BP exploits past triumph over disaster to camouflage new one welling up

April 12, 2011

In an access of self-congratulation, BP’s current press advertising campaign trumpets the oil company’s success quelling one of the world’s worst natural disasters  – caused by, er, itself (and, in fairness, a few commercial collaborators such as Transocean and Halliburton). An irony in itself, you might say. But, as will be seen, not the only one.

The ads, created by Ogilvy, feature an image of the Macondo oil site in the Gulf of Mexico taken on September 28th last year, showing a crystal-blue ocean lapping around an oil rig. Below it is the strapline: “One year later. Our Commitment continues.” And, just to give the flavour, here is some of the body copy: “From the beginning, BP has taken responsibility for the clean-up. Much progress has been made and our commitment to the Gulf remains unchanged.” The campaign marks the anniversary of a massive explosion on April 20th last year, whose after-effects devastated the wild life, fishing and tourist industry in the Gulf. It should be added that the disaster nearly brought BP, one of the world’s largest companies, to its knees, and cost its chief executive, Tony Hayward, his job.

BP, under new management headed by Bob Dudley, is now breathing a huge sigh of corporate relief. Predictions that it would be broken up, that its share price had undergone irreparable damage, that it would be a blighted brand shunned by consumers, or even that it would be excluded from further drilling operations in one of the world’s most prolific oil fields, have all proved wide of the mark. Meanwhile, almost all the beaches are back in business in the Gulf. So a triumph of sorts .

But what’s this? Dudley, the squeaky-clean new CEO, is in trouble already. An American with extensive experience of the Russian oil market, Dudley’s big strategic idea is to call in the Old World to redress BP’s damaged balance in the New. Specifically, he has crafted a smart but high-risk deal with Russia’s state-owned oil group Rosneft, which would give BP a free hand in exploiting some of the world’s richest oil reserves, languishing under the Arctic shelf. Rosneft does not have the expertise to do this on its own, and the deal – involving a massive $16bn share-swap between BP and Rosneft – would put BP in the enviable position of being the only oil major able to tap into these reserves, while also lessening the company’s dependence on the USA as an upstream (oil exploration) market.

At the time it was announced a few months ago, the Rosneft deal was greeted with much hoopla in the investment community, which had the desired elevating effect on BP’s share price. Now, however, the deal has reached an impasse and Dudley’s reputation is potentially oil-tarred. The politics are complicated but, essentially, BP’s partners in its existing Russian joint-venture, TNK-BP, have – apparently unexpectedly but so far successfully – injuncted the deal. Time is running out: the deadline is April 15th. Either the deal fails, in which case BP will receive another massive blow-back to its reputation. Or BP comes up with a huge bung (said to be $2bn) so that the green-mailers go away. Option B is of course preferable, but still leaves Dudley, BP, his chums at Rosneft and in the Kremlin looking like a bunch of chumps who have been outwitted by a few greedy oligarchs.

Either way, a bit of tactical diversion aimed at BP’s investment community – which is still largely London-based – seems highly desirable while things are sorted out. And what better manner of doing it than to remind investors, via the Sunday press, the dailies, The Spectator, New Scientist and the Economist, of BP’s earlier triumph? Or rather, triumph over a self-manufactured disaster.

Chevron CSR campaign plays with fire

October 22, 2010

Chevron, the second largest US oil group and owner of the Texaco brand,  launched a major corporate social responsibility charm offensive this week. Days later, it announced it is resuming oil exploration in the Gulf Mexico. Are these two things by any chance connected? And, less rhetorically, is this connection wise?

The CSR offensive, which takes the form of a press and TV ad campaign masterminded by Dentsu subsidiary McGarryBowen, has caused equal measures of mirth and consternation in the USA. And for good reason. Here’s the flavour. In each of the five full-page Chevron ads appearing in major newspapers (and the Economist), banner headlines announce that oil companies have responsibilities with phrases such as “Oil companies need to get real,” “Oil companies should clean up their messes” and (probably the most ironic one) “Oil companies should support the communities they are a part of”. Beneath each of these sonorous declarations of intent is the statement: “We agree”.

