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CMO Inc. Executive Interview

Peter Horst, Founder, CMO Inc.

Take a Stand or Play It Safe? Brands Seek the Right Response to Highly Charged Political Issues

It used to be relatively easy for brands to employ shared values to tug at the heartstrings of consumers. General Motors touted “baseball, hot dogs, apple pie and Chevrolet” in the mid-70s and it drove sales. Jack Daniel’s whiskey proudly boasted “we live in a country that lets people build what they believe in…” and buyers drank it up. Dodge Ram Trucks tied a moving Paul Harvey homily on how “God created a farmer” into their ads and people listened raptly.

Until the past few years, companies seldom addressed social issues that weren’t universally acceptable, such as helping American victims of natural disasters or supporting research into finding cures for cancer or heart disease. But since 2017, the landscape has shifted dramatically. Corporations have gone beyond saluting common values and moved boldly—sometimes blindly-- into the uncharted territory of advocating activism for specific, often controversial causes.

As noted in an Inc. Magazine article by Maureen Kline, VP of Public Affairs & Sustainability for Pirelli Tire, NA. “Brands took stands on such issues as immigration policy, climate change, national parks, diversity, and net neutrality - even when these issues weren't related to the company's business. The article cited a survey by Cone Communications , finding that 63% of Americans were "hopeful businesses will take the lead to drive social and environmental change," and that 78% "want companies to address important social justice issues." It also noted that the 2018 Edelman Trust Barometer, based on a global survey conducted in October- November 2017, showed "a fast recovering belief in CEOs (up from 37 percent to 44 percent), rewarded for speaking out on issues." 

Peter Horst, Founder of CMO Inc, a senior global marketing executive with almost three decades of leadership at major organization consumer and service organizations such as Hershey, Capital One and TD Ameritrade, agrees with this research. “Most CEOs used to sit on the fence, now their silence is considered complicity,” he said. “With so little trust in government and institutions to fix a broken system, consumers now expect brands to play a role and put their values on display by helping to make society better. However, companies need to carefully assess where and how to engage.”

Horst, who has guided the marketing of banks during a financial crisis and food brands through inquiries into questionable ingredients, has recently written a new book on the topic: Marketing in the Fake News Era: New rules for a new reality oftribalism, activism and loss of trust. In a recent conversation with CRMXchange, Horst said he was “struck by what a treacherous environment we seemed to be living in over the past few years. Whether you call it the Trump Era or the Fake News Era, it’s become a boiling pot of issues and trends and other factors that make life difficult for brand owners.”

Horst cited the much-discussed annual letter to CEOs sent by BlackRock CEO Larry Fink which stated that "... society increasingly is turning to the private sector and asking that companies respond to broader societal challenges. Indeed, the public expectations of your company have never been greater. Society is demanding that companies, both public and private, serve a social purpose…whether it’s employee retraining, healthcare or other issues. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.”

“With the dramatic polarization now taking place, people are retreating into the bosom of their tribe,” said Horst.” They’re turning to the brands they patronize and saying ‘Ok, how are you going to fix it all?’ And while that presents a fantastic opportunity to build a deeper and more resonant bond with customers that goes beyond price points, features and functions, it also creates risk. These risks go in all directions: there’s the danger that a company will say something that some people like and some people hate, but there’s also the risk of trying to ride out issues without saying anything. But in the age of the activist politicized consumer, there are no more safe sidelines. CEOs know that consumers now often interpret silence as a position and it puts companies in jeopardy of having people fill in that blank piece of paper for them. You risk the chance of being thought of as providers of a commodity with no character or moral standing. Yet, the more a company puts its values on display, the greater the chance of some people objecting to them.” 

Horst cited research that states what some may see as obvious conclusions: If people agree with a company’s stand, they may like it more and purchase more, if they don’t, they might like it less and purchase less. “But the degree and the relativity of those pluses and minuses may vary by segment and by issue, so you can’t just make a blanket assumption about what the outcome might be,” he said. “The quantitative part of is finding a way to numerically assess what the benefits and drawbacks could amount to for a business. But there’s also a strategic, almost more judgmental-based aspect of it, which is brand vs, sales, long-term equity vs. short-term results. Are there benefits in being known for taking a stance, such as in hiring and retaining employees, stronger emotional ties with customers, proactive good will with the community? This knowledge of what a company stands for can be helpful when it stubs its toe in some way.” 

He pointed to Starbucks as an example of an entity that is known for being socially responsible yet was portrayed in a negative light when a store manager in Philadelphia called the police on two customers she thought to be loitering. This immediately triggered an international brand crisis, causing the company to have to defend itself from charges that it was racially insensitive. Awareness of the company’s positive values made it easier for them to bounce back quickly along with Starbucks' rapid and well-publicized effort to respond by providing sensitivity training for all employees. He contrasted that with Uber, which never gave anyone any reason to believe they had any guiding moral compass, trying to provide additional vehicles at Kennedy Airport during a taxi strike. Rather than being perceived as trying to step in to help travelers, their intervention was viewed as an attempt to break the strike.

