Category Archives: Sales news in the headlines

Sears: Bankruptcy through Management by Magazine

Sears, the company that gave the world Kenmore appliances, Craftsman tools, Sears houses, and catalog retailing “limped into bankruptcy” on October 15, according to The Wall Street Journal (Sears, Once Retail Colossus, Enters Painful New Era).  As one who grew up near two Sears anchor stores, this is astonishing. Never mind that for years, “the handwriting was on the wall.” It wasn’t always that way. Sears was the first major retail chain to build parking lots for cars and to offer store hours on Sundays. Talk about innovation!

The bankruptcy will affect nearly 70,000 Sears employees, and threatens the financial security of 100,000 Sears pensioners. “Employees are our greatest asset!” – until they’re not. In 1925, when Sears opened its first store in Chicago, the “limped into bankruptcy” part of their story was unimaginable. I wonder how Amazon’s epitaph will read, and when.

Over the next year, there will be copious Sears-related analysis. Stern-faced investment analysts will appear on TV. Wizened B-School faculty will lecture classes about the company’s missteps. And armchair quarterbacks like me will proffer reasons for the company’s demise, and post them online.

“In the end, Sears just didn’t . . .”  Almost any crucial corporate outcome or result you’d care to include at the end of that sentence will ring true. Management flew an already-troubled company into the ground in every sense of the word.  “It’s an American tragedy and it need not have happened, said Arthur Martinez, Sears CEO from 1995 to 2000. Amen.

As I read about the various Hail Mary’s Sears tried to save itself, I detected a strong aroma of Management by Magazine in the C-Suite. I saw how Sears executives flung themselves onto the life-ring of The Next Great Management Fix, and along the way, how they strangled the company beyond hope of resuscitation.  “Sears said in court papers if faces ‘catastrophic consequences’ if it can’t repair its unraveling supply chain. Some 200 vendors have stopped shipping goods to its stores in the past two weeks, and it faces potential liens if it can’t pay logistics companies owed millions of dollars over the coming weeks,” according to The Wall Street Journal.

Sears CEO Eddie Lampert resigned his position on October 15th. Here’s what he tried along the way. Below each, I’ve included counterpoints that by now, I’m sure Lampert wishes he read:

1. Cut costs, increase profits!

Analysis: the right strategy, done the wrong way.

“[CEO] Eddie [Lampert] inherited a difficult situation, but he made the operating performance worse,” said Steven Dennis, a former Sears executive who left the company in 2003. “He cut costs in places that hurt the company and didn’t reinvest in the stores.” Mr. Lampert’s strategy included cutting advertising spending. Predictably, goods wouldn’t sell, former executives told The Wall Street Journal. He also limited merchandise purchases to the point where stores routinely had empty shelves and outdated products.

Counterpoint: A Better Way to Cut Costs.

 

2. Create transformational change!

Analysis: the right strategy, done the wrong way.

“We chose transformational rather than traditional change,” Lampert said. “Some efforts gained traction while others did not, and there were external factors that have severely hurt the company.”

Counterpoint: Transformational and Incremental Change: A False Dichotomy?

 

3. Diversify, or die!

Analysis: the wrong strategy.

“Industry executives say Sears planted the seeds of its demise nearly 40 years ago when it diversified from socks into stocks with the 1981 purchases of the Dean Witter Reynolds brokerage firm and real estate firm Coldwell Banker,” according to The Wall Street Journal. “That was their first mistake,” said Allen Questrom, a retired retail executive who ran JC Penney. “They took their eye off the ball.”

Counterpoint: To Diversify or Not to Diversify

 

4.  Fail fast!  “Mr. Lampert would green-light a project, then quickly shut it down if returns didn’t materialize. That applied to investments other executives saw as necessary, such as store upgrades: Some stores had holes in the floors, broken fixtures and burnt-out lights.”

Analysis: the wrong strategy.

Counter-point: Why Fail Fast, Fail Often May Be the Stupidest Business Mantra of All Time. 

 

Lampert ran Sears via teleconference from his home in Florida. He visited the company’s Illinois headquarters “once or twice a year” according to former Sears executives. For those who believe senior executives lead by demonstrating their commitment to the company, it’s hard to miss Lampert’s message: “we’re toast.”

Nike and Kaepernick: Oh Baby, Show Me The Money

I’ve often wondered why companies hammer sharp social stakes into the ground. Ben and Jerry’s. Hobby Lobby. Chick-fil-a. Lately, Levi’s – my jeans brand – has advocated for gun restrictions. Gasp!

Ardently promoting a social agenda is antithetical to what I’ve learned about marketing. Don’t alienate people with disposable income or investment capital. Better yet, don’t alienate anyone! Just sell. As one sales rep told me, “if there was a society for people with six toes, I’d join it to mine for prospects.” A man after my own heart.

In over 40 years as a marketeer, I’ve yet to work with an organization that has purposefully promoted social values to its prospects and customers. It’s easy to understand the rationale for remaining scrupulously agnostic: when a customer intends to buy, make it easy for them. Don’t screw things up by injecting politics and personal morals into the mix. Buyers and sellers, let’s just coexist as one big, happy egalitarian value chain. Sunshine, puppy dogs, and daisies. Sometimes, when business is left alone, things do work out for the best for society. Sigh . . .

