Marketing and crisis management

IMAGINE this scenario: you are the boss of a company making infant milk powder. One day, your marketing head and product quality head come to you with grave news: a hospital has contacted the company informing it that 10 babies in the hospital’s ward have contracted kidney stones, and that the one common factor in all of them is that they had been consuming your brand of infant milk powder.
Your product quality head cannot explain why and he needs time to investigate.
Your marketing head, after having faced a mounting number of angry calls from customers, wants to know what to do next, as, every day, your company is shipping out 90,000 tins of milk powder to retailers and exporters. What do you do?
We should be fortunate if we, in the course of our lifetimes, are never put in such quandaries.
"Tough" armchair marketers who like to talk about strategy and grabbing market share can freeze and wilt during times like these.
Chances are, however, that a problem of this nature is bound to hit sooner or later, especially in mass consumer market food companies.
Crisis management 101
How a company’s manage-ment and its marketing and communications department react to it can effectively determine its fate.
The important elements of crisis management are:
1) recognising a crisis early and dealing with it swiftly;
2) establishing regular and daily communications with customers and the public, through media sources;
3) updating the public on the company’s response and steps being taken to arrest the crisis;
4) not focusing on blame, or culpability, and just doing all that can be done to protect its customers and, hence, its brand, its reputation, its very future.
In the case histories of crisis management, these are the best practices that have pulled companies through difficult times – examples include the Tylenol poisoning crisis of 1982 and, recently, the Mattel lead paint crisis of 2007.
Nothing is more important than item 1 – acting early. As in the case of an earthquake or a tsunami, it is worthwhile imagining a countdown clock starting the moment it happens … every second that ticks away without anything being done means more lives lost.
In the case of Sanlu, it seems it had plenty of chances to start managing the crisis – as early as December 2007, some report.
But by ignoring or burying its bad news, it actually sealed its fate. Doing this tells the public that your management would choose its own image and reputation over that of the lives of its customers.
Its probably fair to say that from being the No. 1 market leader in China, Sanlu is now quite finished.
As for steps 2 to 4, the various Chinese companies affected should borrow a leaf from their own political leaders.
From the winter storm crisis to the Sichuan earthquake of 2008, Chinese leaders at the highest levels had been perceived to be actively involved in doing their best to solve the problem, with even Premier Wen Jiabao making appearances in crisis hit areas and addressing victims directly.
Crisis management 201
Another scenario: you are the local country head of a global, billion-dollar investment bank.
Through weekly conference calls and updates, you know your company is facing a cash crunch due to a worldwide seizure in the credit markets, and you are nervous about the company’s future.
Business, however, must go on. One day, your regional boss instructs you to market a new series of financial products, to be distributed through local banks to retail investors.
The products are themselves quite complicated and, in your view, rather risky, as they are linked to financial derivatives such as Credit Default Swaps.
However, looking at the prospectuses and marketing material, you see they are couched in investor-friendly phrases designed to give the impression they are safe, as they are backed by the full faith and guarantee of your own bank.
Your regional boss tells you to launch the products ASAP and is breathing down your neck every day for sales.
Meanwhile, your own questions about the health of your company are swatted away. What do you do?
Unlike the first dilemma, where doing the ethical thing – responding quickly – helps save the company, this second is a lot harder, as doing the ethical thing actually harms the company. Resolving this problem is not covered in this post..!