10. Reputation as an Intangible Asset

     By now, you see that you’re not marketing just a product—you’re marketing an image. You need to build an image to market your product, but you also need to protect the image of both your product and your company.

In a large part, this involves two important concepts:

1. Stakeholder relations management (SRM)

2. Corporate social responsibility (CSR)

     (If your business is not a corporation, the lesser-used term business social responsibility would apply. We still use the abbreviation CSR.)

     Let’s start off with some simple exercises in reputation management. You already know that your business should have a reputation for a reliable product and dependable service after the sale.

     What about threats that your company’s reputation may face? How do you manage your business so that the threats are less likely to arise?

     Here you’ll learn that SRM and CSR are often inseparable. You’ll learn to use both SRM and CSR as a team to build your company’s reputation.
Let’s take some case studies.

Starbucks and reputation management

1. Starbucks coffee beans are grown in third-world countries.

2. Political instability is often found in third-world countries.

3. Poverty and worker abuse is often found in third-world countries.

4. Jungle areas often have to be cleared for growing coffee plants.

5. Coffee plants are grown along mountainsides.

Question: What events may threaten Starbucks’s reputation? How should they keep these events from taking place?

1. Since Starbucks is the world’s best-known marketer of coffee, they’re an inviting target for any labor activist group or environmental group with a gripe against them.

2. Most coffee consumers know that coffee bean growing and harvesting is a highly labor intensive business. Laborer’s are usually poor, overworked, and are housed under substandard conditions. It wouldn’t be much trouble to link Starbucks to labor abuse.

3. Coffee growing is often associated with rainforest destruction and soil erosion. It wouldn’t be much trouble to link Starbucks to rainforest depletion, soil erosion and global warming.

Question: If you were the CEO of Starbucks, what would you do to keep labor activists and environmental activists from questioning your reputation?

Here’s what Starbucks does:

1. Starbucks is a generous contributor to several activist groups.

2. They regularly meet with leaders of these groups to discuss problems that directly or indirectly touch upon Starbucks’ operations in those areas.

3. They initiated and maintain programs of education, poverty relief, and environmental protection in the countries where Starbucks operates.

4. Starbucks publishes an annual CSR report on Starbuck’s activities. Their CSR report is published on recycled paper but is also available on the (paperless) Internet.

     As far as we have been able to determine, Starbucks has never been accused of labor or environmental abuse. Other coffee marketers have been accused of both.

     As it pertains to this lesson, we’ve already discussed SRM and CSR in Lesson 1 (Fit). We’ll further discuss them in other lessons (Supply Chain Management) and (Managing Outside Pressure).

     In this part of the lesson, we’ll go over a couple of case studies in crisis management. Put on your thinking caps. You’ll be expected to make suggestions as to how a business can manage its reputation when things go wrong.

How do you handle negative publicity? Here are two case studies:

Case Study #1: The Johnson & Johnson case

     Johnson & Johnson is a maker of household medicines, baby care products such as baby powder, and other care products. Their best-known product is Tylenol, a headache reliever.

In the Chicago area in September 1984, six people died after taking Tylenol tablets.

Investigators quickly determined how the poisonings had occurred. It had been done at a store in the Chicago area—nowhere else. Of course, it had been done after it had left the Johnson & Johnson factory. Quite clearly, Johnson & Johnson was not at fault.

     Over the next few weeks, sales of Tylenol dropped by more than half and were continuing to decline. If something wasn’t done soon, Tylenol would become so unpopular that no one would buy it. Johnson & Johnson’s most successful product would have to be dropped from their inventory.

     Question: If you were Johnson & Johnson, what would YOU do?

Here’s what Johnson & Johnson did:

     The chief executive officer (CEO) of Johnson & Johnson appeared in a series of high-profile public service announcements. He apologized but then explained how it all had happened. Without sounding like an excuse maker, he made it clear that Tylenol was safe.

Not leaving it at that, he said that...

1. Johnson & Johnson would recall and destroy all containers of Tylenol,

2. People who had already bought Tylenol could take it to the store for a full refund, and

3. Johnson & Johnson had designed a tamper-proof bottle. From then on, all Johnson & Johnson medicines would be marketed in tamper-proof bottles.

Case Study #2: Levi Strauss and child labor in Bangladesh

     During the early 1990’s, Levi Strauss formulated a code of conduct for its source suppliers. One of the provisions of the code was that school-age children would not be hired in source factories.

     Less than a year after the code was made public, labor activists revealed that a Levi Strauss source factory in Bangladesh was using children as factory workers.

     Levi Strauss faced a dilemma. The children should be in school, but they were important sources of income for poor families. If they didn’t go to school, the cycle of poverty would never be broken. On the other hand, if Levi Strauss had the children fired, they still wouldn’t go to school. They would go into such dangerous occupations as rag picking and child prostitution. If they didn’t have the children fired, the Levi Strauss’s reputation and business would be harmed.

Question: What should Levi Strauss have done?

Here’s what Levi Strauss did:

1. They instructed their source suppliers to stop using child labor,

2. They instructed their source suppliers to keep the present child laborers on the payroll even though the children were no longer working,

3. Levi Strauss would continue to pay the children at the same rate they had been paid previously, and

4. Levi Strauss built and provisioned a school for the children who had been working at the source suppliers’ factories.

     Here are the results of Levi Strauss’s response:

1. When other foreign-owned companies in Bangladesh learned of Levi Strauss’s actions, they took the same steps Levi Strauss had taken.

2. When the Bangladesh government learned of what Levi Strauss and other foreign-owned companies were doing, they started their own program to get children out of the factories and into the schools.

3. The end is not yet in sight, but Bangladesh is making progress. They’re taking steps to end the exploitation of children, improve educational opportunities, and break the cycle of poverty.

Now it’s your turn.

     You and your team must design a reputation management strategy for your business.