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Brand Threat: The Out-Of-Touch CEO

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Brand Threat: The Out-Of-Touch CEO

“Bank of America Corp. is scrapping its plan to charge a $5 monthly fee for making debit card purchases after an uproar and threatened exodus by customers.” –Bloomberg, 11.1.11

 “Netflix has decided to can Qwikster, the DVD-rental spin-off it announced to unlimited screaming last month.” –-Wall Street Journal, 10.10.11

“Barely a month into Meg Whitman’s tenure as chief, Hewlett-Packard announced on Thursday that it would not sell the company’s dominant personal computer business — closing off a strategic path offered by her predecessor.”–New York Times, 10.27.11 

These stories might be laughable if they weren’t such a tragic waste of shareholder value.

Most every company says it values its customers, and hates to ‘walk away’ from them. Leaders are called on to make tough decisions they believe are in the best interests of their companies. And sometimes, these decisions advantage some customers at the expense of others. That doesn’t make them bad decisions, just risky ones.

But leaders of some of our greatest brands act like they have forgotten (or never knew) what every junior brand manager surely knows — to test potentially risky messages and find ways to mitigate their negative impact. Instead, senior leaders are acting like bulls in a china shop, awkwardly and prematurely broadcasting their strategic decisions in ways that destroy their company’s (and their own) reputation and value.

HP’s announcement last August that it was considering selling its PC business could be read as either the hubris of a short-timer CEO or a strategically important move to free up resources for higher margin and/or growth opportunities. Either way, the already struggling stock lost nearly 1/3 of its value upon the announcement, dropping to $22.60 from $32.61/share in one day HP’s stock price has languished around $25 ever since.

Netflix shot itself in the foot multiple times last year – and its stock price has suffered the consequences. Shares have fallen from an all-time high of $298.73 on July 13 (just 4 short months ago) to close up 10% at $91.80 today. The mail order DVD model may in fact need to be phased out for Netflix to continue to reign pre-eminent in home entertainment or media or whatever business they see themselves in. Surely, they could have used their prior market capitalization better to help achieve their vision, rather than see precious capital and valuable customer relationships squandered by leadership ineptitude.

The latest episode of self-inflicted damage came last September from Bank of America who announced a monthly charge for checking account customers to use their debit cards. This controversial move follows years of encouraging and rewarding debit card usage (and reaping the cost savings over paper check processing) and is part of what is fueling the Occupy Wall Street anger. Already reeling from other challenges, it’s hard to attribute any Bank of America stock price change specifically to the announcement of the new $5/month charge on September 29 or its reversal on October 31. The point is, if it was the right business decision, it should have been handled differently.

What has happened to the instincts of corporate America? Have the leaders of these companies become so insular, so arrogant, or so detached from reality that they don’t bother developing a customer-focused plan to communicate their decisions effectively? Do they assume that, like diamonds, a customer is forever?

These days, there is no excuse for this type of leadership blunder. Testing messages with customers is faster, cheaper, and easier than ever. So is building a communications plan that manages risk and avoids patently value-destroying moves. Testing messages with customers is not just a “marketing ploy” or “spin doctoring”. Although it’s the fashion to malign them, simple focus groups and surveys are very effective at identifying truly bad ideas. They cost little and take next to no time. They should be considered the equivalent of spell checking for customer-facing decisions.

Being in touch with customers is the antidote to company hubris at all levels – and these days particularly for CEO’s as well as those who advise them.

Contributed to Branding Strategy Insider by: Judy Hopelain of Brand Amplitude

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