Back to reality. Social values do influence a vendor’s marketing actions, and when that happens, it can be alarming. Bakeries that turn away gay customers. Restaurants that refuse to serve unpopular political appointees. And Nike featuring Colin Kaepernick in its ads. These events shake our assumptions to the core. How does this happen? Enterprises that eschew revenue uber alle? Criminy! What’s next? Selling without trust? Maybe things are changing faster than ever.

For marketers, the main story isn’t whether Nike endorses Kaepernick’s free speech rights. This is about how to use risk as a competitive weapon. Take notes, because succeed or fail, we’re about to benefit from a powerful lesson. Although Kaepernick is a polarizing personality who doesn’t play for an NFL team, he’s among the most recognizable sports personalities on the planet. For marketers, that alone makes him tantalizing to incorporate into a campaign. Not surprisingly, Nike was not the only company to find Kaepernick attractive for its advertising. Earlier this year, Puma and Adidas dabbled with the idea. But Nike jumped on the opportunity. A deft move. Nike has never been a company that looks a gift horse in the mouth. And it showed up when Kaepernick became the centerpiece of a mounting protest that had both controversy and appeal.

Nike’s choice to use Kaepernick speaks volumes about their brand promise, the customers they want to reach, and their strategy for revenue growth. To use a trite sports metaphor, it’s called “skate to where the puck will be.”

And where the puck will be is spelled m-i-l-l-e-n-n-i-a-l. By 2019, Millennials, Americans between 22 and 37 years old, are projected to become the largest US demographic, surpassing my generation, baby boomers. And – fun fact– 44% of Millennials are non-white. Post-Millennial, the non-white ratio increases to 48% and post-post Millennial (kids who are currently under 10 years old), it’s 50%. You don’t have to be a math whiz to extrapolate the trendline. And you don’t need to be a social scientist to project which brand attributes future buyers will value. If I were in Nike’s executive suite, I’d bet on Kaepernick, too. And believe me, I’m no willy-nilly risk taker.

Millennials are “very different than earlier generations,” according to demographer William Frey, author of Diversity Explosion: How New Racial Demographics are Remaking America.  As sports columnist Sally Jenkins wrote in The Washington Post (Nike Knows What the Future Looks Like, September 5, 2018), “They are more prone to interracial marrying, friendlier to immigration and often want their consumption to have a social component. If Nike is willing to offend its graying buyers in order to court these multiple generations with a racial justice campaign, ‘it’s a good bet that a lot of younger people will be attracted and go along with that,’ Frey said.” Yepper.  56% of Millennials said they found the Kaepernick’s anthem-kneeling protest appropriate. Someone needs to figure out how to parlay that into revenue . . .

Nike is betting that younger, active buyers will also continue to buy lots of athletic shoes and athletic wear, and with Kaepernick tied to the brand, they have given them greater reason to identify with Nike. And of course, it doesn’t hurt that Nike’s NFL contract will propel that distinctive swoosh logo onto millions of viewing screens this fall.  I picture commissioner Roger Goodell slamming his head against the wall as I type this. Woulda, coulda, shoulda . . . I think you did this to yourself, pal.

With Kaepernick, Nike has alienated older buyers and Republicans, who overwhelmingly find his anthem protests objectionable (only 10% of Republicans approved, according to a Wall Street Journal article, Nike Faces Kaepernick Backlash). No doubt many of them have already torched their shoes at the end of their driveways. But Nike has clearly set its sights on high-use consumers: Millennials who grind through athletic footwear like popcorn, by skateboarding, running marathons, or walking to an Uber pickup spot after the concert downtown. They’re less interested in appealing to my fellow boomers who spring for a shiny pair of white sneakers to wear on the cruise, or to walk the ultra-smooth sanitized floors at the mall. Those shoes will look pristine forever. Yawn.

Nike, which coined, Just do it, knows its customers desire more than shoes and apparel. They want inspiration, which is already embedded in the brand. And the company’s big hairy audacious bet is that a sizable chunk of the world’s population will align with Colin Kaepernick for his resolve to take an unpopular, but principled stance. That’s an American theme, shared globally. The bet carries risk, but it’s an intelligent choice. I predict that Nike will weather the backlash and reap financial rewards. Not every company has the backbone, brand equity and financial capacity to sustain the problems, and I have no doubt the depth of Nike’s risk capacity played a role in the company’s decision concerning Kaepernick. Assuming Nike wins, their campaign will inform marketers that risk isn’t something to tremble about. When used strategically with proper intelligence, it can become a powerful competitive weapon.

Announcing 16 New Inductees to the Sales Ethics Hall of Shame

A business scam begins with collision of circumstances. A scheming opportunist crosses paths with a person prone to deception. The extension of trust sparks ignition. As Philip Broughton wrote in his book, Mastering the Art of the Sale, “the moment of maximum trust and cooperation is when the virus of dishonesty takes hold.”

A chain reaction follows where value flows from prey to predator. And the victims are not just buyers, but just as often employees, investors, and other stakeholders. As you will see in this article, some victims recover, but for others, the damage can be permanent.

Scammers have low barriers to entry. They need to concoct a scheme and have immunity to shame. Then, they must stack information to their advantage – a skill humans cultivate early in life. Finally, they need access to vulnerable people. Voila! A scam is born. Notably, investment capital isn’t always required.

Low barriers and easy access to victims are why there is a bottomless well of candidates for the Annual Sales Ethics Hall of Shame. And lately, defanged consumer protections have added to the community. Don’t get me started.

