News: Big Ideas

Brilliant Leaders, Bad Ideas

I’M JUST SAYING. . .
Brilliant Leaders, Bad Ideas
By Jay Osterholm

Over the past month I have found myself reading the news and asking, “What was that CEO thinking?”

If you look back in history, you probably would ponder the same thing. Sometimes it seems the smartest people make the worst decisions, especially from a marketing perspective. From BP, HP and most recently, Netflix, we consistently see brilliant minds leading their companies astray and as a result, losing customers and brand value.

Of course, as a witness with a marketing slant, hindsight is 20/20. Never before have we had so many communication channels available to interact with key audiences, receive feedback from customers, and have real conversations about our brands. Ideally, this means companies should be making smart, sound business-decisions based on feedback, analytics and product performance.

Take for example Netflix. To say they have had a bad month is a drastic understatement. Its stock has fallen more than 60 percent amid a customer backlash over a price increase and plans to operate the mail-order business separately from streaming. I immediately thought, “Don’t forget what made you successful.”

Prior to their decision to separate services, Netflix had approximately 25 million customers.
It made no sense to me that Netflix would turn its back on the customer base that made them successful.

This begs the question: What would cause a successful company to change their business model so drastically?

For any outsider to try to answer this question, I would suggest a rationale approach and that decisive business mistakes could be bucketed into four categories:

1. Greed and immediate cash-flow gratification. While it may sound strange, it is possible for a company with 25 million customers to have limited profits if there is not a sustainable business model. For most companies, business is all about maximizing profit at any cost. At the end of the day, if the revenue stream is slow, changes need to be made. As marketers, it is our job to properly position business changes, as to not upset or drive away customers. Netflix should have informed customers of the price structure changes prior to implementation.
2. Ignorance is not always bliss. Social media. Blogs. Communications 2.0. Call it what you will, but in today’s business world there are a plethora of channels available for customers to engage with a brand and vice versa. The strength of a brand is valued in their response to this information. However, in order to respond, companies must first be aware. Analytics and monitoring are the necessary follow-up to effective marketing campaigns and business decisions. Perhaps Netflix was unaware of how consumers would react to their unannounced pricing structure.
3. Denial. Acceptance of defeat is never easy. Some companies continue on a perilous path rather than owning up to mistakes, and changing course. Moreover, communicating a defeat or mistake is often more difficult than admitting it. Customers expect transparency and honesty. Without these, brand loyalty cannot exist.
4. We are immune. When a company reaches a certain level of success, it is easy to lose sight of the initial goals, mission and brand promise. They forget that they need their customer more than their customers need them. Rising stock prices easily lure executives to make impulsive decisions they believe will lead to short-term higher profits. Regardless of business change, it is imperative companies remember their mission and brand promise before implementing changes.

At the end of the day, brand loyalty is in many ways equated to trust. Companies are always going to make poor decisions, just as individuals do. We all make mistakes, and we are all human. The controllable element in all of this is communication and transparency. In order to maintain a solid customer base, it is imperative to remember that consumers are only loyal to a brand that continues to deliver on the expected brand promise.

Jay Osterholm is founder and CEO of The ODM Group