Social Judge, Jury & Executioner: Do Social PR Disasters Really Affect Sales?

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Our Social Justice series analyzes incidents of the social media mob judging and deciding who is guilty or innocent on the social networks.

We’ve covered two heart wrenching cases of rapes that were judged heavily via social channels, and last week we covered a personal brand,  social bullying and professionalism.

At the core of these PR sensationalized incidents is the question: Do social PR disasters really matter, or is it all just glorified social-water cooler talk?

Are we all just a giant version of what the great Joe Girard called “The Dope Ring?”  If you haven’t read Girard, he’s probably the greatest sales person ever.  He attributed most of his success from staying focused on work, and out of the time wasting gossip circles that spring up in most companies.

This week we are taking a look at 10 companies who have been through the Social Media Wringer to see what the ‘disasters’ did to their sales performance.

1. Nestle

Nestle’s social media issues were a lot deeper than an out of control employee sending a bad tweet or creating an embarrassing video. A faced a Greenpeace organized campaign that  focused on Nestle’s real life business practices and an Indonesian supplier.

Aileen Ionescu-Somers and Albrecht Enders covered the issue in detail for the Financial Times.

As I said, this wasn’t a simple snafu; this was Greenpeace and all of its resources attacking Nestle using video and social campaigns.  Before too long, Nestle buckled, or at least agreed to change its business practices, with a goal of using only palm oil certified as sustainable by 2015.

What happened to sales? A mega-company like Nestle has a vast number of brands, and not surprisingly, the overall company sales were not impacted by this PR issue. As a matter of fact, “The Americas remained the group’s biggest revenue generator, with 34.3 billion francs last year, up 5.9% in organic growth.”

However, to say that the brand wasn’t impacted at all is a misstatement; they reacted quickly realizing how bad the impact could be. They hired a new Digital Marketing Head, and they created a strategy to change the issues that started the problem in the first place. Social Media spoke, and Nestle listened.

Verdict: Sales Impact – negligible, but this campaign did have a major impact on company organization and business practices.

2. KitchenAid

After a terrible tweet about Obama’s grandmother went out during a Presidential debate,

Kitchen Aid obama tweet

the company quickly deleted the tweet and apologized. Their profits soared that quarter.

Kitchen Aid handled the kerfuffle gracefully, and the hubbub around the story quickly diminished.

Verdict: No impact on sales or reputation; when handled proper, social media ‘disasters’ become just a bump in the road.

3. Applebees

A famous story of social media backlash was generated at the hands of an Applebees employee who posted a bad tipper’s bill, including her terse comment of why the server did not deserve an 18% tip, on Facebook.

The anti-Applebee Social Media-ites called Applebees out for hypocrisy, citing their own use of positive customer reviews on their social channels, and a call for a boycott was under way. Applebees did itself no favors by fumbling their handling of the issue, issuing a non apology-apology.

Applebees became overwhelmed by the avalanche of comments, and their practice of responding to 90% of comments was impossible to keep up with.  They shut down their page for comments, and suffered even more outrage.

So what happened to Sales? Applebees had 42% decline in profit in the first quarter, but analysts primarily link that on the company’s shift to an almost all-franchise system. Considering that the chain beat Wall Street estimates for earnings , we take them at their word.

Verdict:   The impact was purely Social Media related   Applebees made novice mistakes when social fury came its way.  The company’s own behavior compounded the problems, and they say they’ve learned a lesson .  It’s a tough way to learn.

4. Dominos

You may remember that in 2009 two Dominos employees created a disgusting video showing them contaminating food before sending it out.  Although no one blamed the Domino’s brand, it made people take a huge step back and consider whether they could trust the quality of food coming from them.

[youtube]http://www.youtube.com/watch?v=xaNuE3DsJHM[/youtube]

As company spokesman Tim McIntyre stated “We got blindsided by two idiots with a video camera and an awful idea.”

Verdict: Sales were untouched, Domestic sales were flat; international sales soared, and Domino’s net profits were up by 76%.  On the social media front, anyone paying attention learned how vulnerable brands are to ‘idiots’ on social media.

5. Solid Gold Bomb

Large corporations have a lot more leeway when it comes to weathering PR disasters; small companies like Solid Gold Bomb aren’t so fortunate.

When the Worcester MA based company found itself facing a boycott and banned from Amazon based on misogynist slogans for its t shirts that were computer generated, it faced the full fury of social media.

T-shirts riffing on the famous Keep Calm slogan were generated with horrible statements about violence towards women. The founder, Michael Fowler, apologized and accepted responsibility, but once Amazon cut off his primary channel for sales, the company was in financial trouble, instantly.

