Combating The Crisis – Winning Back The Critics

Business at the speed of light. Everything happens in the blink of an eyelid. Blink and you are history. Business is a war without bullets. The market place has no sympathy for anyone.

It is a battle for survival. Last week, we had discussed cases of companies suddenly plunging into turmoil. We shall examine more cases and come out with ten actions points that could be used to see that such a situation does not arise and if it arises how to tackle it – head on!

Amway India’s CEO William Pinckney gets arrested:Kerala Police had arrested US citizen William S. Pinckney; the CEO of Amway India in 2013 and later was arrested by the Andhra Pradesh police in 2014.

Amway (The American Way) is a Michigan-based MLM (Multi-Level Marketing) company. It is one of the first MLMs to become a household name in the US and one of the first to expand successfully abroad.

Amway’s has a long product line including home and personal care products, electronics, jewelry, insurance and dietary supplements.

Amway’s non-employee distributors are paid small commissions to sell products and recruit as many new non-employees as possible for which they get a handsome commission.

Thus, the thrust seems to be on recruiting more and more distributors rather than on selling Amway products. The outrageous and farfetched success storiesof Amway’s distributors are widely publicised in the media and through persuasive presentations by successful distributors.

The so called success stories bring in hordes of eager distributors. These distributors quickly realise that in reality, very little money can be made in distribution.

They concentrate on recruiting more distributors, a lucrative way of making money. Quickly the entire thing becomes a Ponzi scheme (a scheme were people are recruited in waves, the second wave pays the first, the third wave pays the second and within no time the entire system collapses).

After a slew of complaints from various quarters, the company’s business practices came into question. Police from Andhra Pradesh state raided the offices of various Amway distributors.

The police claim that Amway had violated the "Prize Chits and Money Circulation Schemes (Banning) Act of 1979," which outlaws pyramid schemes and similar money circulation scams.

Arresting a CEO for fraud that too a US citizen, who operates a successful branch of a company with $11 billion in 2012 revenues,was a very strong statement The Indian Direct Selling Association is rattled. It claims that it is a big blow. The future of the MLM industry in India is at risk.

Amway has made requests to the Indian officials to clarify the difference between an illegal pyramid scheme and an MLM. But companies like Amway who use the MLM method are always flirting with risk and danger. Amway has been banned in many countries.

Red and green mark on food: NECC (National Egg Coordinating Committee of India) did an innovative campaign. They said that eggs are vegetarian and that eggs can be eaten by pure vegetarians. NECC’s logic was very simple.

Poultry hens are not fertilised and thus the subsequent eggs are not fertile and will not hatch out as chicks. So according to NECC poultry eggs are pure vegetarian.

This led to such a furore unleashed by the vegetarians that NECC had to back pedal. This incident gave birth to the marking of the infamous green and red dots on all the packaged food in India.

Red indicates non vegetarian food items and green indicates vegetarian food. Lohia Machines Ltd (LML):Lakhs of consumers had paid security deposits to Lohia Machines Ltd(LML),

the scooter company for advance booking of its new range of scooters. Delivery was promised within a certain period but the demand far outstripped the supply.

Tired of waiting, many consumers cancelled their orders and asked for refund of the deposit. Despite numerous reminders, their deposits were not returned.

Mumbai Grahak Panchayat (MGP)fought for the consumers and filed cases at State and National Consumer Disputes Redressal Commissions against LML and successfully got refunds for more than 4 lakh consumers, aggregating to about Rs 40 crores.

Cadbury India: In October 2003, worms were found in bars of Cadbury Dairy Milk (CDM) in certain shops in Kerala and Maharashtra and Cadbury saw its share value go down from 73 per cent in October 2003 to 69 per cent in January 2004.

Cadbury quickly went into the damage control mode. It made its brand ambassador Amitabh Bacchan through a media campaign assure its customer base that Cadbury’s CDM were safe.

That campaign helped restore consumers' faith in the quality of the product. CDM sales volumes declined from 68 per cent in October to 64 per cent in January 2004. It edged up to 65.9 per cent in May 2004.

But it was not simply only the campaign of Amitabh Bacchan that saved Cadbury’s CDM. The packaging of CDM was changed to include a sealed plastic wrapper inside the outer foil to make it air tight.

