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Crisis brand management

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This article was written as an assignment for Com433 Corporate Communications Management at Nanyang Technological University by Alex Zhang, Jolene Yeo, Jeyaseelan J, and Amin Ruslan.

This article was written as an assignment for Com433 Corporate Communications Management at Nanyang Technological University by Alex Zhang, Jolene Yeo, Jeyaseelan J, and Amin Ruslan.

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Crisis brand management Crisis brand management Document Transcript

  • C r i s i s B r a n d M a n a g e m e n t Understanding and communicating with local consumers in China during crises faced by foreign companies Introduction When problems arise and things go south, companies need the quickest and most effective strategy to bail themselves out of the mess and fix the situation. This is especially difficult for firms that are operating in the Greater Eastern Region but are fundamentally based in Euro-centric locations. Thus, adaptations need to be made as usual approaches taken by Western public relations practitioners may not work as well. 1
  • Understanding and communicating with local consumers in China during crises faced by foreign companies In 2008, Fonterra Cooperative Group Ltd. — one of New Zealand's largest companies — was implicated in China’s biggest food safety infringement incident to date. The issue sprouted from the deliberate contamination of milk with outrageous levels of melamine in an attempt to falsify its inherent nutrient levels. This was an unprecedented account of a Western firm scandalised by its action regarding China’s domestic food products (Wishnick, 2008). Although the final construct was more of one that swayed consumption behaviour towards foreign-favoured products, the damage was done and it became a latent issue (Long, Crandall & Parnell, 2010). Thereafter, it was discovered that there was bacteria in some of Fonterra’s exported products to China that could cause botulism, a possible fatal illness, in 2013. This incident can be considered to be affected by one that happened early, also known as the spillover effect (Roehm & Tybout, 2006). 2
  • interaction with their physical environment and knowledge to a set of beliefs (Lillis & Tian, 2010). These beliefs act as a cornerstone for purchasing and consumption behaviour, and the very same beliefs can be challenged in times of crisis. China offers a smorgasbord of o p p o r t u n i t i e s f o r We s t e r n conglomerates but its unique cultural landscape remains difficult to comprehend and decipher, especially when brands are involved in scandals. For public relations practitioners, the identification of local culture, especially consumer behaviour, is highly critical. The understanding of such beliefs will provide a basic and fundamental framework when handling a brand management crisis in China. 3 Since the opening of the Chinese market in the early 1970s after economic reforms by Deng Xiao Ping, it has attracted the attention of several multi-national companies from the West. This propagated the Chinese to achieve a higher gross domestic product (GDP) and purchasing power, effectively changing the dynamics of Chinese society. With this new change, the cultural values of modern Chinese society rapidly evolved with greater emphasis on consumerism (Fleisher et al, 2010). This new sense of achievement leads the Chinese to demand more; they want goods with higher quality and better safety standards (Ortega et al, 2012). Culture can be seen as a projection of various integrated values that appear as consumer behaviour, and people of a specific culture may code their __________ Understanding and communicating with local consumers in China during crises faced by foreign companies
  • Chinese consumers are highly aware of food safety but possess little understanding of what constitutes safe food. They are also hampered in their ability to identify relevant food labels. Despite these limitations, not only do Chinese consumers remain unrelenting in their demands for food safety, quality, nutrition and taste, they are also willing to pay comparatively higher price for them (Liu et al, 2013). Interestingly, the choice of food is linked more to the psychological interpretation of product properties rather than the physical properties of products per se (Yueng & Morris, 2001). Consumers tend to make purchase decisions based on self-perceived perspectives of products. Factors such as one’s socio-economic status and level of education may cause differences in an individual’s perception of products, thus affecting purchase decisions (De Jong et al, 2004). The higher the perceived risk of a product, the lower the confidence the consumer has for it. If perceived risk goes beyond the limits of tolerance, the consumer will adopt methods to reduce this risk (Van Wezemael et al, 2010). The primary way Chinese consumers reduce risk is information seeking, both formal from mainstream and informal by word of mouth (Zhao et al, 2008). The media is thus able to influence these consumers. Both the former and latter are stakeholders though they hold different degrees of importance and thus require differential treatment (Mitchell, Agle & Wood, 1997). 4 Food and the Chinese consumer Understanding and communicating with local consumers in China during crises faced by foreign companies
  • hierarchical control over content and coverage in mainstream media, the presence of this significant attribute will determine the ability to handle information flow in a brand crisis situation. However, not all stakeholders with “Guanxi” are equally powerful or possess legitimate claims. For example, news agencies may possess less power as compared with the fire department due to “Guanxi”. An individual with “Guanxi” may even be of higher power than a governmental department. It is important then that judicious analyses be applied when deter mining the importance of individual stakeholders (Su, Mitchell & Sirgy, 2007). After the stakeholders are identified, the nature of the crisis trigger is next on the agenda. 5 Stakeholder identification Understanding and communicating with local consumers in China during crises faced by foreign companies Before embarking on the arduous journey to tackle a brand reputation crisis, it is imperative for the stakeholders within to be identified clearly (Gao, 2009). Public relations practitioners need to know what are the powers and demands of the people they are dealing with before assigning apposite communication methods. This process will largely be guided by the stakeholder salience model (Mitchell, Agle & Wood, 1997). The key detail that makes the Chinese stakeholder different is the existence of “Guanxi”. “Guanxi”, which means intrapersonal connections, is an important concept in brand management in China. With the ____ POWER URGENCY LEGITIMACY DORMANT DEMANDING DISCRETIONARY DANGEROUS DOMINANT DEPENDENT DEFINITIVE Stakeholder Salience Model