Companies inducted into The Hall satisfy three criteria:

  1. The primary purpose of the enterprise cannot be to sell an illegal product or service, like crystal meth or human trafficking.
  2. More than one employee must be involved in unethical activity. Scams involving a single, rogue employee are not eligible.
  3. The deceit must be systemic.

In 2017, a new-old revelation emerged from the muck: a network of executives and investors enriched themselves by exploiting women. They caused or allowed unspeakable human suffering. In particular, three “superstar rainmakers,” Harvey Weinstein (The Weinstein Companies), Bill O’Reilly (Fox News), and Paul Parilla (USA Gymnastics) – sat protected in their offices drawing outsize paychecks, smugly confident their behavior was unassailable for as long as they kept their cash machines humming. They were right, until they were outed by their victims. Business ethics aren’t available in a more revolting variety.

As these transgressions were taking place, Marketing and PR departments at these companies were cranking hard to keep the sunshine pumps running full bore. Their message to consumers and investors: Everything’s rosy. Profits are up! Just keep buying! Do you think Fox’s CFO didn’t maintain a General Ledger account titled Hush Payments to Victims of Bill O’Reilly’s Predations? As Fox stroked checks to victims, the CFO, the Assistant CFO, and the Internal Auditor all knew the annual amount down to the penny. So did the General Counsel, who wrote the contracts enforcing the victims’ silence. It takes a village to contain news that might harm revenue. As taxpayers, we all paid for O’Reilly’s shenanigans. Yep – I’d call that a scam.

The 16 inductees into the Sales Ethics Hall of Shame for 2017:

  1. The Weinstein Companies: “My motto is keep the peace.”

 

    1. Fox News: The company’s accountants paid victims $13 million to settle harassment claims.
    2. USA Gymnastics: Executives knew about Dr. Nassar’s sexual abuses weeks before they reported it.

 

  1. Bronze Star LLC: Sell now, deliver . . . never. “After Hurricane Maria damaged tens of thousands of homes in Puerto Rico, a newly created Florida company won more than $30 million in federal contracts to provide emergency tarps and plastic sheeting for repairs. Bronze Star LLC never delivered those urgently needed supplies.” (Business Insider)

 

  1. Mitsubishi Materials: Fake numbers. “The company revealed [in 2017] that workers had doctored quality data to make it appear that such products as rubber gaskets and copper products met customer standards when they didn’t.” (The Wall Street Journal).

 

  1. TIAA: AKA Transparency Isn’t Always Available. “TIAA says its 855 financial advisors and consultants operate in a commission- and conflict-free environment. But ex-employees counter that it pays bonuses when sales people steer clients toward more expensive proprietary products and services.” (Barrons)

TIAA spokesman Chad Peterson described its operations as ‘highly transparent and ethical.’ But 10 former employees told the New York Times ‘that TIAA managers doled out ambitious sales quotas and instructed reps to stoke clients’ fears, including those of a retirement shortfall.’” (New York Times)

 

  1. WalMart: Timely applies to supply chains, not consumer disclosures. Wal-Mart Stores was sued [in 2017] on behalf of consumers who said the world’s largest retailer sold products falsely labeled ‘100 % Egyptian Cotton’ from an Indian textile company for many years after it first became suspicious of their origin. Wal-Mart questioned the fiber content of Welspun India Ltd’s products as early as 2008, but waited until [2017] to halt sales of its mislabeled Egyptian cotton bed linens.” (Reuters)

 

  1. Zenefits: No license? No problem! In 2017, “Zenefits confessed that some of its insurance salespeople were selling products illegally, without legitimate state licenses. [Zenefits CEO] Parker Conrad had developed a software tool that allowed insurance salespeople to cheat on an online training course that’s required to receive state certification.” (Forbes)

 

  1. TD Bank: Plagiarizing the Wells Fargo sales fraud playbook. TD Bank employees across Canada “admit they have broken the law at their customers’ expense in a desperate bid to meet sales targets and keep their jobs. Hundreds of current and former TD Bank Group employees wrote to Go Public describing a pressure cooker environment they say is ‘poisoned,’ ‘stress inducing,’ ‘insane’ and has ‘zero focus on ethics.’ Some employees admitted they broke the law, claiming they were desperate to earn points towards sales goals they have to reach every three months or risk being fired.” (CBC)

 

  1. Tanium: A software demo using another customer’s live data? Sure! Why not? “For years, cybersecurity startup Tanium Inc. pitched its software by showing it working in the network of a hospital it said was a client. That and other efforts helped the company grow quickly, notching a valuation of $3.5 billion and a big investment from Andreessen Horowitz, one of Silicon Valley’s most prominent venture firms. But Tanium never had permission to present the demos, the hospital said, meaning a company selling security actually was giving outsiders an unauthorized look at information from inside its customer’s system . . .

To drive sales, co-founder and Chief Executive Orion Hindawi designed a presentation that he said showed his company’s software running inside a client. The system in the demo belonged to El Camino Hospital, a nonprofit community hospital based in Santa Clara County, Calif. He and his staff gave the presentation hundreds of times, from at least as early as 2012 through mid-2015, according to people familiar with the matter and three demonstration videos posted online by Tanium and its resellers. ‘The hospital did not authorize desktop management data or other information to be used in any product demonstration and was not previously aware of these demonstrations or videos,’ El Camino Hospital said in a response to inquiries by The Wall Street Journal.” (Wall Street Journal)

 

  1. SunRun, Inc., and Solar City: The big number they report is the CBC – Contracts before Cancellations!

“The SEC is investigating [SunRun and Solar City] because it believes the companies are not being as transparent and forthright as they need to be in disclosing their rates of cancellations, i.e., how many buyers rescind their agreements prior to installation. The cancellation rate affects the value of the shares of the solar companies because that cancellation rate is an indication of growth potential and whether the revenue stream is subject to further fluctuations.