Most small businesses don’t have the resources to withstand this sort of PR backlash, making them much more vulnerable when they enter into the social marketing arena.

Verdict:  An impact on sales was swift and immediate. As of May 5th, Fowler was unsure if the company can survive.

6. Kenneth Cole

One of the most well know Social Media gaffes was Kenneth Cole using the #Cairo hashtag during the Arab uprisings to promote his own brand.

Kenneth Cole Cairo tweet

As expected, the company experienced a vigorous Twitter uprising itself, and was roundly called out for misuse of the hashtag for self promotion. Kenneth Cole Productions did apologize, but the story has gone down in the lore of social media as a primary example of bad behavior.

What were the sales results? First quarter sales for 2011 weren’t good,  but that appears to have little to do with social media and a lot to do with ongoing company struggles. All of my research on Kenneth Cole Productions 2011 performance shows a company struggling with many issues that effected profitability; not one analyst mentioned social media PR as one of them.

The first quarter of 2013 saw the company doing considerably better.

Verdict: Hung jury.  It is impossible to definitively state that Kenneth Cole suffered sales losses due to their ugly self promotion, but the fact that they are used in countless blog posts and social media training workshops as an example of bad social behavior can’t be taken lightly.

7. United Airlines

The United Breaks Guitars You Tube Protest by musician Dave Carroll was the first and perhaps most famous social media protest that went viral. If you aren’t aware of it, the airline ignored Dave Carroll’s repeated attempts to be compensated for his guitar that was broken by United, and he retaliated creatively on You Tube.

Social and Traditional Media went wild for the story, and Carroll went from musician to sought after speaker.

What was the impact on sales? Considering that all airlines have struggled financially for years, and 2009 was the height of the Great Recession, United did indeed post a profit in the 2nd quarter of 2009.

Verdict: Significant Impact. United may have made money, but they and the rest of the social media world certainly understood the impact social media negative PR could have on a business. After the song went viral, United scrambled to make amends with Carroll, and the incident has been used as a social media case study by countless businesses.

8. Chik fil A

If you don’t know about this debacle, then you could not have been active on social media in June 2012 when Dan Cathy, COO of the company, made more than one public statements against same sex marriage. The Social Networks exploded with condemnation.

Much was made of the fact that the S. Truett Cathy-family-operated WinShape Foundation,  and had donated millions to political organizations that oppose LGBT rights.

Boycotts were instigated by those on social networks opposed to Cathy’s views, and rallies in support of the chain were organized as well.

Chik fil a gay protest

The mayors of Boston and Chicago joined in the debate, siding against Chik Fil A.  The Jim Henson company cut ties with the company.

There were real repercussions, but, what happened to sales?

Verdict: Major Impact, although not what you might expect.  Profits soared in 2012 .  This may be a case that could be used to state that PR Disasters don’t impact sales at all, but I think the folks at Chik Fil A would tell you: it wasn’t worth it. They issued statements saying that they would refrain from making comments on social issues, and we are sure it took a toll on their PR staff.   Sadly,  head of PR, Don Perry, died during of a heart attack during the backlash.  Obviously, no one could say that the stress of the debacle impacted Perry’s health, but if you’re in PR you can’ t help bu sympathize with what his team must have gone through in those months surrounding the disaster.

9. American Apparel

One of the least intelligent Social Media mistakes was American Apparel’s promotion of the SANDYSALE code if people were ‘bored’ during the East Coast super storm and wanted to shop. Countless weather outlets had predicted a massive storm; people were hunkered down and fearing for their lives.

It was not smart marketing, but American Apparel’s handling of the backlash, was most interesting to PR watchers.  They ignored the entire wave of negative reactions.

And what happened to their sales? They went UP.  Online sales went up 42% during the fourth quarter. Is this a case of any PR being good PR?

Most fascinating was the response American Apparel’s CEO Dov Charney had, which was that it was no big deal. Apparently, he was right – check out this excerpt from interview on Bloomberg Business Week:

Bloomberg Businessweek: Why do you think there was so much blowback?
Dov Charney: It’s the blogosphere. Each blogger or Twitterer eggs on the other, and it becomes a big deal. That doesn’t represent the majority of the people. I don’t think the average person was offended. There were 25 bloggers who blew up. That’s their right. The media is also interested in getting a rise out of readers. You have to look at your motivation in covering this, too. But it’s not a big deal. We don’t think it was offensive. We’re sorry if others thought it was.

