Getting your company slated online can feel overwhelming. The speed at which a brand’s reputation can be shattered is close to instantaneous thanks to social media, and a lot of business owners might just throw in the towel. Branding is everything nowadays, after all.
However, what we’ve curated here are the companies whose reputations were burned to the ground. And like the phoenix in Harry Potter, they’ve somehow managed to experience some crazy rebirth out of the ashes of their demise.
Some of the scandals we’ll be diving into are beyond your average company whoopsie – we’re talking catastrophic allegations that caused public uproar. And these are the company’s that have bounced back. We want to make it clear that we don’t condone any of the actions any of these businesses have undertaken. Still, these stories speak more to how a business, even one that saturates a global market, can damage and then be subsequently saved by their iron-clad reputation.
Scandal #1: Volkswagen
So how did the world’s largest auto-manufacturers manage to get into a situation that required them paying out €30 billion in compensation and repair costs? It all came out with a massive diesel emissions scandal.
Dubbed the diesel dupe back in 2015, the EPA (Environmental Protection Agency) in the US uncovered that the German brand had built in software into the vehicles so that they could detect when they were being tested, and then change their performance. Volkswagen admitted that 11 million cars worldwide were fitted with these devices and were essentially cheating the emissions tests.
How did this affect VW?
The brand’s credibility plummeted with what’s known as the ‘defect device’. And these were sophisticated pieces of kit. The engines were capable of interpreting when a test scenario was being carried out by monitoring speed, air pressure, engine operation and the position of the steering wheel. VW really wiped out trust in their brand, particularly as public concern over climate change was emerging as a central issue.
And it got worse before it got better. As reported by Bloomberg, once the company was alerted to the fact that EPA had revealed their car models emitted between 10 and 40 times the legal levels of nitrogen oxide, which is responsible for smog, they called an emergency meeting in Wolfsburg. The attendees were virtually all white and German, and many were engineers and scientists by way of profession. Needless to say, that the two-minute apology video was a disaster.
What was their rebranding strategy?
Fast forward to 2018, just three years later, and it has once again become the number one car manufacturer on earth. So if anyone tells you that you can’t recover from bad press, they’re clearly misinformed.
To overcome such breaches against emission regulations on this global scale, Volkswagen had to provide some real commitment to redeem their brand. In 2017, Volkwagen embarked on by far the largest program of electrification in the global car industry, pledging to spend $20 billion to develop battery-powered or hybrid models of their entire fleet – by 2030.
Jochen Sengpiehl, CMO of Volkswagen, says: “We have created a new holistic global brand experience on all channels and across all touchpoints.
“As a general principle, the aim in future will not be to show a perfect advertising world. In our presentation, we want to become more human and more lively, to adopt the customer’s perspective to a greater extent and to tell authentic stories.”
This is a clever strategy as it shows a movement away from the non-democratic culture of before. The company completely rebranded it’s company ethos.
They’ve also recently come out with a statement that; “By formulating new content and with new products, the brand is undergoing a fundamental transformation towards a future with a neutral emission balance for everyone. Now is the right time to make the new attitude of our brand visible to the outside world.”
Scandal #2: Nike Scandal
You’d be right to question which one, we’re all too familiar with the child labour scandal. It seems that no matter how many unethical boundaries that Nike oversteps they are unwaveringly come out relatively unscathed.
First, there was the sweatshop scandal. Back in 1997, rallies took place admonishing Nike’s use of horrific labour conditions in their overseas sweatshops. Even the CEO of the time, Phil Knight acknowledged that “the Nike product has become synonymous with slave wages, forced overtime and arbitrary abuse”. It is really understating things to call this a scandal – really, we’re dealing with a massive human rights catastrophe here, and their brand shouldn’t have recovered from this.
Now, we’re going to tackle their most recent debacle – the gender inequality scandal of 2019.
