Expect the Unexpected - Issue and Crisis Management

Università Master Issues
della of Science in & Crisis
Svizzera Communication Management
Italiana and Economics SE 2006

Managing Communications in a Crisis

Expect the Unexpected
Three exemplificative cases of crisis:
Perrier, Johnson & Johnson, Mercedes “A-Class”

by
Cammarata Vincenzo, Kurucz Veronika, Maj Valentina,
Salgirli Seda, Schulte Jan

Università Master Issues Managing Communications in a Crisis

Perrier, Johnson & Johnson, Mercedes “A Class”.

What is a Crisis?
‘A crisis is a major occurrence with a potentially
negative outcome affecting an organization as well as
its publics, services, products, and/or good name.’

Two different views of Crisis:
> Traditional view:
‘An event that can destroy or affect en entire
organization.’ (Mitroff et al.1996)

> Strategic view:
‘A decisive moment, a turning point
for a better or worse.’



Crisis are not unusual…
1982 Deaths caused by Tylenol

1990 Benzene in water

1993 Syringe hoax

1996 Suspect for poisoned candies

1997 Woman discrimination

1997 The A-Class failed the moose-test

2000 Privacy & Security on the web

2000 Deaths caused by Baycol/Lipobay



Common elements to all crisis
> A rude awakening
> The rapid speed an escalation of an event
> The presence of panic
> The tendency to act irrationally and preciptiously
when feeling intense emotions
> Chaos in internal commnications
(even if they have a crisis communication plan)

> The omnipresent press
> A threat to the company’s reputation



Crisis Management

- Strategic planning to prevent and respond
during a crisis or negative occurrence

- A process that removes some of the risk
and uncertainty and allows the organization
to be in greater control of its destiny

- Dynamic and enduring process.



Three exemplificative cases
in Managing Communications in a Crisis:

1990 Negative approach

1982 Positive approach

1997 A well-known case



Perrier & Benzene - Facts

1989 – Leader in the sparkling water market
> High reputation – 13% of the Market share – 1mio bottle sold

’80s High Health Consciousness
(Hot spot among consumers)

1990 – Benzene scandal
> Presence of the chemical Benzene at levels above standards



Perrier & Benzene - Actions
- 7mio bottles recalled from North America
> Ronald Davis’ (Perrier America President) declarations
problem limited to North America
Cleaning Fluid on a production line machine mistakenly used
Declaration done before identifying the source of contamination.

Three days later… discovery:

- 6 months’ worth of production affected
- Not only North America but also Global Market



Perrier & Benzene - Actions
> Frederik Zimmer (Perrier’s International Division President)

“Perrier water naturally contains several gases,
Including Benzene.”…

“The Benzene entered the water because
of a dirty pipe filter at an underground spring
at Vergeze in southern France.”

It means that “Natural” Perrier
was in reality processed.



Perrier & Benzene – Effects on the market
> Financial effects

- Perrier’s stock price declined
- Market share declined (13%>9%)
- Price to consumers declined

> Plans to restructure

- Management structure and bottom line
Firing of Gustave Leven (CEO & Founder)



Perrier & Benzene – Analysis 1/3
Lack of internal
communication and coordination
> contradictory explanations
> convey misinformation
(credibility & reputation damaged)
> no centralized approach

Surprise effect & Panic
> Irrational behavior > loss of control



Rely on media for communications 2C

> Media controlled the information
> Defensive behavior (rather than offensive)
> Lack of proactive and clear communication towards customers

Scandal became a big media event

> Rapid widespread of the news > global level
> Emotional component
(People scared > betrayed > bad reputation)




- Inability in gathering information
without loosing control

- Bad relationship management
with stakeholders

- Lack of a Crisis communication plan



Johnson & Johnson - Facts

- Multinational of health care

1982 – Deaths caused by Tylenol capsules
> Seven people died in Chicago

1986 – Second case of death
> A New Yorker died



Johnson & Johnson - Actions

- 31 mio bottles ca. of Tylenol recalled
(a retail value of more than USD 100 mio)

- Offered to exchange
all Tylenol capsules with Tylenol tablets
(other million dollars..)

- Production Suspended
(until the company could innovate its tamper-resistant bottle)



Johnson & Johnson - Actions

- Toll-free telephone hotline

- Cancel all Tylenol ads

- Immediate Nationwide warning
not to use Tylenol
(Transparency and honesty towards customers)



Johnson & Johnson – Analysis

- Proactive approach
(Opportunity to consolidate the relationship with Stakeholders)

- Timely PR campaign based on honesty
(Ads, videos to newspapers and TV Networks)
> Keep the public informed

- “Customer-oriented” > Customer safety first
(than company profit and other financial concerns)



Johnson & Johnson – Conclusions

- How handled J&J the crisis situation?

Offensive - Proactive – recalling the product
Saving the brand
Responsability – care for its consumers



Johnson & Johnson

Take care not only the crisis,
but also the EMOTIONS.

quot;We believe our first responsibility
is to doctors, nurses and patients,
to mothers and fathers and all others
who use our products and services.quot;



Mercedes Benz – “A-Class” case



Daimler Benz AG - facts

1997 - Mercedes Benz subdivison of Daimler Benz AG
(now DaimlerChrysler)
> annual turnover 124 billion DM - 180 000 employees

> Market share 24,4% - on the European luxury car market
(BMW 20,7% and Audi 20,5%)

- High reputation
technological innovations, safety and high prices



Baby Benz - facts
> First-ever Mercedes for middle market segment
> Goal: reaching new customer groups (young, women)
> Risk: weaken Mercedes-brand
> Central values: Quality, Technology & Safety !!!
> Mercedes strategic and technological bet
- Extention of the luxury brand into a lower segment
- Implemention of new development process and production plant
(2.5 billion DM and 47 month of realization)

18.10.1997 - Launch after an 18 month-marketing campaign ‘A-Motion’
(200 mio DM) and 100 000 pre-booked sales



“This is what our future customers want.
We are working on it.”



