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This document contains Chapters 5 to 6 Chapter 5 INVESTOR RELATIONS The arena of investor relations has had a relatively short history, only springing up as an important factor in a corporation’s communications in the 1960s. In concept, a publicly owned corporation is based on an ideal of consensus, where shareholders, employees, community neighbors, suppliers, and customers all have a voice in its operations. Unfortunately, it is not possible for all who have a stake in the outcome of an enterprise to take an active part in the decision processes of that business entity. Many of the decisions are made by management or board members who run the company. Financial relations practitioners have the difficult task of mediating between all the publics that may have an interest in the financial success or failure of an organization. Practitioners have, as prime audiences, millions of small investors who do not control the market, as well as leaders of publicly owned corporations who can make decisions that are short-term expedients or long-haul and public-interest based. These choices can be helpful or harmful to the rest of the corporation and its success. Other audiences that play important parts in a financial practitioner’s efforts include regulators, media, economists, and legislators. The typical corporate financial relations specialist appears as moderate or neutral in economic and political philosophy. The position requires skill and objectivity in representing both the average investor and the middle-class citizen, while at the same time representing private enterprise and its views publicly. This job reports to the CEO, more often than not. When the interests of management and average investors conflict, the financial relations responsibility has an interesting high wire to walk. The authors have described three specific areas where a financial relations practitioner needs to focus his/her energy: Developing a communications strategy that is appropriate to management goals in investor relations. Preparing public literature such as reports required by law and establishing press contacts. Managing relationships with the financial community, including analyst meetings, tours or visits, etc. Exam Questions for Chapter 5 1. According to the text, what is the role of a financial relations practitioner? Answer: In the context of the text, a financial relations practitioner plays a crucial role in managing communication between a company and its investors, shareholders, financial analysts, and other key financial stakeholders. Their responsibilities typically include: 1. Investor Relations: Communicating with current and potential investors to provide them with accurate and timely information about the company's financial performance, strategic direction, and growth prospects. This may involve organizing investor meetings, conference calls, and investor presentations. 2. Shareholder Communications: Engaging with shareholders to address their inquiries, concerns, and feedback regarding the company's financial performance and governance practices. This may include distributing annual reports, proxy statements, and other shareholder communications materials. 3. Financial Reporting: Ensuring compliance with regulatory requirements and financial reporting standards by preparing and disseminating financial statements, earnings releases, and other financial disclosures to stakeholders. 4. Financial Analysis and Insights: Analyzing financial data and market trends to provide insights and recommendations to management and investors regarding investment decisions, capital allocation, and strategic initiatives. 5. Crisis Management: Managing communication during financial crises or adverse events that may impact the company's reputation or financial stability. This may involve coordinating responses to inquiries from investors, analysts, and the media to mitigate reputational and financial risks. Overall, the role of a financial relations practitioner is to facilitate transparent and effective communication between the company and its financial stakeholders to build trust, enhance transparency, and support the company's financial objectives and long-term value creation. 2. In many organizations the role of financial relations has been given to legal counsel. How can this help an organization’s financial communications? What are the downsides of using legal counsel to accomplish the task of financial communications? Answer: Assigning the role of financial relations to legal counsel can have both advantages and disadvantages for an organization's financial communications: Advantages: 1. Expertise in Regulatory Compliance: Legal counsel are well-versed in regulatory requirements and compliance obligations related to financial communications. They can ensure that the organization's financial disclosures, reports, and communications adhere to applicable laws and regulations, reducing the risk of legal violations and penalties. 2. Risk Management: Legal counsel can provide valuable insights into potential legal risks associated with financial communications, helping the organization to anticipate and mitigate legal challenges or liabilities. Their involvement can help safeguard the organization's reputation and financial interests. 3. Integration of Legal and Financial Strategies: Legal counsel can work closely with financial and executive teams to align financial communications with broader legal and business strategies. This holistic approach ensures consistency and coherence in messaging and decision-making. 4. Confidentiality and Privilege: Legal counsel can offer confidentiality and attorney-client privilege protections to sensitive financial communications, enhancing confidentiality and safeguarding proprietary information from disclosure to external parties. 5. Crisis Management: In times of financial crises or legal challenges, legal counsel can provide strategic guidance and support in managing communication with stakeholders, including investors, regulators, and the media. Their expertise in crisis management can help the organization navigate challenging situations effectively. Downsides: 1. Focus on Compliance over Communication: Legal counsel may prioritize regulatory compliance and risk management over effective communication and stakeholder engagement. This can result in overly cautious or restrictive approaches to financial communications, potentially hindering transparency and investor relations. 2. Lack of Communication Expertise: While legal counsel are knowledgeable about legal requirements, they may lack expertise in effective communication strategies and messaging. This could lead to technical or complex language in financial communications that may be difficult for non-legal stakeholders to understand. 3. Potential Conflict of Interest: Legal counsel may have competing priorities or conflicts of interest between their legal obligations and the organization's financial objectives. This could lead to tensions or disagreements regarding the appropriate approach to financial communications, particularly in complex or contentious situations. 4. Limited Focus on Reputation Management: Legal counsel may prioritize legal risks and compliance issues over broader reputation management concerns. As a result, they may overlook the potential impact of financial communications on the organization's reputation and stakeholder perceptions. 5. Cost Considerations: Engaging legal counsel for financial communications may involve additional costs and resources for the organization. Legal services are typically billed at higher rates compared to other communication professionals, which could impact the organization's budget for financial communications activities. In summary, while legal counsel can provide valuable expertise in regulatory compliance and risk management for financial communications, organizations should carefully consider the potential downsides and ensure that legal considerations are balanced with effective communication strategies and stakeholder engagement objectives. Collaboration between legal counsel and communication professionals may offer a more comprehensive approach to financial communications that integrates legal, regulatory, and communication considerations effectively. Case 5 - 1 BANKRUPTCY: COMMUNICATING FOR FUTURE SUCCESS Filing for bankruptcy is a strategic business move employed by many high-profile companies, including General Motors, Delta Air Lines, Dow Corning, and several manufacturers of products such as asbestos-based building materials. In filing under Chapter 11, companies get relief from the pressures of debt or legal obligations while they work out plans for the future success of the company. In other words, bankruptcy sometimes gives management the opportunity to “right the ship” without having to immediately reduce debt or pay other obligations. Delta announced its filing in a news release: ATLANTA, Sept. 14, 2005 – Delta Air Lines (NYSE: DAL) today announced that to address its financial challenges and support its ongoing efforts to become a simpler, more