A while back I suggested an update for this series was in order. Until now, the perfect opposing example to the major US bank brands in crisis was missing. Thanks Tiger.
The point of this update is narrow and brief: The perception of Broken Trust by a brand during a social correction only matters if the trust violation impacts the core utility or shared values associated with the brand. Put another way: if a firm's brand violates trust in the eyes of their customers, in a manner directly associated with your interaction with the customer, then the natural state of social affairs during a social correction will punish the brand considerably more than during periods of social expansion. The point is deceptively simple and straightforward but since the idea of social mood and periods of social correction are not yet commonplace, it is worth tuning into as the social correction we are experiencing may deepen and last years, adding considerably to this challenging reality associated with one of the most powerful corporate tools.
The largest banks on Wall Street (and many others) have been in a state of crisis since last summer (08'). The bailouts required to save the largest banks gave us the TARP program courtesy of the US Congress, as well as using the assets of the FDIC. Everyone remembers the incredible hurry for Congress to OK nearly a $700 billion dollars to bailout bank and buy distressed assets lest our entire economy melt down. What an image! So our intrepid Congress followed the advice of a few, and we trusted them on our behalf.
Public anger toward bankers since last year has swelled as profitability returned quickly for the banks while an economic malaise descended upon Main Street. What of the bailouts? What of these crazy bonuses while unemployment is at a 20 year high? These are just a few of the expected dynamics (social politics) of a social correction.
Here's how both of these subjects mix and why the intensity of social mood during a large social correction will characterize any discussion around bank brands for years to come.
The premise in my first post in the series is that brand equity is at greater risk during periods of social correction. If you are an owner or manager of a valuable brand this is a very big responsibility. The premise of this post is to fine tune that point further by showing how the violation must be something that is correlated with the brand's interaction with the customer. If it is, the implications are critical and likely to be long lasting.
The case of Tiger Woods' problem is easy and offers a comparative basis.
Our relationship with a brand image that is established in our thoughts gets there by way of trusting in what we perceive over time. People who follow or watch golf, or care about the golf lifestyle, those who have strong attitudes about winning and losing cover a very broad section of the US and other parts of the sporting world and are all part of Tiger's influence as a brand. These same people may think Tiger is wrong for what has been revealed by media sources about him but, in the end, a golfer can afford to be a hypocrite in their relationships more than banking brands that must have public support in time of crisis. (The big picture here is obvious but the brand point, less so) Tiger didn't bet against himself, take performance enhancing drugs, nor did he cheat at playing the game. And while a hiatus may be a good idea till the righteous social police train their attention elsewhere, the crisis banks are coping through has everything to do with our (public) trust even though the average person never did any business with Goldman Sachs or Merrill Lynch or Bear Sterns(or even understand why they matter so much). This banking crisis came with an abbreviated lesson book that was forced on the public in short time. Interestingly this primer included little about how we'd benefit...only what we'd be saved from (that never happened). And while the average American has never seen the letterhead of many of the failed/bailed-out banks, we had to accept that these institutions propped up the American financial system (and economy) and that their failure as a group meant our failure even though the smaller details are painfully unclear. Upon hearing the warnings, it is hard to do anything but accept them, but, part of accepting it meant that the average American's opinion of banking practices now matters in ways it never did before now. This is a new direct (emotional) correlation that never existed before now and it has powerful implications that our federal government is acting upon already. Bailouts force discussions about accountability. However, paying off borrowed money will not release them of this new public connection even though that seems to be the motivation by many banks hurriedly paying down borrowed money lately. Like it or not, the public became partners in the banking industry this past year and this new generalized influence will act like a lien on their brands in the years ahead. A large chunk of the public is not very clear about how leverage affects them or banks and fewer still understand what a derivative is but this will not stop the public from deciding how trust in banking will be structured in the years ahead.
The key thing about this discussion is how social mood, at its root, is about changing perception and like the old saying goes, perception is the (new) reality. The average American has been led to believe, right or wrong, that some aspects of the banking system contributed to the crisis and that the trillions of taxpayer dollars to right our listing ship are fair consideration when considering the banking system's obligations to the average American. Right or wrong it is a fair assessment of the situation even if it is very emotional....and then's there's Tiger....the brand, not the man.
The Tiger Woods brand is tarnished, for now. Give him a vacation and then let him loose on a quest for another green jacket and if he does it, most people will forget the past. He will go back to influencing sales for clothes, shaving stuff, gear, and even business services. On the other hand Goldman will report record earnings over the winter months due to some great wins this fall. They will be smacked down hard for it because their machine is not geared toward accommodating the opinions of the non-client public and the public does not readily see how their actions add any demonstrable social benefit in general or especially since the great recession began (and their profit machines began exploding again).
