One of the biggest advantages that brands have is the trust that consumers repose in them, which leads to repeat purchase and loyalty. But what happens if this trust is broken? Or if brands exhibit undesirable behaviour? In the recent past there have been several instances of brand crisis which have catapulted well established brands into the conundrum of public outrage and negative publicity with consumers baying for blood and proclaiming a brand boycott.
Very often one upset consumer is all it takes to unravel a brand’s reputation, at least in the short run or so it would seem. Today’s consumer has easy access to information. From small to big brand misdemeanours- they are all out there in public view. With increasing penetration of social media, consumers are spoilt for choice when it comes to platforms to vent their anger and share negative news.
So one would expect that this would seriously dent the market shares of companies and brands which have behaved irresponsibly, right? Not entirely!
Lets start with the evidence that brands do suffer commercially from boycotts. One of the most widely panned brand behaviours, was the case of “United Breaks Guitars” episode in USA, where United Airlines broke a passenger’s checked in guitar and refused to compensate him over a technical detail. The disgruntled passenger created and uploaded a triology of songs on youtube in 2009, titled “United Breaks Guitars”. The first video itself gained huge eyeballs and snowballed into a big crisis for United Airlines. According to a Times Online article this led to a loss of 10% in market capitalization for United Airlines.
More recently, we had Nestle’s Maggi instant noodles being banned in India due to presence of MSG and the withdrawal of Maggi from shelves in 2015 brought down its share from around 65% to low double digits. And then of course there was the case of an Indigo Airlines passenger getting manhandled on the tarmac at New Delhi, by IndiGo employees. Soon after the video of this incident surfaced online on 7th November 2017, the stock of the publicly listed holding company Interglobe Aviation, slipped by around 2% as reported by Outlook.com on 8th November, 2017. In all the above cases, there was of course a huge storm of criticism kicked up on social media with lakhs of shares, comments and tweets criticizing the brands and many calls for boycotting their purchase.
On the face of it, this supports the story that brands are held accountable and cannot get away with unacceptable behaviour. Consumers today exercise their power to punish brands for their misdeeds. While this may be true to some extent, it is only a partial truth. It is important to dig a little deeper and wait a little longer to find out if the picture thus projected is real or a mirage?
If one looks closely, there exists a big gap between consumer attitude and actual behaviour.
In all the above examples, if we look back on market data, we find that none of these brands really lost much, with the exception of Maggi because it was legally banned. But even Maggi regained lost customers after its relaunch in November 2015, and it’s now back to being the market leader with about 57% market share. Admittedly its lost some ground to competitors, but considering the seriousness of the issue at stake, the dent in Maggi’s sales, is not very significant. Maggi’s case could be slightly different because it had a strong emotional connect with the consumers who love the brand and vociferously defended it even during its worst phase of the brand crisis. And we can argue that it this strong emotional bond which helped Maggi come out strong even after the crisis.
But the case of the United Airlines incident in USA or the more recent IndiGo Airlines incident in India, are somewhat different from Maggi in terms of the nature of brand customer relationship. Both these airline brands share a largely functional relationship with their consumers. Indigo is preferred in India due to low prices and on time performance.
The news about big losses due to share price drop is more hype than substance. The Times article about shareholder loss for United Airlines was widely critiqued as being implausible as there were other factors which the struggling airlines was facing, which had led to the drop in market capitalization. Similarly the drop in market capitalization for IndiGo’s holding company was only a short term blip. A look at the performance of both airlines clearly demonstrates that they continued to gain share, post their respective crises.
DGCA data (accessed 30/6/2018), indicates that number of passengers flying IndiGo fell only slightly from 4.133 million in October 2017 to 4.131 million in November 2017 (the passenger manhandling video broke out on 7/11/17). By the very next month, sales were growing again, and IndiGo flew 4.43 million passengers in December 2017, with the upward trend continuing into 2018, to reach nearly 4.58 million by April 2018. The fact sheet of investor relations solutions indicates that the for the year ending Q1 2009, revenue passenger miles covered by United Airlines was 105,748 which increased to 114,254 million in the year ending Q3, 2009 (United breaks guitars video was released in Q2-July).
If one were to look at the social media comments on Indigo- there are calls for boycott and claims of “I will never fly Indigo again”. However, that sentiment has not translated into action. Consider the average flyer. If one needed to travel for work or for a holiday, one would look at airlines which have convenient times and competitive fares. If Indigo fits the bill and offers the added advantage of an excellent on time record, then it becomes a natural choice. So, even people who were angry with Indigo, do not go the extent of inconveniencing themselves to punish the airlines. Even if the intent to punish the brand is strong, it gets overtaken by need for convenience. Price and quality also take precedence over the desire to punish.
Of course if mistakes are repeated then it will impact consumer perception of quality and expected value and then, if the consumer can find other convenient alternatives they will switch, but till then there is the need to “get on with my life” and if it means letting the brand get away, then so be it!
Views are personal
The author is professor-marketing and Delhi centre head at SPJIMR