efficient and cost-effective airline, the company and its subsidiaries have filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Delta’s Board of Directors, in a unanimous decision, directed the company to take this action after determining that a Chapter 11 reorganization is in the best long-term interest of the company, its employees, customers, creditors, business partners and other stakeholders. Delta expects to continue normal business operations today and throughout the reorganization process. Specifically, it expects to continue to: Operate its full schedule of flights worldwide; Honor tickets and reservations and provide refunds and exchanges as usual; Maintain the SkyMiles program and other customer service programs; Provide amenities like Crown Room Clubs and international lounges in select cities; Provide employee wages, healthcare coverage, vacation, sick leave and similar benefits without interruption; and, Pay suppliers for goods and services received during the reorganization process. Why would a company that is not totally failing want to declare bankruptcy? Answer: Companies declare bankruptcy for two reasons, normally. Most prevalent is the need to “reorganize” in the face of debt that can’t be paid. For whatever reason, a company’s income stream doesn’t meet its need for capital, so Chapter 11 gives the business an opportunity to get its house in order and allow it to stabilize its affairs. In so doing, the company’s creditors are more likely to, ultimately, be paid in full. The second cause of Chapter 11 filing is to allow the company to deal with a catastrophic legal verdict. Celotex, Dow-Corning, Johns-Manville, etc. have found this route beneficial after losing legal decisions related to health concerns tied to their products. Many times, meeting these legal obligations would prevent the company from continuing as a functioning business. Doesn’t the stigma of being bankrupt damage the company’s reputation and business? Answer: No one wants to declare bankruptcy, but nearly 1.5 million (individuals and businesses) did in 2011. Of course, this might influence consumer behavior. On the plus side, however, most consumers just want a good product at a fair price. A company under the protection of Chapter 11 is probably more able to meet consumers’ needs than one struggling to meet its daily obligations. How does bankruptcy affect the publicly held company’s relationship with the SEC? Answer: The Securities and Exchange Commission requires “full and complete disclosure of any material fact in a timely manner.” Thus, any bankruptcy filing, any petitions for relief, any change in a company’s financial structure, any shift in business direction, any change of leadership, etc. would have to be fully disclosed to the investing public and to the SEC. The SEC’s prime role is protecting the interests of equity investors, and it is in the best interests of those investors to see the company emerge from bankruptcy as a thriving entity. Therefore, the SEC would not put unreasonable demands on a company in bankruptcy. How can a reputable company “take bankruptcy” and avoid its legitimate debts and obligations? Is this good PR? Answer: Bankruptcy is a final option for any struggling business. Chapter 11 bankruptcy allows a company to reorganize and try to get back on its feet. It rarely involves liquidation or avoidance of legitimate debt. Chapter 7 bankruptcy is much more serious for creditors and equity investors because that is “final” in that the company’s assets are liquidated and creditors are paid—usually a percentage—from the proceeds of that liquidation. How does communication at a company in bankruptcy differ from that of a healthy company? Answer: Good communication in bankruptcy doesn’t differ from good communication during good times. Every organization should have an ongoing dialogue with key constituent groups or publics. When times are good, ideal communication can slip a bit because the rising tide keeps all ships afloat. In bankruptcy, communication is the key to keeping everyone informed, motivated, and patient. Keeping stakeholders up to date on the activities of the company, the progress of the plan of reorganization, and the direction that the company is moving is critical to emerging as a profitable enterprise. No company can succeed without the support of its employees, suppliers, investors, and the communities in which it operates. Never is good communication more important than in a bankruptcy situation. Case 5-2 AFLAC GIVES SHAREHOLDERS A SAY ON PAY Aflac promotes its name with a large, loud duck screaming its name. But it attracted attention from the financial community with its initiative to invite shareholder input on executive compensation. Its groundbreaking efforts set the stage for many other companies to follow. Large, public, American companies now routinely host non-binding shareholder votes on executive compensation; indeed, such votes are called for under the Dodd-Frank Act of 2010. How did being the first to invite a shareholder vote impact media interest in Aflac? Answer: Being first usually gives an organization a leg up on the competition. It’s up to the organization to not squander the lead. In Aflac’s case, it stepped out at a time when there was intense interest—in the media, with social critics and financial types—in executive compensation and the widening gap between what the CEO took home versus what the average worker was paid. By leading the way, Aflac established itself as a leader, as an organization open to new ideas, as a company unafraid to address the tough issues, and by some accounts, a good company to employ or in which to invest. In terms of media strategy, what role did third parties play in the Aflac Say-on-Pay episode? Answer: Third-party endorsements have long been a valuable tool of the public relations trade. Getting publicity via media placement was valued because of its supposed “third-party endorsement.” Aflac was able to get that same boost from Boston Common and other shareholder advocacy groups. Partnering with a respected advocacy group increased the credibility of Aflac’s actions because Boston Common has no profit motive, but rather is there to look after the interests of the public. People are more inclined to accept concepts that come from those with no axe to grind. How did Aflac’s Corporate Communications team extend favorable national business media coverage over a period of nearly two years based on a single corporate announcement? Answer: It is difficult to keep a topic “alive” in traditional media unless something new is continually happening. In crisis communication seminars, participants are constantly reminded to “make it a one-day story,” by getting all the facts out immediately. Once all is on the table, most media outlets move on to more interesting topics. So, Aflac was able to keep something new and interesting on the table. Making the CEO available, adding credible partners, and introducing new topics such as the announcements leading up to the vote all helped keep Aflac’s story alive and well for a long time. Regarding corporate reputation, what are the lasting effects of such a flurry of positive business media coverage? Answer: The durability of any public relations program lies in its continuing influence. If Aflac had made one announcement and let it die, the corporate reputation would have received a momentary boost, then interest would have waned. By being a leader, by keeping the story alive, and by continuing to be an opinion leader on the subject of executive compensation, Aflac was able to keep its halo on. Why did the Corporate Communications team insist that the CEO be the lead spokesperson on this initiative? Why not the CFO? Or the COO? Answer: Having the CEO as a corporate “face” on this issue was a good tactic because it was his compensation that was being considered. He could have hidden behind his personal interests being at stake, but by not doing so, he gave more weight to the company’s commitment to transparency and fairness. It helped that he was a facile communicator, something that always has to be considered before putting a CEO on the stump. Case 5-3 MONEY SMART WEEK: GETTING AMERICA TO SPEND WISELY The crash of 2008 will probably affect modern Americans as much (and as badly) as the Crash of 1929 impacted our grandparents and great-grandparents. No one escaped the ravages of lost jobs, lost homes, lost savings, and dashed hopes and dreams. How and why the crash happened will take years to sort out, but some obvious clues come from a review of personal spending: people bought houses and other things that they could not afford to pay for over the long haul. The “instant gratification” generation saw its chickens come home to roost in a painful and permanent way. Hoping to get Americans to make better decisions with money was the purpose behind the Chicago Fed’s efforts to create “Money Smart Week.” The program is evaluated by session attendees and by the extent of media coverage it receives. What would you suggest it adopts as a more behavioral evaluation? Answer: Every planned program of public relations needs to have