The ads have spawned a convincing online spoof, created by the Yes Men – who have a track-record in this kind of activity – and caused some hollow laughter at NGOs Amazon Watch and Rainforest Action Network, who provided supporting material for the spoof. Notoriously, Texaco is mired in a controversy over environmental damage it is claimed to have caused in Ecuador.

I suspect the cruellest irony for Chevron may yet be to come. Now that president Obama has lifted the moratorium on deep-water oil drilling in the Gulf of Mexico, the oil company has announced its intention to boldly go where Man has never drilled before. That is, two fields located 7,000 ft down – 2,000 ft deeper than the ill-fated BP Macondo well – and only 280 miles south of New Orleans.

Good luck to Chevron with that one.

Too much marketing at the expense of quality control?

August 10, 2010

As the old adage has it, you can have Speed, Quality and Price, but only two of them at any one time. Some leading brand-owners seem to have forgotten that eternal verity and attempted to have the best of all worlds at once – with disastrous results, according to a thought-provoking article by Jack Neff that appeared in Advertising Age this week.

The gist of Neff’s thesis is that a number high-profile brand catastrophes over the past year – such as those afflicting BP, Toyota and Johnson & Johnson – are essentially attributable to management’s decision to spend too much on marketing and too little on quality control. He contends that the savings on so-called “operational efficiencies” and slashed R&D budgets are ultimately suicidal, because disasters of the above magnitude can undo – overnight – years of patient brand-building, perhaps irrevocably.

Not everyone (by any means) agrees that the fundamental cause of these disasters was the diversion of necessary funds from product enhancement to the marketing budget. For example, J&J’s baffling series of product recalls, and the corporation’s manifest incompetence in righting them swiftly, arguably has more to do with the acquisition of pharma giant Pfizer in 2006 and the botched restructuring that followed than the rechannelling of excessive funds into marketing.

Nevertheless, the article poignantly highlights the limits of marketing when unaccompanied by due managerial diligence.

BP spent five years, and colossal sums of money, building itself into “Beyond Petroleum” – the greener alternative among oil companies – only to cause one of the world’s worst man-made disasters. How much managerial incompetence was at the root of the disaster remains to be assessed, but the suspicion is plenty.

Toyota, which built its brand reputation upon reliability and quality, has now had to recall over 9 million vehicles. It has lost ground, perhaps permanently, in consumer brand quality rankings and done great damage to its corporate integrity by engaging in a series of unappetising cover-ups designed to hoodwink its customers out of legitimate redress.

J&J was once a byword in textbook crisis management, after it brilliant handling of the 1982 Tylenol cyanide scare. Today, it faces federal hearings over its mismanagement of much lesser recalls. Its shiftiness in addressing an avalanche of quality problems has been a gift to the own-label OTC drugs, personal and household sectors.

These are merely some of the most prominent examples. Procter & Gamble itself has been experiencing a significantly heightened number of product recalls (albeit not of the same order) at a time when its main response to intensified competition has been to increase the global marketing budget by a massive $1bn to $8.6bn. Wall Street was not amused by the announcement.

US admen cash in on the Brit-bashing act

July 20, 2010

Anti-British sentiment is now a viral contagion in the USA, thanks to BP and that liddle ol’blowout in the Gulf of Mexico.

Obama has recently cooled the rhetoric, presumably after someone pointed out to him that half  BP’s shareholders are American (must be a few US pensions in there as well). But that has not quelled the ardour of less sophisticated state governors with only one object in mind – re-election in November. Florida governor Charlie Crist (who is seeking election to the Senate, so the stakes are even higher) recently had to be put in his place, firmly but politely, when he came back for another sting, this time for $50m. Allegedly to support a tourism campaign in a state which has, as yet, barely suffered. BP had already coughed up $25m.

