as they are automatically associated with thechaos Costa Cruises has caused. According’s account of the 2012 European CruiseCouncil conference in June, council chairman ManfrediLefebvre D’Ovidio said, “It has cast a shadow over theindustry and we want to try and ensure that nothing likethis happens again.” He told conference delegates theindustry needs to project a “positive” image.Yet, according to Carnival (Costa Cruise’s parent company),“we believe the incident will not have a significant long-term impact on our business.” In fact, Costa Cruises hasdecided to reduce its level of traditional marketing byexpanding its use of digital marketing and social media,including Facebook, Twitter (for customer service andpublic relations) and YouTube.White paper | September 2012 | Can You Survive? | 3“It has cast ashadow overthe industryand we wantto try andensure thatnothing likethis happensagain”Manfredi Lefebvre D’Ovidio,Council ChairmanEuropean Cruise Council
  5. 5. The short-term impact, however, has been evident. In itsForm 10-Q for the quarterly period ended May 31, 2012,Carnival reported cruise passenger ticket revenues for itsEuropean, Australian and Asian brands decreased by $154million, or 12.4%, to $1.1 billion in 2012 from $1.2 billion in2011. The Form 10-Q stated, “Our cruise ticket pricing andoccupancy was affected by the direct and indirect financialconsequences of the ship incident and the challengingeconomic environment in Europe.”While Carnival may not have suffered major revenue losses,sentiment for the brand is low. Costa Cruises has beenheavily criticized for its handling of the disaster, accused ofbeing insensitive and insulting by offering Costa Concordiasurvivors a 30% discount off future cruises. The companylater offered full reimbursement of all incurred expensesand $14,000 in compensation for emotional trauma, but theharm was done.And the public relations damage continues. With the recentfiling of U.S. lawsuits seeking millions of dollars in damages,Costa Cruises released a statement in September rejectingany accountability for the disaster and instead placingblame on the ship’s captain.The Costa Concordia disaster is a tragic example of how abrand can cause further damage to its credibility in theface of chaos by not responding correctly to the crisis.White paper | September 2012 | Can You Survive? | 4
  6. 6. How a crisis can improve brand perceptionMaple Leaf FoodsWhen a brand is negatively affected by chaos, respondingin a timely manner is very important. Canadian foodcompany Maple Leaf Foods faced a severe and deadlycrisis when the Canadian Food Inspection Agency andPublic Health Agency of Canada determined that a strain oflisteria bacteria afflicting several consumers matched thestrain identified in some Maple Leaf food products.According to the CBC, the outbreak was “…linked to 12deaths out of 26 confirmed cases of the disease in BritishColumbia, Ontario, Quebec and Saskatchewan.”One cannot properly describe the severity of this situation.Here is Canada’s largest meat company facing the biggestcrisis in its 100-year history, and is responsible for thedeaths and illnesses of many of its consumers.What can a company possibly do in this situation? Anatural response would be to hire a spokesperson tohandle the media or work on resolving the issue. Instead,Maple Leaf did the opposite. CEO Michael McCain tookthe media head on. He expressed heartfelt emotion as hisorganization took responsibility for the death, pain anddespair that had been caused. McCain said, “Going throughthe crisis, there are two advisers I’ve paid no attentionto... the first are the lawyers, and the second are theaccountants. It’s not about money or legal liability — this isabout our being accountable for providing consumers withsafe food.”White paper | September 2012 | Can You Survive? | 5“Goingthrough thecrisis, there aretwo advisersI’ve paid noattention to...the first arethe lawyers,and thesecond are theaccountants”Michael McCain, CEOMaple Leaf Foods
  7. 7. Maple Leaf handled the crisis publicly and the face timewith the media went a long way. Many Canadian consumerswere open to hear what it had to say, and at the very leastrespected McCain’s honest approach. I worked at KraftFoods during that time and remember how McCain’sresponse was discussed internally with high regardamongst my colleagues and upper management. Hisapproach was a monumental factor in holding on towhatever brand equity was left for the MLF brand.As time passed, Maple Leaf focused onlaunching natural food products andputting greater emphasis on the healthyproducts across many of its brands. In2010, the company launched Maple LeafNatural Selections deli meats that arefiller- and preservative-free. In 2011,Maple Leaf launched Schneiders CountryNaturals products made with onlyrecognizable ingredients such as lemonjuice, sea salt celery extract and vinegar.Marketing Magazine believes Maple Leaf’sstrategy paid off. It reported that third-quarter resultsreleased in October 2011 showed overall profitability of $43million compared to a $19.9 million loss for the same periodthe previous year. In the 2011 Marketing/Leger CorporateReputation Survey, Maple Leaf climbed 30 spots to 56thplace on the top 100 list. Impressed with its hard work to“rebuild consumer confidence and its brand with anincreased focus on product innovation and marketing,”Magazine Magazine voted Maple Leaf marketer of the yearfor 2011.White paper | September 2012 | Can You Survive? | 6
