When Do Scandals Sting?

It's the X factor. Scandals and bad publicity of any sort have evolved into one of lifestyle marketing's biggest mysteries.

The consensus among marketers and analysts is that if what’s attacked is at the core of what a brand does, it has more potential to affect the business than does the personal problem of a prominent employee, made public.

A case in point: current allegations of securities fraud against Martha Stewart, who has traded on a home-and-hearth persona. Besides sullying that image, her initial choice to side step the issue, rather than to address it forthrightly, undermined the stylish perfectionism she has portrayed, observers noted. In analyzing these dynamics, Don Ziccardi, chief executive officer at ad agency Ziccardi Partners, Frierson, Mee Inc., said a virulent strain of schadenfreude, or glee in another’s misfortune, has infected contemporary culture and it is reflected in the way some scandals and bad pr play out. "We put heroes on a pedestal and then we take pleasure in knocking them down," Ziccardi stated. "With Martha Stewart, she is the brand, so it’s going to be particularly detrimental."

And still more so, because, in the 21st century, all products in all categories have become more alike, so marketers have to work harder to differentiate brand images, sources said. "By linking with Martha Stewart, Kmart was able to say to shoppers, ‘We don’t just have crap,’" contended Robert Passikoff, president of Brand Keys, a brand loyalty consultant. "The scandal has ended that differentiation."

Moreover, the consumer’s perception of the Stewart brand has gone south: Shares of Martha Stewart Omnimedia have slumped sharply, and none of the major TV networks will be airing a Martha Stewart holiday special this season.

For instance, each month between June and October, Brand Keys has asked consumers whether Martha Stewart is a "brand I trust," and has found their loyalty to it has eroded by about 6 percent. When asked about the "integrity" of the Martha Stewart brand, consumers posted a 37 percent decline in that measure.

More broadly, Brand Keys has found that the trustworthiness of any brand, the integrity it represents and its ethical standards are more than twice as important in establishing loyalty than they were just five years ago. The marketing consultant has determined consumers’ trust in a brand creates about 11 percent of their loyalty to that label, up from 5 percent in 1997; the integrity reflected in a brand accounts for roughly 6 percent, up from 2 percent in 1997, and the maintenance of ethical business standards contributes around 20 percent, up from 8 percent five years ago.

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