Hell, BP’s even responsible for letting convicted Lockerbie killer Abdelbaset Ali Mohmed Al Megrahi off the hook. Many American victims of the bombing believe, rightly or wrongly, that it was only due to some grubby oil deal struck by BP in Libya – and connived at by HMG – that Al Megrahi got his freedom.

It’s a toxic combination, and who better to exploit it than admen? Here’s Chrysler, courtesy of Wieden & Kennedy Portland, cashing in on the anti-Brit trend:

Yeeahs. For Brits in red coats, read Nazis (see my other post on the pioneering role played by James Mason as Rommel). While we’re there, I’m certain the Germans would have something to say about American car-building expertise. They’re less expert on the subject of freedom, though. See Pitch for more detail about the campaign.

If oil’s the next tobacco, watch out Big Food and Big Booze

June 17, 2010

General Mills, the food giant that owns Cheerios, Häagen Daz and Green Giant, is breathing a sigh of relief after it suppressed a press release suggesting the US government was about to mount a full-scale investigation into its supply chain. The release was a hoax, but General Mills has no room for complacency. The threat of political interference in the food business could be very real if we extrapolate what the government has been doing to BP.

I owe the originality of this insight to the Financial Times’ John Gapper. Gapper’s argument, laid out in a column this week, is as follows. “Slick Willy” Sutton, the infamous armed robber, once observed that he raided banks because – that’s where the money is. In the same manner, US politicians – aware that they have to address a yawning budget deficit if they are to be re-elected – are casting around for easy money to plug the gap. Voters, impoverished by Wall Street’s scandalous behavioiur, don’t have it. But dividend-rich companies, like BP, do.

BP, of course, had it coming to it. Its behaviour in the Gulf of Mexico can be described as neither caring nor competent. That, however, is not the point. It is the ease with which Congress and Obama have been able to extract $20bn – none of which is ever likely to be returned to the company – that should be worrying shareholders everywhere. There is no fixed liability associated with this sum and – like blackmailers the world over – politicians will come back for more if they think they can get away with it.

To Gapper, the BP concession has echoes of the 1998 tobacco settlement, in which the industry paid $246bn to various states following legal action by their attorney generals. It’s worth quoting him more fully here: “Only 5% of tha money was spent on tobacco-related initiatives with Virginia, for example, investing in higher education, fibre optic cables and research into energy.”

Now let me see, which other big-dividend paying companies could land themselves in a pickle with the state over litigation liability? Gapper thinks the list is comprehensive and cites energy providers, drugs companies and consumer goods companies. I think two on his list stand out particularly prominently: the food and alcoholic drinks companies.

Imagine, for example, what might happen if scientific evidence conclusively proved that many of the big food companies had been slowly poisoning us to death through the use of (now largely discontinued) hydrogenated fats? Or what about excessive sugar and salt in cereals directly leading to premature cardio-vascular impairment? The legal fall-out, through class actions, could be stupendous. And lining up behind the lawyers would be the politicians waiting for a big, fat hand-out, or else. After all, it could be argued, a massive amount of taxpayers’ money has, historically, been funnelled into dealing with the collateral medical issues: time for industry to pay back the “subsidy”.

All the more could these arguments be applied to the side-effects of excessive alcohol consumption. The history of the tobacco industry suggests that free will and individual responsibility weigh little in the balance once these matters come to court.

And where the US leads, little Britain surely cannot be far behind.

Obama, BP and the day the British mouse roared

June 11, 2010

Barack Obama must have been stunned when he heard the news. This time he’d gone too far with anti-British, anti-BP rhetoric and he was going to receive the just penalty for his temerity. Yes siree, the full nine yards: an open letter of complaint from John Napier.

John Who? you – like Obama – must be wondering. Come on, you know. Yes you do. The bloke who’s been running media specialist Aegis plc since Colin Sharman left. No, really running it. He isn’t just chairman, he got rid of the former chief executive and did his job for a while too. Which was, you ask? Getting that pesky shareholder Vincent Bolloré to frog off, of course. John, in his spare time, also chairs insurance company RSA, and was once managing director of research outfit AGB.

