April 23, 2012 at 7:37 AM ET
Highly recognizable brands can be invaluable, but they require constant attention. Their value can rise or fall because of management decisions, changes in the competitive environment, and the beliefs that a brand has aged beyond its useful lifetime.
Often, though, the true causes of drops in brand value are folly and arrogance. 24/7 Wall St.’s review of nine brands that were badly damaged recently shows that even the most powerful brand cannot survive horrible decisions.
A brand derives its value from several factors. the most obvious being how much it can earn. This is not the least evident with Marlboro, the best-selling brand for its two owners, tobacco companies Philip Morris and Altria. The companies have fostered the cigarette brand through hundreds of millions of dollars of advertising and marketing support. The brand has evolved, adding other versions. Today there are also Marlboro Lights, Marlboro Reds (which are larger than standard) and Marlboro Menthol. One version of the brand is not enough, in the wisdom of its owners. The evolution of the brand has kept its customer base over the years, and probably added to it.
The brands on this damaged brand list often rose based on lofty claims, and fell when those claims were not realized. The Chevy Volt was meticulously engineered by GM to be its flagship car of the future. Then it had engine fire problems. The Nokia Lumia 900 was built to compete with the Apple iPhone. Just as it was introduced in the U.S. market, it was discovered to have a software flaw that could prevent data downloads. The Airbus A380 “super jumbo” was made to be the most advanced passenger jet in the world, until its wings began to crack.
For our purposes, a brand doesn’t have to be a product or service. People can be brands. Famous sports figures count on their images for large endorsements. Tiger Woods proved how swiftly a sports brand can be destroyed. A country can be a brand. Street violence in Jamaica in 2010 triggered a warning about travel to the island from the U.S. State Department. All of these brands are among the most widely recognized and consumed brands by Americans.
1. Keith Olbermann
“Current went through eight different [limo] companies with Keith. Each and every time ... he didn’t like them” — N.Y. Post (4/2/12)
Keith Olbermann quit, or got fired, from tiny, struggling cable network Current TV on March 30. He joined the organization in February 2011 after a successful but rocky stint at MSNBC. Olbermann claimed that the Current TV did not have professional production facilities and misused his time. The network claimed he did not fulfill his contractual obligations. Each side has sued the other, and the cases may go on for months.
Before he departed MSNBC to go to Current TV, Olbermann was that network’s star with an average audience of about three quarters of a million viewers. He battled NBC management as well, and was suspended for two days in early November 2011 for making political donations that he did not disclose to the network. The suspension only made Olbermann more popular. The first night back from the suspension, his audience number reached 1.5 million.
Now, one of the most popular TV personalities will not be on the small screen for a very long time, if ever at all. His $50 million contract with Current TV could also be voided in court. Perhaps the greatest insult to Olbermann is that he was replaced on Current TV by Eliot Spitzer, a former governor who cannot seem to find permanent work.
Olbermann’s obnoxious behavior, which alienated management at MSNBC and Current TV, may cost him tens of millions of dollars. Beyond that, his career in television may well be over.
2. Chevy Volt
“8,000 Volt Hybrids Recalled For Possible Battery Fire Issues” — CBS (1/6/12)
The Chevy Volt was supposed to be the start of a revolution in car technology. The car was launched on Sept. 16, 2008, by GM CEO Rick Wagoner, who soon after lost his job because of GM’s poor financial performance. "Revealing the production version of the Chevy Volt is a great way to open our second century. The Volt is symbolic of GM's strong commitment to the future ... just the kind of technology innovation that our industry needs to respond to today's and tomorrow's energy and environmental challenges," Wagoner said. When the EPA issued new methods of measuring mileage efficiency later in 2009, the Volt was rated at 230 miles per gallon, effectively making the price of gas nearly irrelevant.
The Volt was not just another car. It was the beleaguered car manufacturer’s signal that it could compete with major competitors like Toyota and VW. GM particularly needed the Volt to show that the Chapter 11 process had not robbed it of its ability to innovate.
Despite the high public relations value of the Volt, GM set only modest goals for first year sales. It said it would sell 10,000 Volts in 2011. It ended up selling only 7,671. Even if the Volt was the perfect car, not many people wanted one. Demand dropped even further when the National Highway Traffic Safety Administration reported that two out of three Volts had battery fires after side impact tests. GM recalled about 8,000 Volts. The carmaker then offered loaners to owners who wanted repairs. Finally, the No.1 U.S. car company said it would buy back any and all Volts with the troubled batteries.
Corrections made to the Volt’s engine structure satisfied the NHTSA, and the Volt was proclaimed safe to drive again. The damage, however, was already done as the Volt’s already modest sales plummeted further. In March of this year, GM said it would suspend production of the Volt at its Detroit-Hamtramck assembly plant from March 19 until April 23 because of lack of demand. GM’s 21st Century flagship had become a bust.
3. New Orleans Saints
“Saints coach suspended for season over bounties” -- Wall Street journal (3/21/12)
New Orleans Saints owner Tom Benson had a team that was worth $965 million, according to Forbes magazine. That was before NFL commissioner Roger Goodell announced its head coach Sean Payton was suspended for a year and general manager Mickey Loomis for eight games for their role in the so-called bounty system. The suspension left the team, which had won the Super Bowl in 2010 and contended in several other recent seasons, without leadership. A few of the team's players could also be suspended for participating in the bounty system that paid players to hurt opponents.
The Saints had come from nowhere seven years ago. They rose to become the symbol of a city nearly destroyed by one of the deadliest hurricanes to ever make landfall in the U.S. The team’s stadium, The Superdome, was used to shelter thousands of people and was nearly ruined by wind. The Saints surged from a 3-13 season the year Katrina hit to a 10-6 performance the year after, making the playoffs in the process. All along fans cheered on “Who Dat?” -- the team’s battle cry -- from the cheap seats. It was the city’s phoenix.
Now, Benson has to wait to see if the fans will come out in the numbers they have since 2006, and whether all the sponsors will hold their places. He has to wonder whether his team can make the playoffs again without its gifted coach and probably some of its key players and earn him some extra money again.
"The Acropolis is not in flames" -- SmartMoney (2/15/12)
Greece has been one of America’s most important tourist destinations for years. No longer.
Tourism revenue is 15 percent of Greece’s GDP, which is one reason the nation is in so much trouble now. Businesses in the country have watched the number of people who travel to the southern European nation fall. Contributing factors to the drop are the fact that Greek air traffic controllers occasionally shutter airports and drivers sometimes quit their public transportation posts. They do so as a means to protest austerity measures that have cut their pensions and pay in the name of bringing down the national deficit. Businesses in Greece have watched the situation deteriorate so much that they expect the trend will continue, or even worsen.
The Greek news agency ANSAmed reports: "Business expectations in the Greece's tourism sector fell significantly in the fourth quarter of 2011, a recent survey showed. The business expectations index fell to 71 points for hotel enterprises and to 48 points for tourism enterprises, down 35 and 22 points, respectively, from the previous three-month period."
“It took years for Athens to get a good reputation with the 2004 Olympic Games,” the president of the Hellenic Hotel Federation, Giannis Retsos, told BusinessWeek. “Last year showed how this reputation can be destroyed in one day through one incident.”
The Greek islands, the beaches, Athens, the Acropolis -- Greece markets itself with the tagline “You In Greece.” Right next to the protestors with the stones and Molotov cocktails.