So do you think it was a mistake to run that ad?
Was it a mistake? I don’t know. If so, we make mistakes at times. We chalk it up to experience. The reality was there were a lot of people stuck at home in front of the Internet. I don’t think our marketing guys made a mistake. Part of what you want to do in these events is keep the wheels of commerce going.

How did it affect your sales?
People shopped on it. We generated tens of thousands of dollars from the sale, but we’ll probably lose a million dollars from this (storm) event at a minimum. We’re here to sell clothing. I’m sleeping well at night knowing this was not a serious matter.

Every word he spoke in answering those 3 questions should make all social strategists think hard.

For one: bloggers may be loud, but they’re not always Influential; and all of their fury, without action by their audience, is no different than a child’s temper tantrum. Charney’s right, American Apparel DID generate sales during Sandy, and he’s sleeping well at night because that’s his job – to sell shirts.

Verdict:  American Apparel wins.   To me the lesson is obvious: be smart, try not to offend, but don’t think the world has ended just because a group of bloggers call you out.

10. Ragu

Back in 2011 Ragu got itself into hot water with the blogosphere when it attempted to use Twitter as a blogger outreach tool by spamming them with a video making fun of Dad’s making dinner.

Proper blogger outreach is done by identifying the right target bloggers and connecting with them, and requesting politely that they take a look at your product. Ragu went wrong on so many fronts, the core being making a video that many, including dads and moms, found offensive.

Unwittingly, Ragu angered the very market it was trying to target. You can read about the social lessons here .

What were the sales results? At the time of the pr flap, Ragu was part of the giant Unilever, and in any profit reports you can track down, sales across the board were strong.

Verdict: No Impact.  As much as this pr dust up may have offended bloggers, the brand itself did not suffer anything more than PR humiliation. It has been used, repeatedly, as a lesson in how not to reach out to bloggers, and joins the many social pr stories of social fury, lessons learned, nothing more.

At the end of the day the question as to whether Social PR Disasters effect sales can’t be answered with a simple yes or no. Sometimes, they are a tempest in a teapot, and they only effect the social bubble.

First, you have to consider who is on Social Media.  It may seem like the entire world is, but consider that only 16% of Internet users are on Twitter,  67% are on Facebook, and 20% are on LinkedIn.

Overall, that accounts for a tremendous swath of the population, and it means that a tidal wave of negativity can have a huge reach.   However, reaching people does not necessarily mean you influence their actions, and that is the crux of the question.

The plain reality is that all companies are vulnerable to social media negativity, even if they aren’t operating active marketing on the social networks.  Well run companies with savvy social and pr teams can weather social storms fairly well, but preparedness is the key to minimizing the damage.

As Social Gold Bomb shows, being vulnerable, short on cash and unprepared can spell insurmountable damage to small companies.

VP of Content & Strategy at ArCompany. She has an extensive background in Sales, and focuses on generational marketing and content. With Hessie Jones she founded ArCompany’s Millnnnial, GenX and Boomer Think Tanks and writes and speaks on those topics from an insights/strategy perspective.

24 thoughts on “Social Judge, Jury & Executioner: Do Social PR Disasters Really Affect Sales?

  1. […] ArCompany examines famous social media PR disasters and how they impact sales.  […]

  2. Danny Brown says:

    I remember being in the UK when Gerald Ratner, CEO of cheapo jewelry company of the same name, was at an evening cocktail event. During his speech, he uttered the famous “My jewelry is crap!” words. The company nose-dived (though didn’t go bust), it wiped millions of their share price, and he was forced to resign.
    It’s interesting, but I’ve yet to see a “social crisis” have the same effect. Yes, there was the AP tweet hack; and the 2009 CNN iReport example, where a citizen journalist published breaking news of Steve Jobs dying from a heart attack, that led to a 10% drop in share price in 10 minutes, and 3% down overall at the end of the day.
    But none that I can think of that has truly hurt a company (though the Facebook case of the tee shirt company is a valid one). Perhaps we’re all just too embroiled in this social bubble, and the bigger audience just doesn’t see the same crises?

  3. Amy McCloskey Tobin says:

    Yep, that is definitely valid – especially when it comes to Twitter. However, what’s clear to me is that terrible PR is MUCH worse for small business, especially if a small business is depending heavily on social for its sales funnel.
    The one incident I left out was the Tweet about Obama being hurt, because it effected the stock market, not one company. But of course, the market quickly recovered when it was discovered to be false.
    The case of Nestle is the strongest one for social media impact, because the company changed their business practices – understanding full well what could happen if Greenpeace remained focused on them in their social campaigns.
    The entire story says, loud and clearly, that you can OVERESTIMATE the impact of social, and an integrated approach is still absolutely essential.