Of course, there are often unintended consequences. In the Starbucks situation. their updated ‘open bathroom’ policy has caused difficulties with some customers who are uncomfortable with the constant flow of people they may consider to be seedy and with employees, who may resent not only being compelled to take classes to ensure they are not racist but having to clean the bathrooms far more frequently.  After the recent Supreme Court decision to uphold the president’s travel restrictions, Airbnb sent an email to people in its database asking them to contribute to a fund to aid immigrants, which alienated many of those who were contacted.

Horst acknowledged these difficulties. “In my book, I was careful to never prescribe an answer for everybody. Each company needs to go through a series of thought processes in deciding what to advocate. Are there issues that it genuinely cares about-- because no organization wants to be inauthentic in what it does to curry favor with the public which would be rapidly sniffed out. This occurred with Audi, which ran a stirring Super Bowl commercial about a young girl in a go kart race and her father’s wish for equal opportunities for women, which turned out not to be the case at the company itself.” Another such misstep was the Pepsi Kendall Jenner ad in which she stops a riot, sounding what many critics saw as an utterly false note about race relations, which Horst sees as a worst-case scenario. He cites the Heineken “Worlds Apart” promotion-- which portrays people of varying backgrounds getting together to discuss matters over a beer --as a far more genuine promotion and a best-case example.

He asks if there is a natural connection of the business model of a corporation, such as IBM which was an advocate for DACA and the Dreamers due to the diversity of their hiring practices. “A business has to make sure that its own house is order and know how far they want to go. The NFL never wanted to be a political organization, but they didn’t have a choice; the players were kneeling, and the president kept tweeting.  It took them 18 months to cough up a policy because they never really knew where they were on the issue.  Were they in favor of respect for the flag or the players’ right to express themselves? They were unprepared when the situation came up and they suffered greatly for it, with a large segment of fans boycotting their lack of action and others dissatisfied with their refusal to stand up for the protesters. The league discovered that nothing goes as viral as rage. So, at the very least, a business needs to ‘know thyself.’

Horst notes that the least controversial path to addressing issues is the one many brands take by addressing “evergreen” non-polarizing topics such as “real beauty’ for Dove. This engenders little to no risk to the company. A level up from that is “safe issues” where businesses can be a little sharper and embrace advocacy, such as Frito Lay encouraging young people to register to vote or a company supporting women’s issues, but not taking a yes or no stance. The most provocative stance—with the highest risk of people being alienated but also the highest reward of customers becoming more engaged-- is companies taking “positions” such as open advocacy of immigration or favoring or opposing same sex marriage. Fewer brands take this route, unless there are obvious benefits to them. Of course, such brands must accept that certain customer segments will then decide that the company is not for them.

Companies also need to know when to say nothing, as Nordstrom did after President Trump tweeted in protest of their discontinuing his daughter Ivanka’s fashion line. “They made the decision based on numbers, not politics and just waited out the controversy, which dissipated in a very short time. Companies need to be able to analyze if it is an issue that will just go away or one that has legs and must be addressed.” He noted Wells Fargo’s initiative to create a campaign that acknowledged the ongoing charges of corporate wrongdoing and state what they were doing to change their culture.

Another reality that has surfaced is that politics has become pop culture. One memorable example of this was the viral videos of people throwing Keurig machines off their balconies, setting them on fire or smashing them with axes to protest the company’s announcement that it would stop advertising on a popular right wing talk show after being pressured by liberal groups. It later rescinded this decision, a flip-flop which made it seem the company just shifted under pressure from activists on either side.  

“It’s very easy for people to badge themselves morally …with the power of social media, everything has become so entertainment gamified,” Horst said. “Two out of every ten people say they have participated in some type of political protest this year and intend to take part in more. A lot of people are new to this. While they’re fired up and passionate, it’s a lot easier to sign up for #boycotts on social media than to march in the rain and collect handwritten signatures.”

In this hypersensitive environment, Horst believes there are no cookie-cutter answers for brands. “Every business needs to have a clear idea of what it truly believes, know what risks are involved in taking a stand and go through the process of planning what it would say when caught in the crossfire of conflicting public opinion. A company needs to look and see who are the people making noise on social media…are they our core constituency or those who will most likel  never do business with us anyway? It needs to be done quickly…the gavel in the court of public opinion often comes down over a 3- or 4-day period, so there’s no time for focus groups or drawn-out meetings to ponder a decision. Leaders need to know whether to respond and if they do, what to say that will come off as thoughtful and not a knee-jerk reaction.”