At SolarCity, cancellations reached 50% in 2016, just before Tesla’s acquisition.  Sunrun had a cancellation rate of 40%. Some solar-energy companies have recently disclosed in public filings and earnings calls that increasing numbers of customers are canceling, but the companies have provided few details about the number of cancellations or their impact on the companies’ business.

The door-to-door sales [for residential solar energy] have become problematic because of some of the tactics used.  For example, one customer decided against a Sunrun system and called to explain that she was not interested.  The company indicated that she already had a contract and could not cancel.  She did not recall signing a contract, but the company pointed out that she had checked a box on the sales rep’s iPad and that was the contract.  Known as fraud in factum, this is a ploy often used to get customers committed.  The customers believe they are simply checking a box for the sales rep to show that there was a demonstration.  The checked box is actually the signature for a contract.  The customer is entitled to set aside the agreement when there is fraud in factum.  The customer was so taken aback by what happened that they decided to forget about solar panels entirely.” (Cengage Learning.com, Wall Street Journal)

 

  1. Fyre Festival: A start-up specializing in separating fools from their money. “Billy McFarland sold elite millennials (and his investors) on an ultra-luxurious ‘Coachella in the Bahamas,’ but the much-ridiculed fiasco that actually took place in April derailed the 25-year-old serial entrepreneur’s checkered bid for moguldom.” (Vanity Fair)

“The endeavor has also become the focus of a criminal investigation, with federal authorities looking into possible mail, wire and securities fraud, according to a source with knowledge of the matter, who was not authorized to discuss it.” (New York Times)

 

  1. Outcome Health: Baking the numbers. Outcome Health installs video screens in doctors’ offices and offers pharmaceutical companies the opportunity to pay for advertising aimed at patients. The company accepted around $500 million from investors. In May, 2017 the company had a $5.5 billion valuation, and venture capitalist Bill Gurley tweeted that Outcome Health CEO Rishi Shah, was “the real deal.”

“Somewhat less real were aspects of some deals Outcome cut with pharmaceutical advertisers, say former employees along with several advertisers. Interviews with these people as well as internal documents and other material from Outcome reviewed by The Wall Street Journal show how some employees misled pharmaceutical companies by charging them for ad placements on more video screens than the startup had installed.

“Some Outcome employees also provided inflated data to measure how well ads performed, created documents that inaccurately verified that ads ran on certain doctors’ screens and manipulated third-party analyses showing the effectiveness of the ads, according to some of these people and documents.” (Wall Street Journal)

 

  1. Uber: Trusting the honesty of thieves.

Hackers stole the personal data of 57 million customers and drivers from Uber Technologies, Inc., a massive breach that the company concealed for more than a year. This week, the ride-hailing firm ousted its chief security officer and one of his deputies for their roles in keeping the hack under wraps, which included a $100,000 payment to the attackers. Compromised data from the October 2016 attack included names, email addresses and phone numbers of 50 million Uber riders around the world. The personal information of about 7 million drivers was accessed as well, including some 600,000 U.S. driver’s license numbers.

At the time of the incident, Uber was negotiating with U.S. regulators investigating separate claims of privacy violations. Uber now says it had a legal obligation to report the hack to regulators and to drivers whose license numbers were taken. Instead, the company paid hackers to delete the data and keep the breach quiet. Uber said it believes the information was never used but declined to disclose the identities of the attackers.

“None of this should have happened, and I will not make excuses for it,” Dara Khosrowshahi, who took over as chief executive officer in September, 2017 said in an emailed statement. “We are changing the way we do business.” (Bloomberg)

 

  1. Equifax. Profits over all!

It took six weeks after credit reporting agency Equifax found out it had been hacked for the company to notify the 143 million customers whose private data was at risk. Following what might be the worst data breach of the past decade, such a long delay is shocking — but given the lack of regulation it’s not all that surprising.

“It hasn’t helped that Equifax has handled the situation incredibly poorly. High-level executives sold off almost $2 million of the company’s stocks after finding out about the breach in late July, weeks before they went public about the hacks.  (Vox.com)

 

  1. Unroll.me. What’s mine is mine, and what’s yours is mine.

“Unroll.me, a free service to unsubscribe from email lists, can scour people’s inboxes for receipts from services like Lyft and then sell the information to companies like Uber. The data is anonymized, meaning individuals’ names are not attached to the information, and can be used as a proxy for the health of a rival.

Slice Intelligence , a data firm that uses an email management program called Unroll.me to scan people’s inboxes for information, faced an outcry [in 2017] after The New York Times reported that Uber had used Slice’s data to keep tabs on its ride-hailing rival Lyft.

After the revelation, angry users demanded that Unroll.me explain why the company had gone into their inboxes and betrayed their trust. [In 2017], Jojo Hedaya, the chief executive of Unroll.me, apologized in response to the surprised reaction to a practice that he said the company had been open about in the past.” (New York Times)

See something? Say something!

For more information, please see Whistleblower Protection in the United States. or the US Federal Trade Commission (FTC) website

And, if you have a candidate for this year’s Hall, please email your recommendations to the Sales Ethics Hall of Shame: SEHOS2018 (at) contrarydomino (dot) com.

