This article first appeared in my column on Equities.com more than two years ago. The events have changed, but the patterns have remained the same. I decided to not update this article (except from the title), because this way it interestingly shows where we stood a few years ago and where we stand now. Up to you to decide how much has changed since. I hope you enjoy the read.
According to Oxford Dictionaries, “post-truth” was the word of the year in 2016. Thanks to the controversial “Brexit” referendum and the highly contested US presidential election, the use of the term increased 2000% last year. The phrase ‘post-truth’ is aptly described by Lahcen Haddad as the use of pseudo-facts to twist reality, so that it looks and sounds in line with the fears and anxieties of an already angry and frustrated population.
And it’s not just the integrity of politicians that is being questioned. Edelman, a global PR firm reports that public trust in all four key institutions — business, government, NGOs, and media — has broadly declined. Over the last year, we have seen a public backlash against media outlets and social media platforms facilitating ‘fake news’, and also against public figures and brands that have been seen to align themselves with controversial politicians and their beliefs.
For modern investors and consumers alike, this poses an interesting dilemma. While it has always been important to ‘look behind the scenes’ at a brand’s backstory and values to make sure there are no ‘skeletons in the cupboard’ before investing, now more than ever the walls between business and politics have been broken down, and there are many more factors to consider.
So how much is brand integrity affecting business, and how can investors and consumers make safe investments in the ‘post-truth’ age?
The Sheep Have Become the Wolves
More so than ever, people are realizing that brands and media companies are only as strong as their customers and followers. Thanks to social media, today’s world has become more transparent and brands and public figures are expected to weigh in on current events and social issues. As Uber recently found out with the #Delete Uber campaign, staying neutral is not an option anymore, and lack of a clear stance can be misconceived as complicity.
As consumers take sides, they are using their buying power as a political weapon. The Grabyourwallet movement is encouraging consumers to boycott brands and retailers deemed to be supporting of the Trump family or endorsing president Trump’s administration. However, on the flipside, brands like Nike (NKE), Nordstrom (JWN), T.J. Maxx (TJX), Starbucks (SBUX) have found themselves losing custom from Trump fans, for voicing opinions against the president and his policies, or in the case of Nike for releasing a Nike Hijab, which has been deemed ‘Un-American”.
Corporate values have become a key motivator of customer purchase decisions, dramatically increasing volatility for brands. While this has placed some brands on the firing line, it has also boosted the popularity of brands seen to be taking a moral stance.
Over the last year, we have seen brands taking a stab at the ‘powers who be’ with advertising campaigns and company policies. In the midst of the Trump immigration ban fiasco, Airbnb won millions of hearts by offering free housing to those affected by the travel ban, and Google (GOOG) and Starbucks announced new employment policies aimed at welcoming foreign workers. Over the last year, Airbnb, Budweiser and Amazon also released adverts that tackled the issue of acceptance and integration of people from different backgrounds and cultures.
Smart brands are realizing that their values offer a strong playing card, and while it might be viewed by some as opportunistic, by weighing in publicly on political and social issues whenever the opportunity rises, brands can see likes, shares, followers and sales come rolling in.
Public Take a Stand Against ‘Fake News’
It is not just brands that have been affected by the political and social whirlwind in the US and Europe. The media and social media platforms have been forced to take sides too, and those viewed as being selective in their facts have come under fire.
In January 2017, after the Grindeanu Cabinet was sworn into office in Romania, widespread protests erupted against controversial ordinance bills effectively legalizing government corruption. In response to the bills, the commission of Romanian advertising agencies organized a boycott of “Romania TV” & “Antena 3”, which spread government propaganda. The media boycott successfully led to a withdrawal of advertising from multiple major brands from those TV channels.
In the US, President Trump’s administration was recently forced to apologize after retweeting a Fox News report based on a Breitbart news story. Both Fox News and Breitbart have been publicly slammed for publicizing factually incorrect and inflammatory right-wing content, and politicians, brands and advertisers have begun giving them a wide berth in fear of being caught up in the controversy.
In response to accusations that Facebook was responsible for spreading fake news during the US presidential election — which founder Mark Zuckerberg initially denied– Facebook publicly backtracked in December 2016, announcing the launch of measures to combat fake news. Other media and social media companies such as Medium and Snapchat, have also returned to their core mission and values, and controlling external content from paid advertisers, in an attempt to better control the content which reaches their users.
Be Careful Where You Place Your Chips
We are entering a new era of brand volatility in which consumer trust and loyalty — and in turn custom — are linked to much more than products, but instead the values and perceived allegiances of brands and their stakeholders including founders, investors, employees and media partners.
A recent Fast Company article offers some tips for how brands can protect themselves from unwanted heat during the Trump administration, but for investors and consumers, who want to place their chips on the right bets, and to avoid any nasty surprises, this means researching brands and their stakeholders extensively.
Here are some guidelines to bear in mind:
- Find Out if a Brand Practices What it Preaches
The Delete Uber campaign is great example of how important this is. Uber wasn’t boycotted because the CEO is a Trump advisor, but due to the snowball effect of multiple scandals including the CEOs spats with Uber drivers, allegations of spying on customers and downplaying sexual assault risks. With consumer trust at a low, the JFK airport surge ban was enough to tip consumers over the edge.
- Find Out if the Brand Looks After All of its Stakeholders
Motivational speaker and author Simon Sinek said, “Customers will never love a company until the employees love it first.” A good way to get a grasp of how well a company sticks to it’s core values is by looking at how happy it’s key stakeholders are: its employees. Millennials are value driven and want to work for companies which ‘make a difference’. Use resources such as Glassdoor to assess what current and former employees have to say about what goes on behind closed doors.
- Listen to What Customers are Saying
Check social media channels and review websites such as trust pilot and Yelp to see what customers are saying. Look at how brands respond to clients and deal with complaints and issues. Do they try to minimize damage or do they try to listen to customers and implement changes?
- Look at a Brand’s Loudspeakers
As seen in Romania, and with respected media organizations turning their backs on Fox News and other right wing news outlets, it is important to look at where brands are advertising and any media partners or celebrity endorsers they may have. In a recent article Jeff Jarvis argues brands should be judged by the company they keep, citing how the Guardian, Havas, the UK government, the BBC, and now AT&T have pulled their advertising from Google and YouTube, complaining about placement next to “inappropriate” and “offensive” content.
Companies have always been vulnerable to scandals. Even in monopolized industries, the power has shifted towards consumers. Who could serve better as an example than United Airlines (UAL), who seems to have learned only little from past experiences. The 2009 song “United Breaks Guitars” has over 16 million views on YouTube until today, and it allegedly sent the airline’s stock price down by $ 180m when released in protest to poor customer treatment on their flights. The Facebook (FB) video of the company’s most recent scandal of the physical assault of a customer due to overbooking has already generated 19 million views, and the company’s stock price has fallen by $ 800m.
However nowadays brands have to worry about much more than their employees behavior, and customer service, instead making sure that their wide network of stakeholders stay true to their values and aims. Gone are the days when brands can bury their heads in the sand about current affairs. Modern consumers are becoming increasingly motivated to stand behind the causes and brands which represent their views and values, and are placing their money, and trust, exactly where their mouths are.