specific, measurable goals stated in terms of what behavior the program is supposed to elicit from primary publics. Unfortunately, many PR efforts miss this important step. In this case, the measurement was more related to awareness than outcomes. It is good that thousands of people attended, and that media found it newsworthy, but without specific, measurable goals to track, the behavioral impact is unknown. The Fed could have set some behavioral standards—reduced unemployment, more savings or investing accounts, for example—then it would have had something to measure and evaluate. Do you believe this program alone can impact the Fed’s reputation or the reputation of the financial industry in general? Answer: Again, if enhancing the reputation of the Fed is a goal, then the existing reputation needs to be established via research and then measured after specific time periods to see if the needle has moved forward. Certainly, one program can’t do all the work. But if Money Smart is part of a larger, overall effort, then it can certainly contribute to a more positive atmosphere for the Fed and the industry in general. What social media sources would you recommend it adopt and how would you suggest they be used? Answer: This program was firmly rooted in “traditional” media from the start. That’s not a bad thing, because the money-management audiences it was addressing were likely not fully engaged in social media. But as the community moves away from print, and younger audiences become part of the primary public for Money Smart, the Fed is going to have to include social media if it expects to bring these new audiences into the program. The problem is, social media is such a flexible, dynamic entity, what works today might be outdated by the time it is included in the program. Look how quickly My Space became nearly obsolete! Future generations of Money Smart would be wise to include younger input in any future plans to be sure social media are (a) part of the plan, and (b) relevant to the audiences being targeted. Does having Visa (credit card company) as a partner diminish the objectivity of Money Smart? Answer: Probably not. Any public program might want a sponsor, and Visa certainly has a high profile and deep pockets. Most consumers have multiple credit cards (and debit cards) so having one of the industry leaders has a marketing partner shouldn’t harm credibility. Having said that, if the Money Smart program becomes an advertisement for Visa, then it loses all credibility. Case 5-4 WHEN ACTIONS OF A FEW CAN LEAD TO ORGANIZATIONAL FAILURE; WHAT IS PR TO DO? In tackling the world of investor relations, practitioners are faced with a different class of information and communication obstacles, which require a new school of public relations that is specific to investor relations. Like those outside the financial arena, stockholders and investors need effective and open communication in order to operate successfully, and consequently, they have a need for public relations practitioners. What if the TSG case happened today? How might things have been handled differently with today’s technology? Do all the recent “insider trading” scandals make this case seem less or more problematic? Answer: This case wouldn’t have happened in today’s modern media climate. The rules are much more precise and well-defined. Social media would have made this a hot topic, one which any company would have recognized the need to speedily address. The SEC would have more access to facts, rumors, reports and comments from company officials. With the recent emphasis on catching and punishing insider trading, no company today would allow insiders to trade on material information yet unreleased to the public. Today’s electronic police would have spotted the trades and kicked them back. Yes, violations do still occur, and people probably get away with sophisticated insider trading, but it’s harder to get away with it now. Think about a different situation. Suppose that a weekly financial e-mail newsletter “Tips and Rumors” regulary got into some people’s hands a day before each issue of the magazine came out, and some of the stocks mentioned were suddenly traded heavily and run up in price. Suppose, also, it turned out that a clerical person in the magazine’s public relations department privately had been sending an advance rough draft of the column as a favor to a friend at a brokerage firm. Neither that clerk nor the friend at a brokerage firm traded or made any profit. As you understand SEC’s Rule 10b, who is legally liable? Put another way, where does common sense tell you the responsibility for the privacy of material facts belongs? Answer: This scenario is not fictitious. Years ago, a printer whose company printed copies of Business Week realized he had prior knowledge of which companies and stock were going to be favorably reflected in the weekly pages of BW. He made some trades, made some money, but eventually got caught and lost his job and his reputation. Anyone who trades on material information yet unreleased to the public is subject to the penalties of the SEC and the law. Anyone in the “stream” of information is subject to the law. Making a profit isn’t what the law is about. The goal of the regulations is to keep insider trading from happening. Anyone who abets insider trading will have to answer for his or her actions. Objectively, was the initial TGS news release about the ore strike at Timmins misleading based on what was known at the time the news was released? Or did it go only as far as a cautious, prudent management was willing to go for fear of overstating and getting in trouble for that? Or, what else does your objective evaluation say might have been the determining consideration? Answer: Who knows what was in the hearts of the people who signed off on that release? Absent that information, one can look at what was said, weigh it against what is known now, and see that the release did not come close to being accurate. Looking back on the time when the release was issued, it’s hard to believe that the management team at TGS didn’t know there was a high likelihood of there being a major ore strike in the offing. Was management being cautious or misleading? Again, no one knows. But executives with knowledge of what was in the ground were buying stock. That should tell something about what was known and when it was known. A reputation for being honest in economic matters, civil in social relations, and honorable in character has long been said to be a precious and fragile possession. And the reputation of communications people is generally perceived by critics and supporters alike as being a reflection of those they serve and associate with. If we accept both premises, how can we stay clean and honorable, earn a good living, and advance in a career when we are cast in an atmosphere that many moralists, historians, intellectuals, journalists and some government officials describe as a “moral morass”? Answer: The principle behind professional ethics is that one’s actions are designed to create the greatest good for both the client and community as a whole, rather than to enhance the position and power of the practitioner. With this in mind, public relations professionals must, at all times, ensure that their actions are ethically (and professionally) correct. While it is difficult to stay “clean and honorable” in an environment that is morally lacking at times, the PRSA Member Code of Ethics gives us a guide for what is acceptable, and reminds us of our moral obligation to society, above anything else. If, indeed, public relations falls into that “moral morass” atmosphere, the challenge of maintaining ethical standards of practice is even greater. By applying the Golden Rule of “do unto others as you would have done unto you,” the public relations practitioner could set an example by exhibiting morally and ethically prudent business behavior. The only way to shake a negative stigma is to practice positive behavior, and if public relations practitioners set the trend, it is likely that other professions would follow. It is important to note that the pendulum is now beginning to swing the other way. Where business practices once involved a general disregard for the common good when it interfered with private gain, that is not the rule anymore. Corporations and individuals alike are discovering a need for social consciousness and responsibility, and that need is well served by ethical and honorable actions. Public relations could take a leading position in this movement, thus serving the community and simultaneously disproving the notion of the “moral morass.” Problem 5 - A CAN AN ANNUAL REPORT PLEASE EVERYONE? This question asks students to plan for an annual report, taking into account the divergent interests of the CEO, the heads of operating division, and the systems analysts. As mentioned in the problem scenario, an annual report should communicate persuasion, compromise and reconciliation. In order to do this, some preliminary research should be done. A good research tool may be to have a brainstorming meeting with some of the senior executives and management