Past inductees in the Sales Ethics Hall of Shame:

2016, 2015, 2013

Hate, Bad Product Placement, and Brand Risk

The author and his dogs on The Lawn at the University of Virginia. The Rotunda appears in the background.

 

What keeps marketing executives up at night? A duo of sticky problems:

  1. how to create unique product designs that consumers easily recognize, and
  2. how to ensure consumers prefer their product, and not ones that appear similar.

By solving these two challenges, marketers earn a beautiful gem: brand equity. Enjoy it. Cherish it. But remember – in an instant, that gem can turn ugly.

On August 11, 2017, white supremacists organized a rally called Unite the Right, and marched in Charlottesville. The group of about 100 men and women walked past the University of Virginia’s iconic Rotunda, and then down a pacific area on the UVa grounds known affectionately as The Lawn.

Chanting racist and anti-Semitic slogans, the supremacists carried torches that were readily identifiable based on their distinctive features: Tiki-brand torches, manufactured by a Wisconsin-based company called Lamplight. The racist symbolism of the torches and their connection to the Ku Klux Klan was not a coincidence. The purpose was to communicate an odious message, and to intimidate anyone watching.

It’s unlikely that product planners at Lamplight ever developed a use case for this malevolent activity. How could they? An abiding assumption for most marketers – myself included – is that our prospective customers have benign intent for using our products or services. When deciding how many torches to manufacture and where to distribute them, Lamplight probably considers banal matters like economic conditions, leisure trends, and weather patterns – not the number of hate rallies to be held, or how many marchers will participate.

For Lamplight, the prominent role their torches played in the Charlottesville tragedy are what author Nassim Taleb calls Black Swan events – situations that are extremely difficult to predict. The proverbial blind-side tackle. The catastrophe that came out of nowhere. No company should ever be self-satisfied that such things could never happen. Prior to August 11th, few people heard of Lamplight, or its parent company, W. C. Bradley. After that, both became known globally, for all the wrong reasons.

Shortly after the Unite the Right rally video went viral, the company issued the following statement:

“TIKI Brand is not associated in any way with the events that took place in Charlottesville and are deeply saddened and disappointed. We do not support their message or the use of our products in this way. Our products are designed to enhance backyard gatherings and to help family and friends connect with each other at home in their yard.”

Marketers and salespeople worship at the revenue altar, and here’s a company that states unequivocally that some revenue is filthy, and they’d rather not have it to augment the “top line.” Kudos to them not only for their morals, but for making them public.

Tiki torches weren’t the only easy-to-identify brand dragged into the supremacist vortex:

New Balance shoes was recognized by a writer for the neo-Nazi website Daily Stormer as “the official shoe of white people.”

The Detroit Redwings hockey team had their logo corrupted by the Unite the Right marchers, who modified it only slightly. On August 12, @onelectionday posted a Tweet that would make any marketer break out in a cold sweat:

“Wait a minute…@DetroitRedWings have you sanctioned the use of your logo here or is a copyright infringement suit pending?”

Perry Polo shirts. “The alt-right’s Proud Boys love Fred Perry polo shirts. The feeling is not mutual,” wrote Kyle Swenson in The Washington Post on July 10. Proud Boys describes itself as a “western-chauvinist men’s club” and the distinct Fred Perry [shirt] design helps them “sport a common uniform: black polo shirts trimmed in yellow stripes.”

In the aftermath, all three companies moved quickly with public statements:

“New Balance does not tolerate bigotry or hatred in any form…New Balance is a values-driven organization and culture that believes in humanity, integrity, community and mutual respect for people around the world.”

“The Red Wings believe that hockey is for Everyone and we celebrate the diversity of our fan base and our nation . . . We are exploring every possible legal action as it pertains to the misuse of our logo in this disturbing demonstration.”

“No, [Perry Polo shirts doesn’t] support the ideals or the group that you speak of . . . It is counter to our beliefs and the people we work with.”

Bad product placement is not a trivial issue. Ubiquitous video cameras and social media have upped the risks for companies. It’s hard to say how long it will take these brands to lose their linkages to heinous events, as others have suffered:

  • White Ford Bronco and OJ Simpson
  • Tic Tacs and the Donald Trump – Access Hollywood video
  • Skittles and Donald Trump Jr.’s statement about Syrian refugees
  • Skittles and the murder of Trayvon Martin in 2012

On June 17, 1994, over 95 million people watched livestream coverage of the OJ Simpson chase, but nobody at Ford cheered about the free product placement. Ford stopped selling the Bronco in 1996, though it plans to reintroduce the model in 2020. No doubt, one of the top-of-mind questions at Ford is how many years it will take for the OJ-Bronco connection to dissolve. 2020 probably seemed safe for re-introduction, because in 1996, the core buying demographic for the 2020 either wasn’t yet born, or couldn’t comprehend the news reports. Still, I wonder if white will be among the color choices.

What’s the impact on brands and revenue when products are tied to hate and political controversies? Not good – at least, initially. “When a brand gets involved in political issues, whether accidentally or on purpose, it’s bound to have an impact on how consumers talk about it on social media,” according to a December 12, 2016 AdWeek article, How New Balance, Pepsi and Kellogg’s Were Impacted by Trump Controversies. “Three brands that made headlines due to the election of Donald Trump—New Balance, Pepsi and Kellogg’s—had to deal with negative sentiment on social media as a result.” A research company, Taykey, explored how each incident impacted the brands on social media.