These actions made CDM recover lost ground and get back its lost market share. Flipkart's Big Billion Day (06th October 2014):was an online sale that has been heavily advertised on television, in print and online.

It was supposed to be the coming of age of the online marketers. It was the sale that entire India was waiting for, with baited breath. Unfortunately, it fell short of its own expectations and the built up hype.

The minute the sale started the glitches were visible - Flipkart was struggling to keep up with the demand. Products are sold out in a matter of seconds, which showed just how limited the stock was.

The biggest problem was the number of technical issues the users faced. The site kept crashing, error messages were coming in, and there was too much lag and orders were not booked, if booked orders were not confirmed.

Yes FlipKart did clock Rs 600 crore sale on the day. But its image took a very bad beating. FlipKart was the butt of the jokes in the social media.

There was so much pressure that the CEO had to personally apologize to all the users and customers through a personalized E-mail.

He said that FlipKart would try to be better the next time around. Now that the second big billion Day is fast approaching, can FlipKart do better or would it be a Déjà vu?

So it is quite possible that companies can fall from grace. So what should be done by the concerned companies to see that the damage is minimal and controllable?

Given below are ten actions points that a company can use

1) First of all apologise and accept responsibility: Johnson and Johnson accepted responsibility and said sorry even though they were not directly responsible. But strangely not a squeak from Nestle about the excessive amounts of lead in its noodles. Nestle thinks that the customers will forgive and forget!

2) Address the issue beforehand: Address the issue on all media fronts including digital properties, as soon as possible.

3)Use the virality of the social mediato the best advantage: see that the company’s view gets as much exposure as possible. The company should not edit out the negative publicity. Let the company’s loyalists (Evangelists) defend the company. If the customers talk positively about the company instead of the company itself, it adds to the credibility and authenticity of the message being conveyed.

4) Beproactive: Do not try to sweep the issue under the carpet. Customers are vigilant and the omnipresent social mediawill see that the issue is kept alive and burning. And it will garner eye balls. Bad news travels faster than good news! If one is inactive the brand gets butchered on the socialmedia. During the worms’issue where worms were reportedly found in KFC’ nuggets, KFC was named KFW ((Kentucky Fried Worms)!

5)Bring in a human face to the brand: this was done successfully by Cadbury’s CDM.The immense charm and charisma of Amitabh Bachhan rubbed off on to the brand. That is the power of a super star celebrity!

6). Choose words carefully: Anyexplanationshould be given carefully and as diplomatically as possible. Any blamegame or trying to be smart alerkywould back fire on the company.

7).The tone and the tenor: should be about the issue and how the issue would be tackled.If it is not proper then it would seem as if it is all about the brand and how the sales have been affected by the whole incident. It should not appear as if the company is not at all concerned about the customers. It should not sound like a sales pitch!

8). Regain the lost trust:The community trusts the brand and the company needto respect that. It might be an unfortunate incident but the fact is that it did happen and there was ample evidence. So, the company has to deal with it. While the company is seriously ‘investigating the claim’, it needs to regain the lost trust of its customers.

9).Spell out the corrective measures: Findout what went wrong. What has the company done to see that the same mistake is not committedagain?Johnson and Johnson reworked on its packaging to make it tamper proof. Similarly Cadbury worked on its packaging to make it air tight. CEO of FlipKart went directly to the customers and promised that his company would offer betterservice in the future. Appearing to be sincere and making efforts to improve product quality and friendlier service goes a long way in making the relationship smoother and more trustworthy.

10). Let the employees monitor all customers interactions as if their life depends on it:Most employees take interactions with the customers for granted. It should be remembered that 999 transactions can be satisfactory or create delight but that single transaction that is not satisfactory or is below par could lead to an avalanche of complaints and be the trigger for massive protests.

11).Make the mistake a part of the company’s history: Just because the mistake has been corrected and the customers are back, does not mean that the incident should be forgotten. The company shoulddocument the entire incidentimpartially and it should become training material for all its employeesespecially its new recruits to show case the fragilerelationship between the company and its customers. So fragile that a single incidenthas the potential to be the proverbialTsunami that could sweep the company into oblivion.

By:Dr M Anil Ramesh