How Activism Targets Different Business Sectors

The surge in social and political activism in recent years has finally become a recognized, formidable challenge in C-suites and Boardrooms of American business today.  At the same time, there are still so many unknowns about this phenomenon – what is the key issue inspiring an activist initiative, what exactly is driving their actions, what form will the protest take, who are the principle activists, what kinds of outcomes can be expected, how will the company brand or reputation be effected, and finally what is the likelihood that your specific industry or business sector will be targeted. 

Activism is about change.  Most activist initiatives start with strong beliefs about what they perceive as fundamental wrongs that impact society negatively.  Among the most common and severe causes include inequities such as the rights of women and civil/non-white populations (e.g. Black Lives Matter), sexual harassment, unethical and/or unfair behavior by companies and specific executives, and product or service performance that can irresponsibly endanger the safety or privacy of customers. 

Validating Brand Risk Types By Industry Is Critical

While business leaders believe that every situation is different, especially with unexpected demands, they also admit that all these types of activist events can become a major risk to their brand integrity and business valuation.  To clarify what is actually happening with activism trends, Marketing Scenario Analytica (MSA) has been monitoring and evaluating activism risk events over the past 3 years.  Specifically, MSA has conducted an in-depth assessment of the frequency, nature and manifestation of these social/economic/political activist events in a recent sample month.  A key finding helps to answer a critical question by executives:  what is the likelihood of such an event happening to me, or to a peer in my business sector.  And related to this, what type of risk event is most likely to occur – see chart below:

MSA tracks and analyzes activism risk events every week. This sample comprises 138 risk events from 4 weeks during October, 2018.

MSA tracks and analyzes activism risk events every week. This sample comprises 138 risk events from 4 weeks during October, 2018.

The empirical data from this research show that the types of industry most likely to be targeted by activists are primarily service oriented, which tend to be very visible and multi-customer oriented in our culture.  Further, each service sector has certain unique attributes that will attract different causes or issues pushed by activists.  Not surprisingly, technology faces activist protests mainly on information security and data privacy.  Many of these technology companies have been developed and managed by bold, innovative managers who thrive on breaking the mold and testing societal limits, so risk exposures consistent with this managerial backdrop are likely.

New Demands Require New Solutions

This new world of unpredictable activism is dynamic and potentially confusing, primarily because there has been a general lack of hard data that can allow business leaders to better understand their vulnerabilities, prepare accordingly and even take proactive initiatives that reinforce a company’s brand values and help prevent such activist threats.  MSA can provide important empirical information to help companies make smarter decisions and focus better on their biggest vulnerabilities, which will help managers avoid such catastrophic risks and strengthen their brand reputation.

To receive a copy of MSA’s risk event research, click here.

The Perilous "Blind Side" to Socio-Economic Activism

The internet has accentuated the impact, public sharing and immediacy of an ominous set of risks to business in the past few years, aggressively fueled by activists who can unexpectedly damage every type of brand or reputation.  

There is no longer a reasonable “comfort level” for business leaders which prevailed for decades before social media came on to the scene.  Threats to the integrity of a company or personal brand occur in every type of industry, every company size, and are manifested in so many different kinds of risk events.  For example:

  • Employment Practices – diversity/inclusiveness, health and safely, compensations, etc.

  • Social Issues – civil rights (“Black Lives Matter”), LGBTQ and women’s rights, gun ownership, etc.

  • Corporate Conduct – business ethics, corporate governance, data privacy, ethical sourcing, etc.

  • Civic Responsibility – child welfare, community outreach, education, political accountability, etc.

  • Charity/Philanthropy – arts & culture support, disaster and humanitarian relief, donations, etc.

  • Environmental Stewardship – energy efficiency, carbon footprint, recycling, water use, etc.

Most business leaders hear about a variety of these brand risk events in the news, yet most also feel detached – that such events are unlikely to occur in their own backyard.   In particular, they aren’t fully aware of the extent, frequency and nature of all the types of brand risk events surrounding their business, much less if/how their business is vulnerable to such activist attacks and how quickly social media can ubiquitously motivate an anti-company movement. 

In short, there is a serious risk that most of these leaders will be blindsided when an event does happen.

So what should companies do to reduce these risks to their brand or reputation?  At a minimum, business leaders should become more familiar with the full breadth of this new world of different brand risks.  Activism has many causes and avenues to incite problems, most often using the internet to quickly target a brand.  Disinformation prevails in many cases, and all too often, leaders are caught by surprise with no good response plan in their hip pocket.  Basic preparation is essential and includes two critical preliminary steps: 

1.      Learn and Focus On the Most Likely Risks – randomly hearing about an activism risk event is not enough.  While these activism trends are relatively new, there now is empirical data being collected that will enlighten management on the vast array of risk events, how each threat evolved, and the outcomes for each event.   Business leaders can study these events by industry, type and sector to better gauge the risks they will most likely experience.

2.      Diagnosing Vulnerabilities – such an assessment of hard data will provide a framework for a more focused and meaningful internal analysis of pertinent vulnerabilities within a company.  Ideally these vulnerabilities should be quantified, prioritized and compared to peer group companies to assess relative threat exposures.