New Balance. In November 2016, consumers protested New Balance when the company’s VP of Public Affairs, Matt LeBretton, spoke about President-elect Trump’s position on the Trans-Pacific Partnership Agreement, telling The Wall Street Journal that “things are going to move in the right direction.” Some New Balance customers took umbrage to that endorsement, and protested by posting videos of burning New Balance Shoes. As a result, “brand sentiment declined by 75%,” according to Taykay. “Social conversation volume for New Balance rose by 100% (their biggest conversation-generating event of the year). This conversation was negative, though, and brand sentiment declined by 75 percent.”

Pepsi. Following the US presidential election in 2016, Pepsi CEO Indra Nooyi said some of her employees were “in mourning” about Trump’s election. Trump loyalists were not pleased with that comment. They announced a boycott of Pepsi products, and launched fake news stories alleging that Nooyi told Trump supporters to “take their business elsewhere.”

“Again, social media conversation volume for Pepsi spiked, but the negative conversation drove social brand sentiment down by 93%, as positive sentiment for Pepsi dropped from 72% to 4.5%, according to Taykey . . . However, since the incident, positive sentiment for the brand has been on the rise.”

Kellogg’s. Compared with Pepsi, Kellogg’s has faced more durable backlash after terminating its advertising on Breitbart, a website popular with white supremacists. Following that action, Breitbart launched a #DumpKelloggs campaign, and encouraged Trump supporters to boycott Kellogg’s products. “The boycott caused Kellogg’s social media sentiment to fall dramatically, with a 75 percent nosedive, according to Taykey. Through Dec. 5, that sentiment had stayed mostly negative.”

Brand managers cannot easily mitigate the risks that their products could become entangled in public controversies. But they can be prepared for what to do when it happens:

  1. Immediately issue a public statement to separates the company, its products, and its brand from the controversy.
  2. Make the statement clear and unequivocal. Do not leave room for other interpretations.
  3. Stick to the brand knitting. Don’t attempt to exploit the controversy to drive sales, or to create related advertising messages. These only serve to solidify negative connections in consumers’ minds.

Tiki torches, New Balance shoes, and Perry Polo shirts were not the only brands to get sullied on August 11th. The University of Virginia did, too. The school’s logo features a simple white outline of its Rotunda surrounded by orange. With its viewpoint from The Lawn, the logo is integral to the UVa brand, and instantly recognizable to UVa alumni. For me, the logo carries meaning beyond the physical building that Thomas Jefferson designed, and is now recognized as a UNESCO World Heritage site. That enslaved people constructed the building brick-by-brick and board-by-board makes the August events in Charlottesville even more poignant today.

For the time being, I can’t un-see the white supremacist marchers, or stop hearing their hateful chants as they walked past the Rotunda. And I can’t ignore their worldview that we should return to the institutions and society that subjugated human beings, and openly advocated the existence of a “superior race.”

At least in Virginia, many of us have convinced ourselves that Jefferson – who himself enslaved over 220 people – would be reviled at the Unite the Right marchers, and what they stand for. “It is safer to have the whole people respectably enlightened than a few in a high state of science and the many in ignorance,” Jefferson said. For generations, that idea has been woven into UVa’s brand. On August 11th 2017, I suspect Jefferson was twirling in his grave.

Companies That Abuse Privacy Might Feel Consumer Fury – Again

The company Ashley Madison offers an audacious capability: extramarital affairs.  “Ashley Madison is the most famous name in infidelity and married dating,” proclaimed the company’s marketing pitch in 2015. “Have an Affair today on Ashley Madison. Thousands of cheating wives and cheating husbands signup everyday [sic] looking for an affair . . . With Our affair guarantee package we guarantee you will find the perfect affair partner.”

A great value prop for those seeking such experiences – until July of that year, when hackers broke into the company’s data files.  The thieves coined a name for themselves, The Impact Team. A modest appellation, considering the extensive collateral damage their activities produced.

Mission accomplished. The Impact Team’s cyber-haul included 25 gigabytes of profiles describing the people who signed up for Ashley Madison’s services. Many records included email addresses ending with .gov and .mil (the domain extensions for the US government and Department of Defense, respectively), which stoked curiosity, to put it mildly. Had the hackers compromised the US nuclear launch codes, there would have been less panic in Washington.

But unlike most hackers, The Impact Team was motivated by more than extracting ransom. Impact Team ostensibly wanted to preserve morality, citing that the reason for the hacking was Ashley Madison’s facilitation of marital infidelity. Another website, EstablishedMen, was also targeted. Both are owed by parent company Avid Life Media (ALM), which rebranded as Rubylife in July, 2016. “Too bad for those men, they’re cheating dirtbags [sic] and deserve no such discretion,” the hackers wrote. The Impact Team threatened to expose the identities of Ashley Madison’s customers if ALM did not shut down the websites.

There was more. The hackers complained that although ALM charged users $19 to delete personal data from the Ashley Madison website, the company did not fulfill its promise – not fully, anyway. Instead, ALM simply relocated the “deleted” records to its backend servers. “Too bad for ALM, you promised secrecy but didn’t deliver,” the hackers said. Clearly, the hackers feel that philanderers deserve honest treatment from vendors.