  8. 8. FordDuring the recent recession there was atremendous financial threat for carmanufacturers such as General Motors andChrysler, whereas Ford remained financiallyindependent from government support. Thatbeing said, Ford still lost money during therecession, recording a loss of $14.7 billion in2008 and another $1.4 billion in 2009’s firstquarter. However, as Ford worked throughthe financial turmoil it did not lose sight ofits vision and mission. It seems like a prettybasic plan to practice, however in chaos or crisis it is veryeasy to lose sight of what you stand for as an organization,especially if that’s what you desperately need to focus on .CEO Alan Mulally printed out the corporate mission andvision on cards and passed them out to employees, makingeveryone accountable for the livelihood of the organization.However, Ford still had a lot of work to do. One of the firsttasks for Mulally was to streamline the product portfolio.Ford removed brands such as Jaguar, Land Rover andVolvo in order to put more focus and resources on the corebrand. Bringing back Taurus, a brand name synonymouswith Ford, was considered a risky move to some, butMulally went back to basics and focused on investing in thefuture of Ford’s core brand.As of January 2010, Ford Motor Company reported thatvehicle sales rose 43% and the company’s share of the rose 3 percentage points to 17%, compared to thesame period the previous year.White paper | September 2012 | Can You Survive? | 7fordvehicles.comINTRODUCING THE ALL-NEWTAURUSIT SPEAKS TO YOU. LITERALLY.The sweeping cabin surrounds you. The massaging seats invigorate your senses. And thenthere’s the hands-free, voice-activated, voice-responding SYNC®* entertainment andcommunications system. Technology that perfectly connects you to what you love: driving.We speak car. We speak the all-new Ford Taurus. The most innovative car in America.***Available features. **Class is five-passenger large cars equipped with standard and optional driver-centric features.
  9. 9. How chaos can positively affect your brandDomino’s PizzaWhat do you do when sales are declining and consumershave negative feedback on your core product offering?Expose it and take advantage of it. In 2009, Domino’s Pizzatook a negative situation and leveraged it to its benefit.After a product research session, Domino’s was shocked todiscover that consumers thought its pizza crust tasted like“cardboard” and its sauce like “ketchup” — hence thedecline in sales. Horrifying comments to hear when yourcore product offering is being negatively criticized.Domino’s started from scratch andfocused on changing consumerperception of its brand throughproduct reformulation. It embracedthe criticism and even took newproduct back to the respondents foranother taste test and opinion.Although the Domino’s crisis wasnot as serious as Maple Leaf Foods’,Domino’s Pizza’s response was thesame — it was honest and admittedthe product could be better. It was arisky move, but it worked.Domino’s launched the “Oh Yes We Did” and “” campaign, which showed how it changed itspizza formulation as a result of listening to its customers. InQ4 2009, Domino’s increased sales by $23.6 million.White paper | September 2012 | Can You Survive? | 8
  10. 10. What happens if you do not react?Abercrombie & FitchWhen a company or brand is faced with a crisis the normalresponse is to react. But what if you don’t? What if youdecide not to change or react at all?During the recent recession, clothing retailerAbercrombie & Fitch faced almost a year of double-digitsales declines. In Q2 of 2009 alone, sales declined astaggering 30% across its three brand name outlets(Abercrombie & Fitch, Hollister and Ruehl). This waspartly due to A&F closing Ruehl, but another factor waspricing. Abercrombie refused to lower its price. As theeconomy spiraled downward and competitors likeAéropostale started discounting, Abercrombie insistedthat price cutting would cheapen the cachet of the brand.Discounting would be an automatic strategy to strengthenor continue customer loyalty. The more loyal customers youhave, the greater the possibility of leveraging the upswingassociated with an economic recovery and raising pricesagain when the market improves. However, Abercrombiedidn’t budge and as of January 2012, net sales for A&Fincreased 16% to $1.329 billion for the quarter, compared tonet sales of $1.149 billion for the fiscal quarter endedJanuary 29, 2011.One could respect the clothing retailer for not jeopardizingits brand equity by associating itself with low prices,however it was a risky move that wouldn’t necessarily workfor every brand or company.White paper | September 2012 | Can You Survive? | 9