Marketing Scenario Analytica is at the forefront of helping companies minimize these new brand risks. MSA has developed a detailed catalog of activism risk events impacting brands that clarifies the incidence and nature of these incidents.   We’ve also developed a proprietary approach for assessing the vulnerabilities of a company, which are documented and evaluated in a scorecard approach.

Are you concerned about getting blind-sided by an activist risk event?  MSA can help.

Brand Risk & Activism Featured at Boston University’s 2019 BBR Institute Event

BU’s “Risky Business Conference: Understanding & Mitigating Brand Risk”

 Branding is the core of marketing, yet it is a strategic discipline that has been dramatically impacted by social media in recent years. It has opened the door to a great variety of activism and disinformation and as a result, companies are facing new types of brand risks. In light of this surge of threats to brands, it is important to stay updated with the latest trends and new research that can provide insights to help protect (and ideally build) brands.

A few weeks ago (May 22), Boston University’s Questrom School of Business held a conference on “Risky Business:  Understanding & Mitigating Brand Risk.” The main focus was on whether and how brands should take a position on social, economic and political issues that have polarized our society today.

Here are some of the highlights from this conference that show what companies are doing, which can hopefully help managers minimize such brand risks:

Tim Powell (President, The Knowledge Agency and Marketing Scenario Analytica (MSA) Network Partner) presented findings from his recent Conference Board supported study “Brand Equity Risk: Challenges in the Digital Marketing Era.” The main goal was to determine “the impact of digital and social marketing risks to brand equity.” Tim focused on brand equity risk to emphasize the financial vulnerability of this valuable asset.

As part of this study, Tim identified and tested 7 different types of brand risks to assess the probability of occurrence and the potential impact

  1. Counterfeits Risks – knock-offs described as genuine that are sold on the internet.

  2. Brand Safety Risks – typically ads displayed adjacent to objectionable content (e.g. adult content, political extremism).

  3. Public Issues Risks – where people perceive the brand to be on the “wrong side” of a polarizing issue (e.g. gun control, “LGBTQ”).

  4. Disinformation Risks – usually a website or social media campaign launched against a brand.

  5. Activism Risks – a rising trend where activists use social media to badmouth a brand, even organizing boycotts.

  6. Personnel Behavior Risks – key managers behaving in an illegal, unethical or socially unacceptable way, causing adverse publicity. 

  7. Execution Risks – where the message and/or visual is perceived as inappropriate resulting in consumer push-back.

 Some major findings from this study include: Brand equity risk is definitely a growing concern at the senior executive and board levels, where the rise of brand risks is commensurate with the increasing dominance of digital marketing. The discipline of managing brand risk is still emerging since this a fairly recent phenomenon.  The types of brand equity risk reported to be the most acute were “public issues” and “disinformation risks.”

Patrick Marrinan (co-founder of MSA) moderated a panel of impressive brand risk experts who have noteworthy experience dealing with various threats to brand value. They also showed how many companies are adding anticipatory tools and responsibilities to protect against and more quickly respond to such threats, going beyond crisis management:

Janet Comenos – (CEO of Spotted, a celebrity data firm offering “disgrace insurance”) commented that “social media has made personal brand crises inescapable.”

Pen Pendleton – (co-founder of CLP Strategies, a crisis management firm focusing on financial services) pointed out that the 2008 recession forever changed Wall Street, making it more vulnerable than ever to extreme activism.

Desiree Moore – (partner at K&L Gates and founder of the global law firm’s “Digital Crisis Planning & Response” practice area) said companies can no longer just put out a statement to a few newspapers to explain their position, but must be more “artful and diligent” for preparing and widely circulating responses that re-define the narrative for online attacks from whom she called “crazies”.

Neal Thurman – (founder of the Brand Safety Institute) emphasized the importance of training to prepare for threats to brands and the need to shorten the communication gap between middle management analysts and the C-suite to ensure quicker, more effective responses.

Pierre Berthon (Professor of Marketing at Bentley University), reflecting his article, “Brands, Truthiness and Post-Fact: Managing Brands in a Post-Rational World,” emphasized two trends that have come to dominate social discourse. These include “truthiness,” or the validity of something based on how it feels, and “post-fact,” which refers to taking a position that ignores facts. Both trends have been galvanized by social media.

As the keynote speaker, Thomas Clayton O’Guinn (Professor of Marketing, University of Wisconsin) discussed how the world has become so politicized that it is impossible today for brands to completely avoid being politicized as well. 

These conference highlights are important because they reflect the results of comprehensive studies and the conclusions of respected experts. The emergence and seriousness of various brand risks are beyond doubt, but the questions on effective responsiveness are less clear. While many companies state they are prepared for such brand risk events, there is general agreement that companies should be more proactive with responses planned ahead and communicated quicker.

 Written by Jay Gronlund, MSA partner and author of "Basics of Branding" (publisher: BET).