Despite getting caught with their cyber-drawers down, “Avid Life Media defiantly ignored the warnings and kept both sites online [Ashley Madison and EstablishedMen] after the breach, promising customers that it had increased the security of its networks. That wouldn’t matter for the customers whose data had already been taken. Any increased security would be too little too late for them. Now [those customers] face the greatest fallout from the breach: public embarrassment, the wrath of angry partners who may have been victims of their cheating, possible blackmail and potential fraud from anyone who may now use the personal data and bank card information exposed in the data dump,” according to a story in Wired Magazine published shortly after the incident (Hackers Finally Post Stolen Ashley Madison Data, August 18, 2015).

The Ashley Madison hacking was not the first incident involving a vendor that failed to adequately protect customer information from hackers. There was TJX, parent company of retailer TJ Maxx in 2003 (94 million stolen records), Sony PSN in 2011 (77 million), Target Stores in 2013 (70 million), Home Depot in 2014 (56 million), and eBay in 2014 (145 million). In fact, of The Nine Biggest Data Breaches of All Time (Huffington Post, August 20, 2015), Ashley Madison doesn’t even make the list.

But if someone maintained a list titled Most Awful, Ashley Madison would rise to the top. Ashley Madison scared the bleep out of everyone because the incident compromised not only financial information, but lifestyle preferences – the kind an individual would not likely share with friends or family. Purloined credit card numbers can be deactivated, but evidence of promiscuity and related information, well, once liberated, those horses aren’t heading back to the barn.

Should companies care about protecting personal customer information? The question is not rhetorical. By being opaque with customers about what they were doing with their sensitive data, Ashley Madison apparently didn’t care enough. Some could say they didn’t care at all. And their cyber-barriers weren’t insurmountable for the dedicated hackers on The Impact Team. Post-Ashley Madison, people began to think about their information in the IT cloud, and the associated risks to personal privacy. “Click to submit!” – software developers have made sharing personal data all too easy.

People worried about where their private information goes, where it’s stored, and who might have access to it. They began to imagine voyeurs who might crave such information, and they wondered what criminals could do with it. Consumers realized they couldn’t entrust their privacy to firewalls, encryption, secure data storage, and other jargony techno-obfuscations that marketers routinely use to sweeten their “privacy assurances.” Poignantly, Ashley Madison meant that most consumers did not need any imagination to understand the outcomes when vendors are lackadaisical about data governance.

Customer worry becomes a marketing worry. If customers can’t trust that their privacy won’t be abused, they won’t trust the many mechanisms that happen in online commerce, notably, allowing their primary information and data exhaust  to be collected, stored, and analyzed. If – when – that happens, marketers will experience a setback in solving a perennial problem: Finding the likeliest buyers. Right now, marketers depend on both to fuel their ravenous lead-generation engines, and to close transactions. With every data hacking, regulators raise their hackles, and customers become ever warier. “Hell hath no fury like a woman scorned!” The same for customers when their trust and privacy are abused.

Fury – aka The Do Not Call Registry. In the ’80’s and ’90’s marketers got increasing blowback from agonized customers who felt their privacy had been violated, a development that directly contributed to the US Federal Trade Commission establishing the Do Not Call Registry in 2003. The registry’s intention was to curtail what became a reviled business practice: marketers using telephone contact to prospect for new business. Many telemarketing calls were made to residences, and numbers-driven marketers didn’t care about customer experience, often prescribing the calls to occur at dinner time, when prospects were more likely to be home.

Telemarketing began with the advent of the telephone, according to Wikipedia. It flourished in the 1970’s, when marketers got savvier about effective tactics, which were widely shared as “best practices.” That was the beginning of its demise.

The primary customer data needed was culled from lists of residential phone numbers, and ZIP Code directories, all available to the public. For marketers, the telemarketing sales channel became stupid-easy to switch on, and – this is crucial –  wicked-hard for customers to avoid. Before caller-id and call blocking, the only choice for a customer when a telemarketer called was to not answer the phone, and wonder whether they had just missed something important. Vendors became addicted to the low costs and revenue results. For senior executives, self-regulating one’s cash cow did not have wide appeal.

Yet, Do Not Call was a bellwether in the customer fight for privacy, and it caught on like wildfire. While today, it appears that Do Not Call doesn’t have sufficient penal claws to deter vendors from flouting its provisions (my home regularly receives numerous daily phone solicitations, despite being on the registry), its symbolic message is stunning.  Today, there are 217 million numbers on the list. Since its inception, that averages to 42,465 numbers added per day for 14 years. I consider that an “opt-in” success story that should make any CMO drool with envy, albeit for the wrong reasons. The message to marketers: “Do not intrude on my privacy. Do not abuse my personal information. Because if you do, you’ll lose your privilege. Sincerely, Your Customers.”

When it comes to privacy, marketers have no scruples. None. COPPA, The Children’s Online Privacy Protection Act was enacted to prohibit the collection and use of personal data from children under 13 years old. But there’s a problem: “More than 50 percent of Google Play apps targeted at children under 13 – we examined more than 5,000 of the most popular (many of which have been downloaded millions of times) – appear to be failing to protect data,” writes Serge Egelman, research director of the Usable Security & Privacy group at the International Computer Science Institute, in a Washington Post article, We tested apps for kids. Half failed to protect their data (August 7, 2017).  For example, when parents download an app from Google’s Designed for Families section in the Google Play store, they assume data about their child (or children) remains safe. Turns out, that’s a bad assumption.

Which kid-generated data is compromised? Device serial numbers (which are often associated with location data), email addresses, and other “personally identifiable information,” according to Egelman, who wrote that his company found such data had been transmitted to third-party advertisers, and that the nature of the data meant that those companies could engage in long-term tracking of these children.Fortunately, Egelman has developed a website for parents to check the “privacy behaviors of the apps” his company has automatically tested. Just when we thought it was safe to allow our children to stay inside and play on the computer . . .