to find out what they want to see in the annual report, as well as with investors to know what they will want to see. Some questions that public relations should ask ahead of time: What audiences are we trying to speak to with this annual report? What are the communication priorities of each division in what they want to present in the report? What are the financial results for the year? How well did the organization meet its strategic goals and objectives for the previous year? What went well or not so well? After the answers to these questions have been gathered, one thing to keep in mind while preparing the report is to start early in planning. Outline the annual report The answers to this question will vary depending on what company is selected by the student. Some considerations they should take into account: Overall theme in words and graphics (with their rationale) Table of contents indicating obligatory information Preliminary concepts for cover and layout Photography needs or other visual techniques, with costs Printing costs, including number of copies A timetable with deadlines Graphics. Remember your corporate culture. There is danger in being too cute or too glossy. The style and presentation of the cover communicate a considerable amount to the investors before they even open the report. Reducing the cycle time of the report Examine the approval process of the report. Are there any areas where there are unnecessary or multiple approvals of the content of the report? Eliminate any of these redundancies. Another effort that can reduce the cycle time of the report is to transmit it electronically to the typesetter. Problem 5 - B HERE COMES THAT MAN NADER, AGAIN This problem describes a delicate situation in investor relations. While you do not want to brush off this woman’s concern about the policies of your corporation, you also do not want to promise policy change that cannot be followed through. There are a few details to take care of before writing a response to this disgruntled stockholder. One initial task after receiving the letter is to check on the validity of her claim. Make sure she is an investor in your organization. Large or small, any investor can start a proxy fight, and stir up government officials or the media. Identify the particular problems that she and the writers of the “Hall of Shame” article have identified as unethical, illegal, and short-sighted actions. Talk to the president. Discuss those problems and what can be done about them. Find out what he has to say about them before writing your response. Get a commitment from the president that some action will be taken to rectify those issues that contribute to the negative image your company has been given. Consider speaking publicly (or having the president speak publicly) about the article and the negative publicity it has given you. Though you need not reference the article itself, you can focus on the positive steps your organization is taking to rectify these issues. This may head off any further letters from unhappy stockholders. The actual letter written to the disgruntled stockholder should be to the point and accept responsibility for the company’s actions. It should include a thank-you for her concern and a response to her impressions of the company. Any action steps that the president has committed to in rectifying the situation should be outlined in brief here. Problem 5 - C PLANNING THE ANNUAL MEETING WITH A TWIST You work for the corporate communications department of a major corporation in California. Your duties vary depending on what projects come up, but your focus, as of late, has been internal. As a function of your job, your department is responsible for arranging the annual meeting of shareholders. Your corporation has decided to merge with another leader in the industry and the company has decided to release this information at the annual shareholder meeting. Planning the annual meeting is a large task to take on, but with the added information that will need to be communicated, you realize that you have a huge job on your hands. This merger will have a significant effect on many aspects of the corporation. First, it will be a larger operation. As you are already a leader in the industry, this merger will put your company at the top and possibly put it in the Fortune 500. Second, the company will expand its services and products and will have to make changes internally to support the new business that it will be taking on. Job descriptions will need to be changed, as well as departments consolidated so that they may become more cohesive as to what their new concentration will be. Third, many jobs will be eliminated from both companies to complete the final merger. Some of the company’s shareholders are employees; they might lose their jobs in this process. Knowing all of this, how will you communicate this information to shareholders at the annual meeting? Would you make a presentation to employees separate from shareholders and allow them to voice their concerns? What media outlets would you use to relay this information to the public outside of the company? In what sequence would you release this information? Public relations practitioners often play the role of interpreter or mediator in situations like these. What recommendations will you make to the CEO that might help her present this news in a positive light? Chapter 6 CONSUMER RELATIONS This chapter considers the nature of consumer relations and the relationship between public relations and marketing. For many years, marketing was a popular way of attracting people (and their dollars) to everything from hospitals to universities to churches. While this re-established a key point of public relations philosophy, it sometimes pushed public relations departments into a secondary role versus marketing. As public relations practitioners and professors know, there is much debate over whether public relations is a part of marketing or vice versa, or whether they are both essential strategic services and thus, equal factors. Recently, the functions of public relations and marketing have come close together as demonstrated by the dominant customer relations strategy, relationship marketing. Today we know that customers want to be served, not sold, and relationship marketing incorporates public relations principles like personalized, one-on-one dialogue with the marketing of products and services. Integrated Marketing Communication (IMC) further strengthens PR’s role. Marketing and public relations share some fundamental concepts, including analyzing market opportunities (research), selecting target markets (publics), developing a marketing mix (communication and action plan), and managing the marketing effort (evaluation). However, public relations does four things that marketing cannot do: Public relations is concerned about internal relations and publics. Public relations cares about noncustomer external publics and the environment in which the organization operates. Public relations operates on the policies of human nature, while marketing focuses on consumer behavior. Public relations may work to stabilize or change public opinion in areas other than products. Technically, both marketing and public relations support the sales function. The difference is that marketing concentrates on selling, while public relations incorporates building relationships with all stakeholders, including supporting sales to customers. Originally, public relations’ role was to: make people aware of the product or service in the first place; spread knowledge about the benefits and advantages of the particular product or service, and constantly remind and reinforce favorable feelings toward the product or service. These are all one-way communication vehicles, which we know are ineffective in today’s competitive society. More recent activities of public relations include: Forming user groups or customer service departments to personally build customer loyalty. Adopting customer satisfaction programs in which the entire organization is focused on delivering not just a good product or service, but also the quality and personal interactions consumers expect when making a purchase. Concentrating the publicity and promotion activities on taking customers away from competitors (which beer and cigarette makers state as their primary reason for publicity and advertising). Protecting the reputation of the product or service and of the organization in a period of consumer activism, government regulation, competitive predation, global marketing, and similar conditions that bring a continual bevy of public issues to bear on every organization and industry. Exam Questions for Chapter 6: 1. What fundamental concepts do marketing and public relations share? How do they differ? Answer: Marketing and public relations (PR) share fundamental concepts related to communication, relationship-building, and reputation management, but they differ in their objectives, target audiences, and strategies. Here's a breakdown of their similarities and differences: Similarities: 1. Communication: Both marketing and PR involve communicating messages to target audiences. Whether it's promoting a product, service, or brand image, effective communication is essential for both disciplines. 