I’m glad we’ve cleared that one up. So what does he actually say in this letter? Well, all sorts of nasty things about the US president. For instance? He’s not very statesmanlike, he can’t take the heat under pressure, and he’s been lashing out at poor old BP ceo Tony Hayward in a “prejudicial and personal way.” That sort of thing.

I see. It’s like Squibb Minor berating the headmaster for unprofessional conduct – only to find his outburst lands the whole class in prolonged detention of the most humiliating “ass-kicking” kind. More or less.

Mind you, Napier – like Robert Peston in his blog today – does turn a neat trick in comparing and contrasting Obama’s treatment of BP with Obama’s treatment of the banks. In the letter he says: “There is a sense here that these attacks are being made because BP is British. If you compare the damage inflicted on the economies of the western world by polluted securities from the irresponsible, unchecked greed and avarice of leading USA international banks, there has not been the same personalised response in or from countries beyond the US. Perhaps a case of double standards?”

Mr Napier does not, of course, have an election to win in November. Where I suspect he, or rather RSA – the company he represents – is coming from is as a severely damaged investor in BP. Since the Deepwater explosion in April, BP has lost nearly 45% – or £55bn – of its value.

ELSEWHERE BP’s crisis management has descended to new levels of farce, this time over the oil company’s handling of Twitter. A rather annoying critic, Leroy Stick (believe that if you like), has been taunting BP from the fastness of @BPGlobalPR and the company has unsuccessfully tried to muzzle him. This week, Stick was forced to change his ‘bio’, which formerly read “This page exists to get BP’s message and mission statement into the Twitterverse.” Irritatingly for the company, it now reads: “We are not associated with Beyond Petroleum, the company that has been destroying the Gulf of Mexico for 50 days.” BP denies it has pressured Twitter into closing the site, and says it merely asked for the so-called ‘parody feed’ to clarify its status. Stick claims this is the last concession he will make: BP will have to close him down. More in Ad Age. Stay logged.

Domino’s Pizza makes a crust from eating humble pie

June 1, 2010

Does brutal honesty with the customer ever pay off? It does, if Domino’s Pizza is anything to go by.

Tired of being the butt of popular jokes about the lamentable quality of its ingredients, Domino’s decided to introduce a fully fledged overhaul of its product late last year. As even the most junior student of marketing – citing Coca-Cola – will tell you, changing the recipe is one of the most dangerous expedients a marketer can embark upon.

Not content with this, however, Domino’s upped the ante against itself by fanfaring its pizza relaunch with an advertising campaign that rubbished the company’s previous product quality. The “We stink” campaign admitted the old crust tasted like cardboard and the sauce like ketchup; and that its staff were fed up with customers trashing the food.

Now for the first time we can judge the results. In the first quarter of this year, US sales at stores open for more than a year soared an astonishing 14.3%. Not exactly a new-Coke style disaster. Actually, as Domino’s chief marketing officer Russell Weiner pointed out to BNET some months ago, the Coke parallel is a bit misleading. Domino’s has never been successful on account of its taste. The core brand values are in fact convenience, low price and reliability. Even so, the brand communications strategy was clearly a risk.

So far the campaign has run exclusively in the USA, where its mood has provided a nice counterpoint to the singular lack of Wall street contrition over Main Street fall-out from the world financial crisis. A little humility, it seems, can play remarkably well.

We have yet to discover whether the new marcoms formula is for export. There certainly seems scope for applying it to other troubled brands. The Chicago Tribune suggests BP could retrieve a smidgin of its reputation from eating humble pie. Judging from today’s plunging share price, it may be too late for such remedies. Maybe BA’s not too far gone to profit, though. It should run a campaign this autumn along the lines of: “We know you know. Up to now, we’ve been rubbish…”

%d bloggers like this: