From new logos to New Coke: when corporations make mistakes

AP News
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Posted: Mar 27, 2015 6:28 AM
From new logos to New Coke: when corporations make mistakes

NEW YORK (AP) — It was a tempest in a coffee cup.

Mega coffee chain Starbucks wanted to spark a conversation about race when it asked baristas to write "Race Together" on customers' cups as part of a broader effort, but people standing in line for their morning java were not amused. Many voiced complaints on social media and elsewhere that they didn't want a debate with their brew and Starbucks ended the campaign Sunday, although they said the campaign was always meant to be brief.

Corporations spend millions to make sure their products, logos, and branding and marketing are top of mind for consumers in a positive way. But that means that when corporate missteps happen or marketing campaigns are a flop, they can go viral, too. Problems usually arise when companies haven't fully considered the target they're trying to reach and what could go wrong, says Atlanta-based marketing consultant Laura Ries.

"You have to have the right approach at the right time," she said. "The problem many companies have is not understanding the customer's point of view, only understanding their personal point of view in terms of what they want to accomplish."

Here's a look at some major corporations' missteps and their impact.

Starbucks talks race

Starbucks Corp. CEO Howard Schultz is known for taking on big issues like job creation and education so the coffee chain's latest initiative centered around diversity and racial inequality was not a big departure from that.

But one of the components, which had Starbucks baristas write "Race Together" on cups in an effort to get a dialogue on race going, led to an outcry from consumers. Some said it seemed opportunistic and inappropriate at a time of national protests over police killings of unarmed black men. Others questioned whether a line for coffee was an appropriate place for productive talks about race.

"You just don't know what's going to happen when you get out there and do something like this," said Paul Argenti, professor of corporate communications at the Tuck School of Business at Dartmouth College. "To be focused on the big issues of the day is a great idea, but what's the right venue? Not waiting in a rush line in the morning."

Starbucks is standing by its campaign even though the cup initiative has ended. It will still hold forum discussions, co-produce special sections in USA Today and put more stores in minority communities as part of the Race Together initiative, according to a company memo from Schultz. He added in the note: "While there has been criticism of the initiative — and I know this hasn't been easy for any of you — let me assure you that we didn't expect universal praise."

"Schultz is trying to do something bold," Argenti said. "They do a lot of things. Some stick and some don't."

On second thought, maybe don't ask

Sometimes, Argenti said, what seems like a great idea to the marketing department clearly was not vetted by the corporate communications team. In 2013, J.P. Morgan & Co. had just been ordered to pay a multibillion-dollar settlement stemming from the financial crisis, and it was seeking to reconnect with consumers via a Twitter Q&A. The investment giant launched the hashtag # AskJPM for people to ask career advice questions. But the move badly underestimated consumer sentiment toward banks.

"When things go good online, companies benefit. But when things go bad, people tend to pile on," Ries said. "They love to make fun of companies when they do something they don't approve of or agree with or just don't like."

Among the unanticipated responses: "Did you have a specific number of people's lives you needed to ruin before you considered your business model a success?" and "Did you always want to be part of a vast, corrupt criminal enterprise or did you 'break bad'?"

But the J.P. Morgan flap shows that even when a huge company makes a marketing blunder, it doesn't necessarily make a difference in the longer term, she said. People tend to remember the marketing flap but not the brand, Ries said.

"Most of these things -- as quickly and as brightly as the fire erupts -- tend to burn out quickly," she said.

Lululemon's pants-gate

Sometimes, a PR disaster can hurt a brand longer term. Canadian athletic company Lululemon Athletica made a name for itself with its pricey yoga gear, but in 2013 its reputation was shattered after a product defect made yoga pants so sheer they could be see-through. Fixing the problem cost the company millions and prompted investors to question quality control. Then founder and Chairman Chip Wilson compounded the error by suggesting in a television interview that fat thighs caused some yoga pants to be too sheer. He later apologized in a video posted on YouTube and Facebook. But the damage had been done. The company's sales and stock price went into steep decline.

In December of that year the company said Wilson would step down as chairman and it also named a new CEO, hoping new faces at the top would help the company bounce back from the debacle. But Lululemon is still working on its rebound. In its most recent quarter, third-quarter earnings sank 9 percent as a spike in expenses outweighed revenue gains, but the yoga gear company's performance still topped Wall Street expectations.

Gap's logo

Gap's logo has long been a navy blue box with white type, so consumers were stunned in 2010 when without warning Gap swapped its classic logo with a new one online featuring the company name in black with a small blue box overlapping the 'p.' The redesign irritated consumers. Confused fans took to Twitter, Facebook and tech blogs to complain. But the San Francisco company stood fast at first with plans to roll the new logo out in stores and in advertising. However, within days they had reversed that decision, saying they hadn't realized how much their customers liked the old logo.

"There may be a time to evolve our logo, but if and when that time comes, we'll handle it in a different way," Gap North America President Marka Hansen said at the time.

The flap is a case of corporations forgetting about what their core consumers want, Ries said.

"When an image is strongly identified with a brand, making a radical change like that usually has disastrous results," she said. "Companies just don't think from the consumer point of view."

New Coke

One of the most high-profile corporate missteps ever was New Coke in 1985. After mounds of focus groups and testing, Coca-Cola thought the world was ready for an update on the taste of Coke, the top-selling cola in the U.S. The sweeter formula was a marketed as an improved replacement for the flagship soda, but the outcry was immediate and sustained. Coke tried to sell both versions for awhile, but eventually reverted to "Coca-Cola Classic."

But Argenti says the misstep actually led to greater sales of Coke, so it wasn't necessarily a bad move, even though people can still recall it 30 years later. The same might be true of Starbucks' gaffe, he said. He said his class had a long discussion about "Race Together."

"One thing people said was, here we are, 130 people talking about it in class," he said. "It got more people to think about Starbucks."

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Follow Mae Anderson on Twitter at https://twitter.com/maetron