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Penny pinching - your reputation isn’t worth it

Crises bring out the best and worst in people. This is especially true among businesses during the coronavirus crisis. Take the example of Adidas. It is one of the world’s biggest sporting brands and according to https://customer.guru/net-promoter-score/adidas had a Net Promoter Score of 28 in 2020. This isn’t far off the NPS average of 30 for most brands. However in the middle of the coronavirus someone at Adidas’ head office worked out that they could skip their rental payments in Germany for its retail outlets. Apparently this was legal as Germany had a Covid 19 economic relief package which allowed tenants to suspend rents between April and June. The measure was designed to help businesses fighting for financial survival rather than behemoths like Adidas that made close to €2 billion in net profit last year. There was a very quick backlash. A German member of Parliament filmed himself setting an Adidas shirt on fire in a trashcan. The vice president of the European Parliament and Germany’s finance minister denounced Adidas as being shabby and irritating. It wasn’t the only business suspending its rent payments. H&M also did so. However, Adidas was the most financially successful company and this is what gave it a black mark. The brand has definitely taken a hit.

Many of us won’t have a great deal of sympathy for the landlords perhaps believing that they should be willing to accept a rental holiday from the likes of Adidas. However, most of the owners of the large retail parks are up to their neck in debt and many are receiving only a quarter of the rents they had banked on. It won’t be long before a number of them are lined up in the bankruptcy courts.

There have been plenty of other examples of big business bad practice. The way Britannia Hotels sacked some of their staff was appalling but not surprising. The group already had the distinction of being one of the worst hotel chains in the UK in customer satisfaction surveys. Sports Direct has earned a brusque reputation encouraged by its oftimes insensitive boss, Mike Ashley. When the UK shut down its retail businesses, Sports Direct stayed open claiming its shell suits and hoodies were exempt, being essential goods.

It beggars belief that these companies think they can get away with penny-pinching actions. If only they could put their brainpower into more positive and customer appealing tactics. Many businesses have done just that. The luxury goods group, LVMH, shifted production from perfume to hand sanitisers. Bosch, the German engineering group developed a new high-speed test for coronavirus; Vauxhall are printing 3-D parts for ventilators and Dyson are assembling them. Taylor Wimpey, the house builder, is making advance payments to subcontractors for work to be completed in the future. BAT, one of the biggest propagators of lung cancer in the world, is trying to win some plaudits by developing a vaccine against Covid 19 by growing an antigen in its tobacco plants.

A long time ago, Theodore Levitt, a marketing guru, talked about marketing myopia – the short sightedness of many companies. His reference was aimed at companies not able to see potential in their declining markets. The same myopia exists today within Adidas, Britannia Hotels and Sports Direct. They haven’t recognised that this crisis is not just about financial survival, it is also about ensuring they come out of it with their reputations intact.

1 Comment

Apr 15, 2020

One of the amazing things about corporate reputation is how many companies take it for granted, or even believe they are "entitled" to a good reputation due to their position in the marketplace and/or the quality of their products or services. Investment in reputational PR is minimal compared to product/service advertising, or other "good-news" PR activity.

This arrogant posture only is punctured when there is a real crisis, such as those you mention, or an oil-spill, abusive customer action filmed by witnesses, or the CEO is indicted.

At that point, the company goes into crisis mode as it tries to assess the best way to respond. The PR people say come clean, admit the mistake and offer to make amends.…

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