The comparison between the banks brands and Tiger Woods' brand may seem vague but this is the nature of brands and their public perception. They exist somewhere between the world of the rational and emotional. Tiger's brand is very narrow in scope and the requirements for him to recapture his status are very limited. The banking industry is supposedly all encompassing in scope and with the industry a mess, it will take years to de-lever the financial mess and emerge, no matter what. During this social correction bank's brands will be held to very different standards than in decades past and their leaders must find a way to reinvent their brand's active participation in the building of America (work on defining utility and trust). It is a tall order but then so was the rescue from the mess a year ago. The point of this post is to consider how, in this case, the brands in banking are now potential liabilities to the activities of the firm as much as they are assets (picture a balance sheet). This is the most important lesson social mood can show us about brands right now: A crisis near the core of the brand's image, during a social correction, can generate overwhelmingly unexpected negative effects. This is the exact opposite of using brand effectively to lift a company dramatically during period of social expansion. Since we have not seen this kind of social correction in my lifetime it is new for many people and these considerations are worth some time relative to any threats posed in your brand's operating environment.
To keep this brief I did not revisit the issues of reviving very old banking brands that failed last year and/or were merged. For now it seems better to focus on those surviving brands and the implications for them. UBS had its own unique crisis this year and trust was violated at the core of their image. Their problems are deeply rooted but I believe they have a brand in mothballs...Paine Weber. Time will tell on all of this but I suspect in the years ahead that may be real consideration for them, especially if this social correction deepens.
We are all social animals and social mood has a pervasive effect on all our collective efforts. Changing perceptions are at the center of our changing reality. Social mood acts as the root trend through societies and understanding it adds order in changing times.
The second post in this series asked reader to cover a number of links. I tried to simplify it with this entry. I could have added more links to this post for reference but the last ten posts at this blog pretty much cover it. I do not post too often here even though I find these ideas very compelling. Dave
Afterthought #1 Tiger Woods' PR debacle is a fascinating case study in social mood all by itself. The US has the unique quality of having many individuals that have created their own successful standout brands. We've made an industry of it. From a personal standpoint, Tiger's life is a mess currently if half of what is in the tabloids is true but the value in this perspective is strictly from seeing his personal brand and that has the special quality of being very impersonal, even if it regards the details of a person's life.
Afterthought #2 In tonight's FT headlines there is an article about how Insurers To Launch Reputational Risk Product designed for sponsors like Accenture. When you think about it that particular sponsorship was the most damaged among Woods' collection. Still, the idea of insuring against the likes of Tiger and Kate Moss has to be the equivalent of hiring a private detective. You can already imagine where negotiation for such contracts will go in the future and again, that conforms to the expected polarity of trust during a social correction.
12 18 09....this thought below was added yesterday but I might be wrong about this....someone suggested this is a structured deal and not subject to a morality issue. I admit I do not understand "structured deals" but I will add that will not stop John Q Public from using this as a point in a developing social discussion about "shoulds" and other social obligations.
Afterthought #3 Morgan Stanley is reported to be walking away from its obligations on more than one commercial tower in San Francisco because they are clearly worth less than what they owe. Here's an example of how banking brands will be subject to social management in the years ahead (even if they do not owe us) and why their brands may work harder against them now than for them. Morgan Stanley is a survivor in this mess. I do not think they owe any TARP funds and have been having a killer year for profit since the rebounds began in March. The implications of this behavior will be decided int he public court where very few people really understand the business dealings of Morgan Stanley. Once you get through the white noise the question, socially, will become clear. Isn't a mortgage an obligation to pay.....not an option on a piece of real estate? Because if it is only an 'option to pay' if prices go up then it does not matter how many TARP funds we allocate through government, the financial system will crash. Soon we will come to see mortgages as they were always meant to be....social contracts where we take risks and accept the outcomes whether it is good or bad. If everyone walks away with no consequences, interest rates will be high double digits for the next generation or two in order to buy a house. The entire fabric of our country will change. Rather than project this outcome I submit that this is "what really matters" to us as a nation and therefore this is destined to become the dialogue we will share in the years ahead as citizen of the US. When did a mortgage stop being projected as being our "word"? As these discussions circulate the outcome is part of the social correction we must express (collectively)as we reallocate our social capital back towards things that will support long term growth of our country. This is why social mood is best used as a broad directional tool we discuss a society or country...or even an industry where social values are clearly changing. Ultimately, the laws and other rules we use reflect our shared values. As social mood changes, how we value things changes. Businesses lag these social changes but are eventually held to the standards set amongst us by acknowledging who we are as a group. If you'd like the details on this story here's a great blog for keeping abreast of real estate and banking issues. These sectors will see dramatic change in the years ahead it is important to be aware of quality sources of current information. Calculated Risk (blog) is definitely one of those. I added this afterthought because this issue, though small today, may reflect sharply on this behavior resulting in regulation or considerable public discourse. The age of "success at any cost" is over. This social correction will usher in the age of the good citizen in time. Good citizens do not walk away from obligations. Neither do good businesses, lest their reputation (and brand) be tarnished worse than Tiger's.
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