Marketing and Crisis Management

Imagine this scenario: you are the boss of a company manufacturing infant milk powder. One day, your head of marketing and head of product quality come to you with some grave news: a hospital has contacted the company informing them that 10 babies in their 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 head of product quality cannot explain why and he needs time to investigate the situation. Your head of marketing, 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?

Crisis management 101

We should be fortunate if we, through the course of our lifetimes, never have to be 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. How a company’s management and its marketing and communications department reacts 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 the 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, therefore, its brand, its reputation, its very future.

In the case histories of crisis management, these are the best practices that have pulled companies through those 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. Just 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 are 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 at crisis hit areas and addressing victims directly.

Crisis management 201

Let’s try another scenario: you are the local country head of a global, billion-dollar investment bank. Through weekly conference calls and updates, you know that 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 financial products are themselves quite complicated and, in your opinion, rather risky, as they are linked to financial derivatives such as Credit Default Swaps (CDS’s). However, taking a look at the prospectuses and the marketing material, you see that they are couched in investor friendly phrases designed to give the impression they are safe and secure, 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 own 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 dilemma is a lot harder, as doing the ethical thing actually harms the company. Resolving this is beyond the limits of this column. Which is why it’ll be continued, 3 weeks from now. See you then!


As seen in theSun, 8th October 2008.