Brand-Centric Risk Events: Crafting a Common Taxonomy

After studying and reviewing hundreds of marketing-related risk events over the past few years, it is increasingly useful to classify “brand-centric risk” events into specific types.  The benefits are fairly clear: by denoting risk events according to type, we’re better able to understand the nature and characteristics of this more specifically defined risk, compared to related – but different – brand risk events.  We can open windows into better understanding the causes, corporate demography, and hopefully cures, of these risks through more precise descriptive definitions.

Importantly, by introducing a common taxonomy and classification approach, a more uniform understanding can be accessed across impacted industry, thereby laying the groundwork for more rigorous and solution-oriented management of overall marketing risk. 

Through our study at MSA, we’ve identified five major types of brand-centric risks.  Here’s a brief synopsis of each type of risk:

  • Brand Safety Risk is one of the more visible risks within marketing communications.  “Brand safety” is generally terminology co-opted by the media and advertising eco-system to describe ad placement issues.  While concerns with brand safety go back decades, today this risk is largely one that occurs in digital and social channels and is often sourced to automated forms of ad placement.  Safety risk can damage a brand by making it seem to support controversial platforms on which it has been placed or by placing a company in violation of certain regulatory guidelines.  There have been dozens of high profile recent examples and one headline issue has been the on-going ad cancellations from YouTube.
  • Key Personnel Risk is the harm a company or brand may suffer when one (or many) of its key, visible personnel is caught afoul of cultural norms, the law, or appearing as a bad actor versus accepted public views.  Recent examples of headline personnel risk can be taken from the #me too movement—Harvey Weinstein and the bankruptcy of the Weinstein Company, Steve Wynn and the temporary $3 billion market drawdown at his eponymous firm, Wynn Resorts.  
  • Customer Engagement Risk emerges when a company’s interactions with consumers and the public goes wrong – and it’s often caused by enforcing company rules or policy for dealing with the public.  In this era of heightened socio-economic activism, companies directly engaging the public need to proceed cautiously.  Famously, a Starbucks Coffee store recently attempted to enforce restroom usage rules in the case of two African-American non-customers, who were improperly arrested during the incident. Subsequently, Starbucks closed 8000 North American store locations for sensitivity training and has also adjusted their restroom usage policy. 
  • ESG/Socio-Economic Risk is a direct result of the turbulent socio-economic environment we currently face.   Over the past few years, companies have begun to wade into social issues, announcing policies with respect to their brands that are meant to place the brand in a favorable light.  An example of this is Delta Airlines’ cancelling an NRA membership benefits program.  In the past, most brands avoided wading into such issues. However, today such well-cautioned avoidance may not always be possible and may itself come across as an endorsement of an unfavorably-viewed status quo.  Regardless, wading into socio-economic issues is fraught with risk for any brand as our current social environment is so contentious that it’s increasingly difficult for a brand not to sacrifice some portion of loyal consumers over these issues when speaking out.
  • Brand Execution Risk occurs with fumbled, controversial or negative execution and delivery of marketing messaging.  There are numerous reasons why these types of challenges arise.  For example, the sheer quantity of individual ads has exploded with digital and social advertising and things can “slip through the cracks.”   Also, and importantly, advertisers and marketers are experimenting with countless new types of marketing service providers, many of whom are inexpert at the curated process of communication crafting.  A very high profile example: PepsiCo’s ad for flagship product Pepsi Cola which starred Kyle Jenner seemed to make light of the Black Lives Matter movement; the ad was cancelled immediately with PepsiCo issuing a public apology.  

With a common taxonomy, we believe greater understanding and improved management of brand risk will be the beneficial outcome.  More and more companies are encountering risk events which are new and focused on their customer and audience outreach efforts.  Better approaches are needed – to both preserve brand value, and to maintain and enhance investor value, as well.

MSA co-authored this article with market researcher James Harn, PhD.

The Emerging Challenges for Managing Brand Risk

A brief overview…

Last year was a watershed year for business and our society, where rising populism, Trump’s polarizing accusations and various socio-economic trends have made the topic of “brand risk” a top priority concern for every marketer.  Traditionally politics has always been avoided by business leaders as it could lead to unpredictable problems, with no assured benefit for their brands or corporate reputation. 

Today it is almost impossible to avoid taking a position on many political and socio-economic issues, especially with social media ready to spread news (and sometimes distort content) overnight.  The business, political and social landscape has dramatically changed.  How did this all happen?  And what is the impact?

"Alpha" Brand and Marketing Risk

Are there macro conditions facing the broad marketing ecosystem which are contributing to an overall diminishment in brand market power and values?

The news from the marketing front this week brings another interesting headline from CPG powerhouse Procter & Gamble.  During the firm’s Q2 2018 earnings call on January 23, 2018, CFO Bob Moeller summarized the impact of P&G’s new focus on marketing cost containment, and provided some insight into what the future holds:

The new challenge presented by a divided world.

Brand marketers and advertisers are alienating significantly large consumer groups, and suffering for it. Advertising messaging, product packaging, branded events and many other formerly benign marketing efforts are now devolving into risk events which damage corporate reputations, drive stock prices lower and hurt overall enterprise market values. This is new. And it’s being caused by customary marketing actions which affect consumers who are no longer behaving in customary ways.