  • The most basic question that needs to be answered is whether the information that provoked the crisis has its foundation in facts that are objectively true. If the accusation is undeniably true, measures need to be taken to stabilse the situation to prevent further damage to the company’s brand reputation. However, even if the information is false and originated from a dubious source, repetition may cause audience to believe that it is true (Roggeveen & Johar, 2002). In contrast, if consumers identify closely with the brand, they are likely to question the validity of the transgression in order to protect their positive connections to the brand (Einwiller & Kamins. 2008). As information spreads rapidly through Chinese new media platforms, verification of the truth is difficult (Ma, 2008). The next question is: what is the severity is the situation? This calls for a complete comprehension and evaluation of the situation, and its condition and ramifications must be quantifiable. Chinese consumers typically display trust towards foreign brands (Wishnick, 2008). Thus, when Western brands are involved in brand crises, the damage to their reputations is significantly higher (Rhee & Valdez, 2009). Also, it is necessary to understand the spectrum of ______ 6 The questions Understanding and communicating with local consumers in China during crises faced by foreign companies perspectives. The company's brand management practitioners may view the incident that triggered a crisis to be unsubstantial. Yet, it could be easily magnified by cultural and contextual backgrounds in China. While the Chinese consumer is attracted to Western products, he can be dismissive when the infringement on quality and safety is publicised (Wang & Chen, 2004). The last question deals directly with the determination of a reputation restoration and how much the consumers identify with the brand. This question can be answered using longitudinal tracking of consumer attitudes and brand loyalty. Brand loyalty can be seen as the best safeguard for a brand crisis. Consumers that identify with a certain brand will generally display a greater degree of loyalty to their brand as they believe the brand holds similar values as they do (Fournier, 1998). On an emotional level, they thus feel a deeper connection with the brand. Conversely, consumers who do not identify with the brand will give less attention to the examination of the trustworthiness of an accusation, and may choose to believe information based on face value. Furthermore, they are more likely to associate problems with other aspects of the company’s business and operations, and propagate the damage beyond a sole breakthrough point (Ahluwalia, Burnkrant & Unnava, 2000).
  • 7 Understanding and communicating with local consumers in China during crises faced by foreign companies Is the accusation true? Is the crisis severe? Do customers identify with the brand? Reduce perceptions of: Recommended communication responses •Brand responsibility •Brand intentionality •Repeat occurrence •Accusation as reflective of brand •Brand responsibility •Brand intentionality •Repeat occurrence •Accusation as reflective of brand •Accusation truth •Brand responsibility •Accusation as reflective of brand •Accusation truth •Accusation truth •Come clean •Polish the halo •Not just me •Inoculation •Come clean •Yes, but... •Not just me •Come clean •Yes, but... •Polish the halo •Rebuttal •Villifying the accuser •Inoculation •No, not I •Rebuttal •Villifying the accuser •Polish the halo Yes No Yes No Yes No Yes No Yes No Crisis Communication Network (Johar, Birk & Einwiller, 2010)
  • Different situations demand different approaches. In China, an integrated approach that combines a full apology with rectification is generally viewed as more appropriate for Western companies to wield in a crisis. In a crisis, if the brand is indeed responsible for the problem and the accusations made are true, the only practical choice is to apologise for it (Johar, Birk & Einwiller, 2010). By expressing sympathy and regret and accepting responsibility, there is a likelihood that the brand can be seen as being trustworthy and upright (Gillespie & Dietz, 2009). This is especially important in a society that is constructed by Confucius values where reliable behaviour includes accountability for mistakes (Hwang, 2013). In addition, attempts to cover failure is futile in a society where there is a distinct presence of dynamic information flow. However, there may be legal implications when blame is accepted, and these implications would require companies to have a capable legal team well versed in Chinese judiciary practices and regulations. The process of accepting blame is different from that of Western society as the Chinese language is strongly entrenched in syntax. Words can have multiple meanings and when expressed in different tonal projections, may incur different interpretations (McCawley, 2011). Yet, despite all these discrepancies, transparency remains highly valued in crisis communication in China. It is advised to have the situation assessed accurately to avoid inaccuracies and to also have a summarised version of the event. The information communicated must be free of jargons and easy to understand. It is best for all the negative press to be out at once to prevent cumulative damage via trickling information that serves only to remind the public of the harm that was done. 8 Crisis communication strategies Understanding and communicating with local consumers in China during crises faced by foreign companies
  • The key difficulty of brand crisis management in a setting like China for western companies lies in the difference in culture and society. This difference continues to be a hindrance through the process. However, with deeper understanding of the Chinese consumer and better knowledge of Chinese culture, appropriate strategies can be implemented to elucidate the situation, manage the crisis and acquire the support of the public. 9 Conclusion Understanding and communicating with local consumers in China during crises faced by foreign companies Alex Zhang Jolene Yeo Jeyaseelan J Amin Ruslan Done by
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