The Oregon Project, headed by Nike, was founded in Beaverton, Oregon in 2001. The aim was to promote American long-distance running. However, on October 10, 2019, an investigation resulted in a four-year ban of longtime coach Alberto Salazar for his treatment of female athletes.
“I joined Nike because I wanted to be the best female athlete ever. Instead, I was emotionally and physically abused by a system designed by Alberto [Salazar] and endorsed by Nike,” Mary Cain, professional middle-distance American runner, expressed in an op-ed in The New York Times.
The all-male team that coached her demanded that she be “thinner and thinner and thinner”. Cain subsequently went on to break five bones and lose her menstrual cycle.
Chief executive, Mark Park released a statement announcing “This situation, along with ongoing unsubstantiated assertions, is a distraction for many of the athletes and is compromising their ability to focus on their training and competition needs; I have therefore made the decision to wind down the Oregon Project”.
Back in May, Kara Groucher and Alysia Montano told the Times that their contracts with Nike were cut during their pregnancies. Not even a month later, Olympian, Allyson Felix, released a similar story in the NY Times.
How did this affect Nike?
This is an important one to discuss as despite the massive allegations, distrust and boycotting that currently taking place in outrage to the brand – sales have not dropped.
They rose by 1%. Yet this graph from Marketing Week outlines the mere 4% positive sentiment that exists for Nike.
So, how does a global brand that has been proven to produce apparel by way of child labour, gender discrimination and reported sexual abuse in the company to have a brand value of $15.9 bn?
As Richard Williams remarks in his Guardian article, “In their grand scheme of things, any piece of controversy enhances one of the world’s mega-brands.”
What was their rebranding strategy?
Despite their scandals, Nike has had a foolproof strategy to redeem their seemingly irredeemable actions.
And here it is – when Eliud Kipchoge, Kenyan athlete, broke the 2-hour marathon record, he was wearing Nike’s latest pair, the ZoomX Vaporfly Next%. Whenever new milestones are about to be reached by incredible athletes, Nike swoops in and slaps their swoosh on the side of the foot about to make history.
Williams ends his article by getting to the crux of why Nike is here to stay: “no one has yet found a better way of persuading generations of rappers and skateboarders that buying the same sports kit is the best way to express your essential individuality. The end of the Oregon Project is unlikely to change that.
Scandal #3: Starbucks
You’d laugh at some of the ‘scandals’ portrayed by Starbucks – using too much ice, underfilling lattes, redesigning their cups. But one really rocked the boat.
Two black men were arrested in a Philadelphian Starbucks branch. The cafe’s staff rang the police, accusing the men of trespassing, despite them explaining they were in the store waiting for a business meeting to begin.
The arrests were recorded by a cafe customer and went viral, and the company was slated online for the blatant show of racial discrimination.
As The Associated Press outlines: “Nelson and Robinson, black men who became best friends in the fourth grade, were taken in handcuffs from the Starbucks in Philadelphia’s tony Rittenhouse Square neighbourhood, where Robinson has been a customer since he was 15.”
In no uncertain terms, this was a massive dent to mega-brands reputation.
How did this affect Starbucks?
Starbucks made a bold statement by closing 8,000 stores in the USA for a racial bias training day to be attended by all employees. The company lost an estimated $16.7 million in sales for the closures.
What was their rebranding strategy?
Amidst the public uproar, the Starbucks executives showed how seriously they took the incident and made it clear that this did not align with their mission. Starbucks has long held its stores to be a “third place” – separate from work and home: “where everyone is welcome and we can gather,” as outlined in their company policy.
Loyalty is paramount in surviving in any industry, but few more so than your local barista. The CEO of Starbucks called the arrest “reprehensible,” but didn’t stop there. The training day and multi-point plan to get their entire global network of teams respecting all of their customers was a bold statement that people related to and respected.
Scandal #4: Martha Stewart
Cast back to 2002 when a news story broke that the US Securities and Exchange Commission was investigating Martha Stewart for her insider trading. Stewart was forced to step down as Martha Stewart’s Living Omnimedia’s CEO. The negative press hailed down on her – and it only got worse.