2. Audience Understanding: Both marketing and PR rely on understanding the needs, preferences, and behaviors of their target audiences. This understanding helps tailor messages and strategies to resonate with specific groups of people. 3. Brand Building: Both disciplines contribute to building and managing a brand's reputation and identity. Marketing activities help create brand awareness and generate sales, while PR efforts focus on enhancing brand credibility, trust, and goodwill. 4. Relationship Building: Both marketing and PR aim to build positive relationships with stakeholders, including customers, media, investors, and the community. Developing strong relationships fosters loyalty, advocacy, and long-term success. Differences: 1. Objectives: • Marketing: The primary objective of marketing is to drive sales and generate revenue. Marketing activities focus on promoting products or services, increasing market share, and achieving specific business goals. • PR: PR aims to build and maintain a positive reputation for a company, brand, or individual. PR efforts focus on managing perceptions, shaping public opinion, and building trust and credibility. 2. Target Audience: • Marketing: Marketing targets consumers or potential customers with the goal of influencing their purchasing decisions. The focus is on reaching specific demographic groups or segments to drive sales. • PR: PR targets a broader range of stakeholders, including media, investors, employees, government agencies, and the general public. The goal is to influence opinions, perceptions, and behaviors beyond immediate sales transactions. 3. Paid vs. Earned Media: • Marketing: Marketing often involves paid media channels, such as advertising, sponsored content, and paid search. Companies pay for exposure and control the content and placement of their messages. • PR: PR primarily relies on earned media, such as media coverage, press releases, and social media mentions. PR efforts focus on generating positive publicity through strategic storytelling, media relations, and content creation. 4. Metrics and Evaluation: • Marketing: Marketing success is often measured in terms of key performance indicators (KPIs) such as sales revenue, return on investment (ROI), customer acquisition, and conversion rates. • PR: PR success is evaluated based on qualitative metrics such as media mentions, brand sentiment, share of voice, and reputation scores. While quantitative metrics are also used, PR outcomes are often more nuanced and difficult to measure than direct sales. In summary, while marketing and PR share common goals of communication and relationship-building, they differ in their objectives, target audiences, and strategies. Marketing focuses on driving sales and revenue through targeted promotional activities, while PR aims to build and maintain a positive reputation and influence perceptions through earned media and strategic communication efforts. 2. Do you think the more modern concept of two-way communication is more effective than its predecessor? Why or why not? Answer: Yes, the more modern concept of two-way communication is generally considered more effective than its predecessor, primarily because it fosters greater engagement, understanding, and collaboration between organizations and their stakeholders. Here's why: 1. Increased Engagement: Two-way communication encourages active participation and interaction from both parties involved. Instead of simply broadcasting messages, organizations engage in dialogue with their stakeholders, allowing for questions, feedback, and discussion. This engagement leads to a deeper connection and a sense of involvement, which can strengthen relationships and build trust. 2. Better Understanding: Two-way communication facilitates a better understanding of stakeholders' needs, preferences, and concerns. By listening to their feedback and perspectives, organizations gain valuable insights that can inform decision-making, product development, and service improvements. This understanding helps organizations tailor their messages and strategies to better meet the needs of their audience. 3. Enhanced Transparency: Two-way communication promotes transparency and openness, which are essential for building trust and credibility. When organizations actively engage with stakeholders and address their questions and concerns honestly, it demonstrates a commitment to accountability and integrity. Transparency helps mitigate misunderstandings and rumors, fostering a more positive reputation. 4. Effective Problem-Solving: Two-way communication enables organizations to identify and address issues proactively. By listening to stakeholders' feedback and concerns, organizations can identify potential problems early on and take corrective action before they escalate. This proactive approach to problem-solving can help prevent crises and minimize reputational damage. 5. Building Relationships: Two-way communication helps organizations build stronger relationships with their stakeholders. By actively engaging with them, organizations demonstrate that they value their input and opinions. This reciprocal relationship fosters loyalty, advocacy, and long-term support, which are essential for organizational success. Overall, the more modern concept of two-way communication is more effective because it promotes engagement, understanding, transparency, problem-solving, and relationship-building. By embracing this approach, organizations can foster stronger connections with their stakeholders and achieve better outcomes in the long run. Case 6-1 CHEVROLET DITCHES THE TRADITIONAL FOR UNPRECEDENTED CAMPAIGN TO ATTRACT NEW, MILLENNIAL BUYERS New car introductions have been traditional and somewhat hidebound: big press parties, big-budget ad buys, and loads of dealer incentives when necessary. Chevrolet broke this mold with its Sonic sub-compact, going directly to the target audience with stunts and social media leading the way. Could this be the wave of marketing PR for the future? What would you recommend Chevy do to tweak this campaign for your generation, rather than Millenials? Answer: If Chevy wanted to sell the Sonic to college students and recent grads, it might want to center some similar activities on college campus events, spring breaks, major college athletic events and places where students go to have fun. The Sonic is supposed to be a fun car, so attaching the brand to college student activities would likely be successful. Chevy might also want to make some attractive financing packages for college students. Most of them are facing some serious student loan payments, so getting financed right out of school is going to be important. What might be some fallout issues from this campaign? How might GM and Chevy prepare for them? Answer: Any edgy campaign has to prepare for two contingencies: 1. A stunt might go bad. People might be injured (or killed) or something or someone might be damaged. The sponsors prepare for this by checking and double-checking every aspect of the stunt. If it clears muster after three or four repetitions, then it’s probably safe. The Company must think about any backlash resulting from the concepts and execution of the promotions and stunts. Here one must be aware of differing perspectives. Older consumers won’t be amused by some of the stunts, but Chevy isn’t trying to sell the Sonic to older buyers. Answer: Traditional comics like Jay Leno might make fun of your promotion, but Jon Stewart or Daniel Tosh might like it. Remember, your promotions have to appeal to specific targets. That those outside the target ‘don’t get it’ isn’t a problem. Case 6-2 FIRESTONE: A RECALL REVISTED Art Stevens, APR, once defined public relations as “the shaping of perceptions through communication…” This case reflects this definition in that the perceptions formed by consumers following a series of automobile accidents involving Ford SUVs and Firestone tires created massive public relations problems for both companies. This case actually traces the problems created by two similar situations involving Firestone tires. In 1975, Firestone’s popular “500” tires were seemingly involved in thousands of failures and hundreds of accidents and deaths. Although Firestone later won a significant legal victory related to the charges, its reputation was damaged and its response strategy questioned. Twenty-five years later, a similar situation occurred with similar results. Firestone, it seemed, hadn’t learned much about the court of public opinion. This case examines both cases and the role that perceptions play in consumer minds. Compare and contrast the situation Firestone faced in 2000 with the similar situation of 1975. Answer: For Firestone, the two are eerily similar. Tire failure, public controversy, high-profile critics, and some reluctance to make the problem right in the eyes of consumers. In both instances, the outcomes were basically the same—a recall after some delay. In both cases, Firestone tried to pass the buck to consumers