Personal privacy: why ongoing consumer trust isn’t assured. “Today your data can be of four kinds: data you share with everyone, data you share with friends and coworkers, data you share with various companies (wittingly or not), and data you don’t share,” writes Pedro Domingos in his book, The Master Algorithm. As consumers, we’re betting that as companies like Facebook, Amazon, and others gain more data, their learning algorithms improve, returning more value to us. But Domingos says that the “problem is that Facebook is also free to do things with the data and the models that are not in your interest, and you have no way to stop it.”

“When we say we’ll protect your data, you must believe us! . . or not.” Today’s marketers extoll privacy in their customer messaging. After all, they smell money. “Onavo Protect for Android helps you take charge of how you use mobile data and protect your personal info. Get smart notifications when your apps use lots of data and secure your personal details,” the copy on Onavo’s website assures us. But Facebook, which spent $150 million to acquire Onavo four years ago, hasn’t been fully transparent what it does with the data. One thing is certain: Facebook didn’t plunk down $150 million because they fancied the name Onavo. “Facebook is able to glean detailed insights about what consumers are doing when they are not using the social network’s family of apps, which includes Facebook, Messenger, WhatsApp and Instagram,” according to an article in The Washington Post, Facebook’s Affinity for Copying Seen as Stifling Innovation (August 11, 2017) . How private is the data? Will Facebook use it for benign purposes? Will customers experience harm? I don’t know, and the answers aren’t provided in corporate fine print and written disclaimers.

In another example, this year Princess Cruises announced its Ocean Medallion bracelet that promises passengers a unique personalized travel experience:

“It’s cruise planner meets concierge — a guide that you can access everywhere — on touchscreens throughout the ship, your stateroom TV and your own mobile devices. Ocean Compass helps you navigate your ship and your cruise, like streamlining the boarding process, personalized shore excursions invitations, ordering your favorite drink and more . . . Upload your documentation and set your preferences ahead of time so you can swiftly walk on board and communicate everything your ship needs to know about you.”

And:

“Customize your personal Ocean Tagalong™ by body shape, color, pattern and marks (like tattoos) to best reflect your “alter ego”. This responsive digital companion follows you from initial registration to the end of your cruise (as well as rejoin you on future cruises). You’ll find it online within your profile, during interactive PlayOcean games like Tagalong Sprint, as well as through Ocean Portals found onboard Medallion Class ships. Tagalongs even evolve throughout the cruise, reflecting your unique personality and interactions, and will collect ‘charms’ that show off your achievements.”

To me, Ocean Medallion is a marketing name for sophisticated surveillance technology, and there’s “Ewwwwwwwwww!” by the bucket load throughout this cheery write up. Clearly, I’m not the type of customer Princess wants to reach, and I’m sure they’ve heard similar sentiments from others. They’re looking for a much different prospect. One who absolutely, positively cannot stand to separate from technology. Not even for a minute. I can distill Princess’s prose into a single sentence: “We know much about you even before you begin your vacation, and we track you from the time you come aboard, until the time you disembark.”

Where does Ocean Mediallion’s digital information go, who sees it, who uses it, and for what purposes? That’s not spelled out anywhere I looked on the company’s website, though I have little doubt that they have PhD data scientists who know. And it’s not reassuring that Carnival hasn’t updated their privacy policy since December 5, 2014, according to its privacy policy page. Just finding that out required a circuitous content journey. Good thing I liked the photos.

In today’s digital era, batches of delicate personal customer information are produced, captured, selected, sub-selected, curated, sorted, stored, compiled, combined, listed, cut, “value-added,” repackaged, warehoused, transmitted, sold, and shared, like rail cars of soybeans. Your data, e-shot, helter-skelter to the world! A massive logistics system operating in subterfuge, trafficking the data minutia of a human being’s existence, one individual at a time. Without industry self-enforcement, strong governance policies, and legal restrictions, tell me there’s not another Ashley Madison-type wreck about to happen, or already underway.

There’s an entrepreneurial opportunity here, in case anyone wants to step in. Pedro Domingos suggested one in how he envisions a new business model for privacy protection:

“The kind of company I’m envisaging would do several things in return for a subscription fee. It would anonymize your online interactions, routing them through its servers and aggregating them with its other users’. It would store all the data from your life in one place – down to hour 24/7 Google Glass video stream, if you ever get one. It would learn a complete model of you and your world and continually update it. And it would use the model on your behalf, always doing exactly what you would, to the best of the model’s ability. The company’s basic commitment to you is that your data and your model will never be used against your interests. Such a guarantee can never be foolproof – you yourself are not guaranteed to never do anything against your interests, after all. But the company’s life would depend on it as much as a bank’s depends on the guarantee that it won’t lose your money, so you should be able to trust it as much as you would trust your bank.”

I wonder whether a company can honestly commit to never acting against a customer’s interests, when those interests inevitably change. Still, I like his entrepreneurial vision.  In the meantime, Domingos asks, “Who should you share your data with? That’s perhaps the most important question of the twenty-first century.”

Author’s note: This article is the second in a series about consumer privacy. You can read the first article, In the Digital Revolution, Customers Have Nothing to Lose But Their Privacy by clicking here. In an upcoming article, I’ll outline important keys for corporate data governance.