  11. 11. Insights on how to survive and thrive in chaosThere are some common threads with how companiesaddress chaos. Consider the following when facing chaos:Remain focused on your brand positioning and core valuesDo not alter the brand’s core market position in an attemptto stay relevant. Ford reacquainted itself with what it stoodfor. This created focus and accountability within theorganization. Everyone worked towards a common goal.Become a solution to a problemIn the early 1980s, seven people died after taking extra-strength Tylenol that had been laced with cyanide. Thecompany pulled the product off the shelves across the U.S.and developed strict safety measures moving forward.Johnson & Johnsons response to the tampered Tylenol iswidely cited as the gold standard response to a crisis. Itwould ultimately introduce three-way, tamper-proof pillbottles. J&J set the stage for proper safety standards thatare actively practiced to this day.Determine how to remain relevant after the crisisThe H1N1 scare created a prime opportunity for hand-sanitizer brand Purell to take advantage of a desperateneed state. Not only did the product provide reassuranceby allowing consumers to protect themselves, it hasbecome an everyday-use item with portable versions of theproduct made easily available – hand-sanitizer dispensersare now seen in most malls, doctor’s offices and hospitals.White paper | September 2012 | Can You Survive? | 10
  12. 12. Be timely with your message and face the crisisAcknowledge the seriousness of the problem in a timelyfashion. Maple Leaf Foods had severe issues to deal with asa result of its contaminated food. Its approach enabledMLF to maintain brand loyalty and market share, and tofocus on making better, safer products for the Canadianmarket.Give customers extra incentiveWhether it is saving money through multipacks, usingcoupons, or receiving extra points with a loyalty rewardscard, consumers want more. In January 2009, Hyundaiannounced a program called Hyundai Assurance afterexperiencing a 39% drop in salesduring the height of the economicrecession. The program was set up tooffer customers added protection.Should they lose their job in the firstyear of ownership, Hyundai wouldhelp by making payments and givingcustomers the opportunity to buyback their vehicle. This programincreased sales for Hyundai, doublingmarket share from 2.4% to 4.1%. Itwas a great plan to revive sales as itresonated with customers who weredealing with a very real problem.White paper | September 2012 | Can You Survive? | 11
  13. 13. Focus on the long termAlthough it is a common reaction to generate short-termsales during a chaotic period, a portion of your marketingbudget should be retained for long-term brand buildingactivities. If not, when the chaos ends, such as therecession, organizations will find they own irrelevant,confused brands that have been abandoned by their corecustomers.Streamline portfolio but continue to innovateDuring the recession, it was commonly known that it wouldtake 12 to 18 months before the economy starts to recover.Look at your current product portfolio to see if you canmake room for new, relevant product innovations as didFord. Plan for innovation now to be ready for yourcustomers when the chaos has subsided.ConclusionAs we have learned, some brands can thrive as a result ofchaos. Whatever kind of chaos it may be, either market,social or environmental, it is important for a brand toremain true to its positioning, and for marketers to react ina timely fashion. It is not the time to confuse the consumerwith mixed messages, or to launch irrelevant products. Abrand needs to take the journey with the consumer, providesolutions and stay true to its core values.White paper | September 2012 | Can You Survive? | 12
  14. 14. Reference materialsThe BrandGymBlog — Post recession branding: What next? Food Inspection Agency — Meat recall could cost millions more: Maple Leaf Financial Reporting – Fiscal Year 2008 in Review News Center Huffington Post — Dominos new recipe helps pizzamaker more than double its profits Magazine — Maple Leaf Foods: All the rightmoves — Cruise sector “will learn” from CostaConcordia disaster Health Agency of Canada paper | September 2012 | Can You Survive? | 13
  15. 15. Report on Business, Globe and Mail — Concordia operatorrejects blame in cruise ship disaster — Abercrombie & Fitch reports fourth quarter andfiscal year 2011 results Telegraph — Costa Concordia: “insulting” cruise offer tosurvivors Toronto Star — U.S. lawsuits target Carnival in Italy’sCosta Concordia cruise crash States Securities and Exchange Commission — Form10-Q Carnival Corporation Today Travel — Costa Concordia update paper | September 2012 | Can You Survive? | 14
  16. 16. For more information, contact:Jean-Pierre Lacroix, PresidentShikatani Lacroix387 Richmond Street EastToronto, OntarioM5A 1P6Telephone: 416-367-1999Email: jplacroix@sld.comWhite paper | September 2012 | Can You Survive? | 15