and ultimately to Ford in 2000. The 2000 situation was a little different. Only one vehicle supplier (Ford) was enmeshed in the dilemma, whereas the tire failure was across the board in 1975. That enabled Firestone to point fingers at Ford as being the reason the tires failed. How does Ford’s involvement in 2000 change the scenario? Answer: Ford’s involvement was a double-edged sword for Firestone. On one hand, the fact that the failures were mostly on Ford SUVs raised the question of whether it was the tires that failed or the vehicle. On the other hand, Ford was Firestone’s main customer. Does a company want to implicate a good customer directly? Plus, the Firestone and Ford families had been social friends for decades. While that wasn’t a direct influence on the decisions being made—the Firestone family had been out of the brand’s management for decades—it probably made for some interesting talk around the Thanksgiving table. Discuss Firestone’s decision to recall only the 15-inch tires. Was that a good “PR” move? Answer: The decision to recall only a limited number of suspect tires was probably as much an economic decision as it was an operational one. By limiting the recall to the standard tire supplied with new Ford Explorers, Firestone was (a) limiting its financial exposure (recalls can be expensive) and (b) sending a message that the tire problems were limited to (1) only part of the Firestone line and (2) tires on Explorers. The latter message subtly re-enforced Firestone’s belief that the vehicle was integral to the problem. Recalls occur daily in the automotive industry. Why do you think a total recall was such a sticking point with Ford & Firestone? Answer: Again, this reflects economics and pride. When a product is recalled, the consumer gets either a replacement at no cost or, sometimes, money is returned. Either result is an anathema to a bottom-line-oriented company, which both Ford and Bridgestone are. No one likes giving away money. Second, there is an enormous amount of pride in business. Companies want to be admired. Employees have to feel good about their employers. Companies want customers loyal to the brand. A recall of this size is painful, and not just in the wallet. Losing face is equally as painful as losing money, and sometimes more lasting. Discuss the role the Internet played in Ford and Firestone’s communication strategy. How would the situation been affected by today’s Twitter-happy society? Answer: Communicating via the internet probably made good sense. Today’s consumer doesn’t get much of his or her information through historical channels. Newspaper readership is down to about 20 percent of the American public. Nearly half (49%) of Americans get ALL their information from television. Younger audiences depend on the internet and all its tentacles—cell phones, text messages, podcasts, blogs, and other mutations of the web. Covering your communication bases with traditional and modern tactics makes good sense. Overplaying one for the other would be a mistake. How did Japanese ownership affect this case? Answer: Probably not as much as some would make. The Japanese business community is savvy. Japan automakers, especially, are knowledgeable about American customs and Bridgestone officials are no exception. Rather than ethnic culture being the problem, hubris might be a larger influence. Americans have no monopoly on excessive pride. Why do you think the PR agency for Firestone quit in the middle of this crisis? Answer: The agency could probably see its advice being ignored. When that starts to happen, it is smart to resign the account. No one wants to be associated with a disaster in the making, especially an agency that is supposed to play a strategic role. Another reason for jumping off that particular ship is to say to the world: “We tried to tell them, but they wouldn’t listen.” That message resonates with present and future clients and says, “This isn’t our fault.” Case 6-3 JOHNSON & JOHNSON THEN AND NOW: HOW HANDLING A CRISIS CAN MAKE OR BREAK A REPUTATION In 1982 and 1986, Johnson & Johnson’s (J &J’s) timely and comprehensive responses to the Tylenol crises were recounted in various media outlets and incorporated into the best practices of management, marketing, public relations, and the interface among all three. It was accepted that J & J had established a “gold standard” for managing crises, using effective public relations. Since the time of the crises, J & J successfully launched additional Tylenol based remedies and prospered. Yet J & J’s reputation today has suffered from recent recalls and allegations, and its response—or lack of it— is in stark contrast to the company’s actions and reputation in the 1980s. 1. Tylenol is a product of the McNeil Consumer Products wing of Johnson & Johnson. When the deaths occurred, the parent organization moved in and took over both responsibility and spokesmanship. What are the pros and cons of that strategy as far as the CEO and the communications people in McNeil are concerned? What about the news media? Answer: When something life-threatening occurs in an organization, it is incumbent on leadership at the highest levels to be involved in the problem and its solution. That’s why J&J, CEO Jim Burke, and VP PR Larry Foster moved quickly to take over the communication strategy and execution during the Tylenol crisis. If McNeil had tried to handle this crisis, its management would have to pass much of the planning and communication through Burke and Foster anyway. Contrast this with the Diet Pepsi hoax (Case 7-3). Pepsico tried to let local management handle the problem, only to see it escalate to a national problem. Eventually, top management had to step in, so it’s smart to involve those players from the start. As for the news media, getting the news from the CEO, or at least from corporate headquarters, is always better. In the days of rampant social media, headquarters should be grateful that any blogger or news generator even checks with headquarters. Why do you believe J&J has acted differently between the first series of problems in the 1980s and the recent problems? What internal communication problems do you surmise might have impeded a more successful handling of the issues? What would you counsel the company to do going forward? Answer: It is obvious that the corporate culture has changed at J&J. There was once a Credo hanging on the wall that said “We believe our first responsibility is to the doctors, nurses and patients, to mothers and all others who use our products……” Either that Credo no longer hangs prominently, or no one had read it lately. The actions of J&J during the Tylenol scare demonstrated the commitment to customers and consumers. The decisions made lately demonstrate a commitment to the bottom line. It’s hard to say where the PR voice went. Larry Foster was a prime shaper of the strategy for Tylenol’s problems. His replacement must not have much clout at the decision-making table. Going forward, it would behoove J&J to dust off the Credo and make it mandatory reading prior to any major decisions. It worked for a long time as a moral compass. It will work again. It may also help to emphasize the Credo to stockholders who should understand, going into an investment like J&J that this is how it will lead if a crisis arises. One of the Great Truths of PR is that there is no such thing as corporate ethics. How can an organization install and enforce an ethics policy that works? How might it keep it intact even through leadership changes? Answer: There really are no corporations. Just people acting on behalf of the interests of all concerned and involved. Therefore, if people making decisions don’t have a focus on doing the right thing for the right reasons, the organizations they represent will stray from the straight and narrow. By having a written ethics policy, endorsed and enforced by top management and the board of directors, organizations can make permanent the direction it wants to go. J&J’s Credo is a good start. In the 1980’s, J & J acted according to its credo and recovered from two separate, fatal tampering problems. Might the credo have provided some guidance in the more recent situations? Answer: The Credo would have prevented the damaging decisions from being made. The Credo gives a clear focus to the direction J&J needs to go---respecting the doctors, patients and families that recommend or use J&J products. “Our final responsibility is to our stockholders…” it says. Final means “last.” Only after J&J has met its obligations to consumers, employees, community and society does its Credo mention the bottom line. That’s what the founders believed. They were right. Case 6-4 MARRIOTT CULTIVATES CUSTOMER RELATIONSHIPS Most major companies are struggling to understand and use the explosion of “new media” currently available. Social media is rapidly becoming a business tool. Blogs are moving from personal journals to an effective public relations weapon. Marriott, with its worldwide network of hotels, found a novel way to put new media to work. Visit www.blogs.marriott.com/marriott-on-the-move and read at least five blog posts. What do you think about the blog? Answer: Including specific URLs like www.blogs.marriott.com/marriott-on-the-move. However, I can provide insights into what makes a blog effective based on general best practices and principles. For Marriott's blog, "Marriott on the Move," here are some key aspects to consider: 1. Content Quality: The quality of the blog posts is crucial. They should be well-written, informative, and engaging. The content should resonate with the target audience and provide value, whether it's travel tips, hotel insights, destination highlights, or behind-the-scenes stories. 