The moose-test - facts



‘How to create Crisis out of an Issue?’

a. Detection
b. Prevention/ Preparation
c. Containment



From Issues to Crisis



a. ‘Mis’- Detection
1. PRODOME:
Date: 23.09.1997
Location: Tannishus/ Denmark, selection ‘Car of the year’
During the test two wheels of the Baby-Mercedes, a
clear favourite, lost contact with the road at the
average speed

Mercedes sent engineers and The PR Manager to the crime
scene!!! Some eyewitnesses claimed the vehicles
disappeared overnight and returned back in the morning.

Statements that came from PR manager:
“These are claims that cannot be proven!”



a. ‘Mis’- Detection
2. PRODOME:
Date: 21.10.1997
Location: Sweden,Test Drive for “Teknikens Vaaerd” magazine

The A-class failed the moose-test,more than failing
it was topped over at 60 km/h. Journalist Robert Collins
and three collegues suffered from minor injuries.

The Mercedes Headquarters were in Tokyo Motor Show
and only statement from Mercedes was:

“…it is not necessary to provide an official
statement, simply because somewhere a car
has topped over.”



b. Preparation - Prevention
Mercedes:
> Failed to see all the prodomes .
> Missed out all the opportunities for prevention.
> No plan of preparation at hand.

Journalists (left in the dark) started to conduct moose-tests:

Baby-Mercedes lifted two tires and topped over once gain in
Auto Bild’s test.

FOR JOURNALISTS IT WAS A TOO GOOD
OPPORTUNITY NOT TO MISS.



Humor break :-)

“Honestly, we haven’t “Super, the A-class is
done anything!” passing the moose test!”



‘How to Prepare in Advance a Crisis’
> Brainstorm Ideas (Include the Senior Managers into BS process)
> Assess Your Risk
> Set Communication Objectives for Potential Crisis:
(Flow of Communication at all the times!)

> Consider Your Constituencies:
(Find out constituencies effected by the crisis)

> Analyze Your Channel Choice:
(It’s important to find the right channel)

> Assign Different Teams to Each Crisis:
(Different problems require different kinds of expertise)



c. Containment - Actions
> Jürgen Hubbert (board member – resp. Private Cars)
Legal action against “harebrained” journalist > image damaging

- Negation of the problem

> 29.10.1997 (First press conference and first admitance)

- “We have a weakness!”
(Goodyear tires – not appropriate test condition in Sweden)

A-class would carry on with
changed tires and instalation of ESP

Auto Zeitung replicate the test with new tires
but results were the same…



c. Containment - Actions
> 09.11.1997 (Welt am Sonntag pondered A-Class production
stop by CEO Jürgen Schremmp) > Mercedes denied again

- “No comment on speculations.”

> 11.11.1997 (Press conference by Jürgen Schremmp)

- “A-Class stopped for three months.”
(He admitted mistakes and the process would be reviewed)

Evasive and dishonest
communication tactics abondened.
(no communication tactic)

Admission of the problem > Coming up with the solution



‘How to Communicate during a Crisis’
> Define the Problem
(reliable info and S.M.A.R.T. communication objectives)
> Gather the Relevant Information
(Managing many sources of information)
> Centralize Communications (The need of a crisis center)
> Communicate Early and Often:
(Say whatever you can as soon as possible)
> Get Inside the Media’s Head
(Media looks for a good story with villains, victims and visuals.
> Communicate Directly with Affected Constituencies
(Internal and external)
> Keep the Business Running (The show must go on!)
> Make Plans Immediately to Avoid Another Crisis (To be prepared)



‘How to get out of a Crisis?’

d. Recovery
e. Learning



d. Recovery
> Delivery stop of A-Class
strong corporate image > positive impact on media
(technical problems of the Baby Benz immediately solved)

> 19.01.1998 (workshop with journalists on driving dynamics)

- Now I really like this car! ”
(R. Collin, Berliner Zeitung)
> 28.02.1998
Relaunch of the A-class
(Extensive marketing campaign including humor and celebrities)



Humor break :-)

“We have reinvented safety. The new A-Class”



e. Learning

A more timely, open, honest
and coherent approach to communication
saves both face and money.

“The A-class has passed the moose test.
We have learned from it.”



ADV Campaign

“Strong is the one
who does not
make mistake.
Stronger is the one
who learns from “I have learned more out
his mistakes.” of my throwbacks than my triumphs.”



“What happened after”

The Crisis cost for Mercedes

- 300 mio DM (ca. €154 mio)

A-class best selling new car in 1998.
(16th overall, best selling Mercedes)

Università Master Issues

Managing Communications in a Crisis

Perrier, Johnson & Johnson, Mercedes “A-Class”

Thank you for your attention

by
Cammarata Vincenzo, Kurucz Veronika, Maj Valentina,
Salgirli Seda, Schulte Jan

Expect the Unexpected - Issue and Crisis Management

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