2003 saw the incredibly successful former model, chef and business person charged for insider trading. She was caught selling stock in a biopharmaceutical company in 2001 after receiving an unlawful tip from her former stockbroker.
As the Business Insider retells, she was “found guilty on all counts, including on charges of obstruction of justice, conspiracy, and making false statements”.
How did this affect Martha Stewart?
The celebrity icon spent five months in West Virginia’s Alderson Federal Prison Camp. When the sentence came out in court, reporter Ann Thompson for the NBC News reveals the reaction, “you could hear this gasp. No one could believe it, no matter how you thought the trial was going, that this would be happening to this woman who is one of the biggest celebrities in this country of making false statements.”
Financially, the day before news broke of the insider trading investigation, Stewart owned over 30 million company shares worth an estimated $591 million. The company was worth over $954 million.
Once the scandal became known to the public, stocks took a severe nosedive. Stewart’s holdings dropped to $162 million by October 2002.
What was her rebranding strategy?
Fast forward five years and Martha has a 600 strong workforce along with no less than 7,000 products to her name. At this time, she has 71 books published, four magazines in circulation and four new television shows on air.
Martha herself captures how her brand survived the scandal in an interview with Oprah, “Our partners never left us, and our beloved consumers never left us. They are the readers of the magazine, the users of our recipes, the wonderful people who buy our products, who look for the good in the brand. And the brand is strong.”
And her brand really is thriving all done to her connection to her customers.
So how is her brand faring in 2020?
With a fashion line being rolled out, her 100th book just published – her brand is well and truly back to its glory days. She’s even released a cooking show with her friend, Snoop Dogg. The Emmy-nominated show is in its third season. Clearly, Stewart’s dynasty couldn’t be further from the dramatic legal issues of 2003.
Scandal #5: Facebook
How could we leave Facebook out of any list of reputation scandals? The Zuckerberg empire went under fire in x due to their privacy breach.
As James Sanders in the Tech Republic puts it, “A decade of apparent indifference for data privacy at Facebook has culminated in revelations that organizations harvested user data for targeted advertising, particularly political advertising, to apparent success.”
The biggest offender: Cambridge–Analytica. This political consulting and strategic communication firm headed both the pro-Brexit and Trump’s 2016 election campaign.
The firm was just one example of a company able to gain access to Facebook user’s personal data, mainly due to Facebook’s inadequate safeguards. The fact that users are also required to agree to broad terms and conditions before using Facebook’s services has led to series misuse of personal data.
How did this affect Facebook?
Facebook’s market value dropped by $119 billion and shares plunged by 19%. According to Rupert Neate in the Guardian, the collapse of Facebook’s share price was the biggest ever one-day drop in a company’s market value.
And it all happened as the company was reaching new heights. The company hit a record high of $630 bn the day before the scandal came out. One day later and they were down to $176 bn.
This scandal scared people, with all of the other scandals mentioned, the general public was appalled, outraged, shocked. But in this case, millions of people worried that their data privacy was being violated.
Actions on Facebook such as likes, shares and posts have dropped by almost 20%, according to the business analytics firm Mixpanel. The next month saw user actions drop a further 10%.
What was their rebranding strategy?
Zuckerberg kept his head low for five days before emerging with a stark statement on CNN, “we have a responsibility to protect your data, and if we can’t then we don’t deserve to serve you”.
Zuckerberg and his PR team worked hard to convince users that Facebook had “fundamentally changed [its] DNA”.
However, the real reason that in just six months Facebook was back to enjoying market share highs was simple. They’ve built such an extraordinary cultural network that leaving it feels like losing touch with the world.
So, this begs the questions – how do you build a reputation so formidable that you can recover from a public catastrophe such as this? The answer is, an excellent PR and Communications team, a Global repuation repair action plan (and it doesn’t hurt to have a market monopoly, this one of course being the hardest to acquire).