2. Visual Appeal: Incorporating visuals such as photos, videos, and infographics can enhance the blog's appeal and make it more visually engaging. High-quality imagery can help bring the stories to life and capture the reader's attention. 3. Authenticity: Authenticity is essential for building trust and credibility with readers. The blog should reflect Marriott's brand values and personality while also showcasing real experiences and perspectives from employees, guests, and partners. 4. Interactivity: Encouraging reader engagement through comments, polls, surveys, and social media sharing can enhance the blog's interactivity and foster a sense of community. Responding to comments and feedback demonstrates a commitment to dialogue and relationship-building. 5. Consistency: Consistent posting schedules help keep readers engaged and coming back for more. Whether it's weekly, bi-weekly, or monthly updates, maintaining a regular cadence demonstrates commitment and reliability. 6. Integration with Social Media: Integrating the blog with social media platforms allows for broader reach and amplification of content. Cross-promotion on platforms like Twitter, Facebook, and Instagram can drive traffic to the blog and increase visibility. 7. Measurable Goals: Setting clear goals and metrics for the blog, such as website traffic, engagement metrics, and conversion rates, allows for tracking progress and optimizing performance over time. By evaluating these aspects of Marriott's blog, you can gain insights into its effectiveness in cultivating customer relationships and leveraging new media as a business tool. Explain the distinctive benefits and drawbacks of a blog, as compared with other social media channels, such as micro-blogs and social networking sites. Answer: The major benefit of a blog is its ability to go directly to the target. Blogs are subject to no gatekeeper, agenda setters, or filters. A blogger can say what s/he wants and post. Anyone who visits the site will see the original thought—unadulterated, unfiltered, and unedited. Another benefit is the two-way potential of a blog. Once the user has read the blog, it is a simple matter to respond, something one cannot do easily to traditional media stories. Feedback is important, and blogs can facilitate this response. Finally, immediacy is enhanced. Most of Marriott’s posts are not breaking news, but if a matter was urgent or of great importance, posting it on an established blog site is easy. Conversely, a blog has little chance of being seen by random eyes, as a story in a newspaper or television newscast might. Most internet users go directly to sites of interest, rather than “scan” the web for what might be interesting. There are web services (Technorati.com comes to mind) that make surfing blogs easier. But one still has to enter a topic, a name, or other identifying material to get to the site. Newspaper readers, on the other hand, flip through the pages and occasionally see something of interest just because it is there, staring back at them from the printed page. Social networking sites are less specific and much more cluttered than blogs, but still useful. Many companies have gone through Facebook or Twitter to reach employees, customers, and other stakeholders with matters of urgency. A savvy communicator will be involved in all the above in order to best reach all audiences. If your CEO expressed an interest in starting a blog, what would you need to discuss before moving forward? Answer: There would be a series of questions to explore with him/her first: “What is it you want to say?” “To whom do you want to say it? ‘ “Is this the best mechanism to reach them?” If the CEO had legitimate answers to these questions, we would then explore some additional issues. For instance, would he/she have the time required to write a cogent blog? Most CEO types are over-committed on a daily basis. When might this CEO have an hour or so free to put his thoughts together for the blog? Another concern would be parameters for the content. Would this be his opinions? Items of interest internally? Externally? Does she understand the nature of a blog? Its shelf life? Its portability? Finally, there needs to be a discussion on strategy, budget and manpower. Someone will have to devote a lot of time daily to responses and feedback---if the blog is at all successful. Is there additional budget? What should the department stop doing in order to do this? Is the blog more important than what is currently being done? How does it fit into the overall communication’s strategy? In short, the CEO needs to understand how big this is. It could take up a lot of time, but it could have immense value. Weigh the costs and go forward if it looks good. Marriott rejected ghost blogging. Explain and justify your position about whether a blog’s stated author should delegate the writing of the blog posts to a public relations practitioner. Answer: There are two valid arguments on this topic. One holds that public relations writers have long “spoken” for their leaders. News releases contain “Quotes” from the CEO that were created, frequently, by the writer and passed by the boss for approval. Speeches are rarely written by those who give them. So there is ample precedent to having public relations writers pen words for their bosses. So what makes a blog any different? Do bloggers have a greater responsibility for originality? The blogging public seems to think so. Readers like to know that the thoughts being blogged belong to the blogger. (see p. 132) Reality will probably settle on some middle ground. Not all companies’ CEOs have time to create blog content on a regular basis. But the core ideas should be from them. The blogging public will probably realize after time that content is content…..authorship notwithstanding. So long as a corporate blog is worthy of reading, responsive and interesting, people will read it. Case 6-5 TOYOTA: GROWING TOO FAST; RESPONDING TOO SLOWLY Selling cars in America has been quite a roller-coaster ride in the new millennium. General Motors and Chrysler nearly failed. Ford struggled. Foreign imports made huge inroads into the American market, none more successfully than Japan-based Toyota Motor Company. But in 2009–2010, Toyota had its own problems as cars seemed to careen out of control, taking Toyota’s hard-earned reputation with them. How did an iconic company slip so far? Discuss the pros and cons of Toyota’s policy of thorough study of a problem versus a quick response. Answer: There are advantages to both approaches when responding to a crisis. The wise counselor knows that timing is important—knowing when to act is just as important as knowing what to do. Toyota, however, embraced a policy of “thorough study” universally, which, in this case, was the wrong thing to do. Someone in the Toyota system—perhaps someone on the USA side of the business—should have realized that, while important, a thorough study of the problem was hurting the company. The flashpoint nature of these accidents, the extent of exposure, and the life-and-death nature of the incidents all screamed for Toyota to do something, and to do it quickly. The problem grew to gigantic proportions because Toyota gave it time to grow. Why was the American public willing to so readily believe Toyota cars were unsafe? Answer: Toyota should have had a strong “tacit social license” because of its long history of providing dependable vehicles to the American consumer. If it has taken some remedial steps sooner, it likely could have avoided the short-term damage it suffered. When American consumers saw no action to alleviate the problems—no recalls, no statements, no apology—they quickly gave up on Toyota. Interestingly, a year or so after the crisis waned, Toyota once again was ranked first in customer satisfaction, which means its tacit social license is intact—just suspended in lieu of some direct and quick action. What role did culture play in this situation? Can you think of other situations in which culture might have played a role? Answer: Toyota is definitely a Japanese company. It prides itself on deep thought, thorough study, careful analysis and measured response. That probably works well in Japan. But Americans are impatient. The US culture is one of immediacy. We want what we want, and we want it now. Americans wanted Toyota to do something, and when it didn’t, Americans voted with their feet and their wallets. As for other similar situations, culture probably played a part in Bridgestone’s problems. Rather than recall the tires, Bridgestone