  4. […] Social Judge, Jury & Executioner: Do Social PR Disasters Really Affect Sales? […]

  5. […] Social Judge, Jury & Executioner: Do Social PR Disasters Really Effect Sales?, thearccompany.com […]

  6. […] Social Judge, Jury Executioner: Do Social PR Disasters Really Effect Sales?, thearccompany.com […]

  7. […] Social Judge, Jury & Executioner: Do Social PR Disasters Really Effect Sales?, thearccompany.com […]

  8. […] Social Judge, Jury & Executioner: Do Social PR Disasters Really Effect Sales?, thearccompany.com […]

  9. hessiej says:

    @Amy McCloskey Tobin I did an interview with the PR guy of Dominos back in 2009. They used the learning from the incident you described to create a campaign that drew huge numbers for them: The Pizza Turnaround program.  http://buff.ly/15lPxo3. This is a company that is truly humbled by what its customers say and does its damndest to make necessary changes.

  10. […] Social Judge, Jury & Executioner: Do Social PR Disasters Really Effect Sales?, thearccompany.com […]

  11. ginidietrich says:

    Really good look at all of this, Amy! I look at other case studies in Spin Sucks (the book) and found profits, Wall Street, and sales in general greatly affected by crises…though not all of them social media-created, but definitely compounded because of it. It’s an interesting world in which we live and I think it’s extremely important for organizational leaders to understand, just because a person is good at Twitter or Facebook does not make him or her a crisis expert.

    • AmyMccTobin says:

      ginidietrich Thanks Gini – I was wondering if you were back to Inbox Zero yet.   The research on this post fascinated me AND changed some of my perceptions.  I have poo-pooed the idea in the past that companies were ‘taken down’ by Social Media. SURE, many of them faced dings to their reputation, and many companies compounded the original issue by their handling of social.    However, just researching sales’ impact is one thing, but the change to business practices – including marketing – was eye opening.  It also reinforces how vulnerable small businesses that rely too heavily on social marketing are.
      It made me want to review 10 more.

  12. douglaserice says:

    Amy, thank you so much for compiling this! I guarantee I’ll refer back to it time and again. Excellent compilation! I love how level-headed the analysis is and how you focus on connecting the social media fiascos to impact on sales.
    What I found most striking is that only 3 out of these 10 (Ragu, Kenneth Cole, and Kitchen AID) social media PR disasters were caused my content deliberately generated by the companies on social media (None of which negatively impacted sales). The rest of them are caused by content generated from consumers (or employees) via social media as a reaction to the activity of the companies OUTSIDE of social media. This confirms my intution that companies cannot avoid social media PR disasters by staying off of social media. Most of the social media PR disasters are caused by consumer-generated content–not company-generated content.
    Thanks, again. I LOVE this!

    • AmyMccTobin says:

      douglaserice Absolutely – I tell them all that they may stay off of social, but that just leaves them deaf to the conversation.  What became clear to me is how impactful the loud voice of social can be, positive and negative.  And, unless you’re a very small business, the bumps along the way are entirely manageable – you WILL survive.  Thanks for coming by.

  13. dbvickery says:

    Hmm, I recognize a few of these since we talked about a couple before you wrote this post. Amazing the level of boneheaded-ness and sheer lack of common sense. Of course, it is also amazing at our society’s ability to do a reputation witch-hunt at the drop of a hat.

    • AmyMccTobin says:

      dbvickery I am SO sorry Brian – I should have given you credit because you pointed me in the direction of quite a few of these.  It was intended, I just go so deep in that I forgot to add it.  My apologies, sincerely!

  14. […] Our last post explored 10 businesses subjected to the furor of the social gang angered, and outlined the impact it had, or didn’t have, on their sales and business practices. […]

  15. […] Social Judge, Jury Executioner: Do Social PR Disasters Really Effect Sales?, thearccompany.com […]

  16. […] covered the fact that American Apparel sales went up during the outrage in a post a few weeks […]

  17. […] other Social Justice Posts we have cautioned against brands reacting to a backlash and making PR matters worse for […]

  18. […] Media PR crises run the gamut from small dust-ups, like the American Apparel #Sandy hashtag misuse issue, to massive on and offline PR implosions like the one the Susan G. Komen Foundation is […]

  19. […] in May we ran a post covering 10 companies that had experienced a Social Media PR firestorm.  We outlined the impact […]

  20. […] of the most popular posts we’ve run in the series highlights the impact, or lack thereof, of these social media on the […]

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