wanted to limit its exposure, study the problem, etc. That didn’t work out well for Bridgestone either. How important was it that Toyota had a strong balance sheet and ample reserves during the crisis? Answer: A strong balance sheet (lots of liquid assets) was Toyota’s best weapon throughout this crisis. It was able to withstand the drop in sales, the recession, and the constant pressure without layoffs, dealer closures, and the other things the US auto industry was forced into. Staying power is important in hard times, and Toyota’s fiscal position left it in a good position to fight back. It could afford to hold on. Might the definition of safety be different from continent to continent? Answer: Safety is safety. However, perceptions vary from culture to culture. American consumers are probably more volatile and less patient than say, Japanese consumers. Possibly Toyota management was deluded into thinking Americans would be patient, or that problems in one region of the world would not impact decisions in another. That is wishful (or naïve) thinking. How might Toyota have (1) predicted and/or (2) prevented this crisis? Answer: Toyota could have predicted this problem by listening to its American managers and dealers. Some understanding of the American culture would have made it easy to see that Americans will not stand for faulty products and delays in remedial action. It could have prevented the crisis by having better control over its manufacturing process and more of its traditional thorough study of after-market products. Trying to get bigger, faster, allowed some sloppy production and management decisions that jumped up and bit Toyota in the end. Would you consider buying a Toyota? Why? Why not? Answer: Whether or not to consider buying a Toyota would depend on several factors, including individual preferences, needs, and perceptions of the brand. Here are some considerations: 1. Safety Record: Toyota's reputation took a hit due to safety issues, particularly the unintended acceleration problems that occurred in 2009–2010. Potential buyers may be concerned about the safety of Toyota vehicles and whether those issues have been adequately addressed. 2. Reliability: Historically, Toyota has been known for producing reliable vehicles with good resale value. Buyers may weigh the brand's reputation for reliability when considering a purchase. 3. Model Selection: Toyota offers a diverse range of vehicles, including sedans, SUVs, trucks, and hybrids. Whether a buyer would consider purchasing a Toyota could depend on their specific needs and preferences in terms of vehicle type, size, features, and price range. 4. Brand Perception: Public perception of the Toyota brand following the safety issues could influence a buyer's decision. Some may still trust in Toyota's reputation for quality and innovation, while others may have lingering concerns about safety or reliability. 5. Safety Features: Toyota has since implemented various safety features and systems in its vehicles to address past issues and enhance safety. Buyers may consider the availability and effectiveness of these safety features when evaluating Toyota models. 6. Reviews and Ratings: Reading reviews from automotive experts and consumer ratings can provide insights into the performance, reliability, and safety of specific Toyota models. Buyers may consider these evaluations when making their decision. Ultimately, whether or not to buy a Toyota would be a personal decision based on individual preferences, needs, and perceptions of the brand's safety, reliability, and overall value. Some buyers may still trust in Toyota's reputation and continue to consider its vehicles, while others may prefer to explore alternatives based on their own criteria and concerns. Problem 6• A A WINE BAR NEEDS POSITIONING The owner of a wine bar comes to your newly established communications firm in search of more business. You need to conduct some research to determine how to manage customer satisfaction—how to attract new customers and retain current ones. Also, you need to develop a one-year strategic marketing plan. The owner has a budget of $11,000. Consider the types of issues Berry should be speaking out on and how to position the bar as a socially responsible drinking establishment. With only $11,000 for the whole project, research will have to be conducted on a small scale. Customer Comment cards can be an inexpensive way to determine how customers heard about the establishment and what they liked/didn’t like about it. In addition, informal discussions between the wine bar staff and customers can add insight into why they are there. Since it’s more difficult (and more expensive) to reach non-patrons, it may be easier to begin now with an awareness campaign. As part of the campaign, the client should be encouraged to join the Chamber of Commerce and other local organizations. This is an opportunity for networking and getting the name out. Offering the facility for a meeting or special event is an excellent way to get people inside. As for messages to promote, Mr. Berry should obviously be involved in promoting the use of designated drivers and should institute a program that rewards that behavior on the part of his customers. Problem 6• B GOOD INTENTIONS, BAD RESULTS After loaning several used motorized carts to a local festival planning committee, the son of a festival official was injured while playing with one. As the Customer Relations director of the company that owns those carts, set an objective, strategy, and main tactics to resolve the problem. What would you recommend as the dos and don’ts of customer satisfaction in the future and the communication about those relations? The objective should focus on getting through the current situation without losing any customers in the community, now or in the long-run. The strategy would likely be to communicate honestly and openly about the incident, showing concern for the accident victim and his family. Then, a more visible community relations effort can take place. Tactics to consider might be an honest effort to console the victim and his family, whether publicly, or better yet, privately. Also, complete cooperation with investigating authorities will be helpful, as will a stepped-up community relations program. It might be a good idea to require a safety check on all carts loaned out and a lesson for the drivers. Ads mentioning or refuting the incident should not be considered. In the future, it may be suggested that when a piece of equipment is loaned, that party sign a release form absolving Bart’s Cartmart of any wrongdoing in case of an accident. Assuming the cart in question was in proper working condition, there shouldn’t be any reason to reduce the amount of community activities the company participates in. If the cart is found to be defective, you will have a more serious problem that will require much more attention. Problem 6• C TURNING CUSTOMER COMPLAINTS TO CUSTOMER DELIGHT Eagle’s Wings Airlines is a young company that flies no-frills flights within the U.S. You work for its public relations department. Winter holiday time is approaching and flights are booked, but customer complaints are increasing. For now, the cheaper ticket prices are keeping reservations high. But if the level of complaints continue, customers will be lost. In fact, you have just been informed that Eagle’s Wings has been named the worst in customer service. The number of customer complaints has been piling up on your desk. Flights continually arrive and depart late due to the inefficiencies of airport crew members and the on-flight crew has received poor ratings because of rudeness. To add to this pressure, flight attendants and pilots are complaining about being over-scheduled. They want time off to enjoy the holidays at home with their families, not in some remote location as they wait for a flight back as a result of poor scheduling, which has been happening more and more. The number of customer complaints is growing as are employee complaints. You do not have responsibility for human relations, but you can see that it impacts customer relations. The head of HR is very busy and understaffed, but she has agreed to meet with you tomorrow. In the meantime, you need to get a plan formulated because you can’t afford to further antagonize customers. In fact, you want to delight customers. How will you do that knowing what you know about this situation? What is your immediate plan of action? Put together a one-year strategic plan to build consumer relationships outlining possible problems and solutions. Put into action an evaluation process that will help you to gauge the minds of your consumers as well as your employees. This will make it easier for both sides to communicate what they like, what they don’t like, and what they would like to see improved. You hope this will bring about improvements and repeat customers, which will help business in the long run. Solution Manual for Public Relations Practices: Managerial Case Studies and Problems Allen H. Center, Patrick Jackson, Stacey Smith, Frank R. Stansberry 9780132341363, 9780136138037, 9780130981530, 9780137384778
