Beware of These Blunders

Christopher Lochhead, former chief marketing officer at Scient, knows a bit about delivering bad news. So listen up when he recounts the 13 biggest marketing blunders a battered company can make. Ignore them at your peril.

We've all heard the corporate-speak that typically accompanies bad news. "Orders fell off unexpectedly at the end of the quarter, but we fully expect that business will rebound." "The CEO has the full support and confidence of the board." "We anticipate no additional layoffs at this time." "The company is not for sale."

Here is the problem: At a time when the business outlook is unequivocally bleak, few executives know how to deliver bad news. We're a nation of optimists, so we look on the bright side. We fib a little and hope that employees and shareholders won't pay too close attention until the cycle turns up again. We live in fear of analyst downgrades. Basically, we want folks to like us.

To which Christopher Lochhead screams, "Bunk!" Lochhead, the excitable former chief marketing officer at Scient Corp., knows something about communicating under duress. During his tenure, Scient roared to prominence as the edgy leader among the pack of so-called Internet consultants -- and then crashed to Earth when its dotcom business soured.

Lochhead left Scient in December. He's now running his own consultancy -- called, simply, Lochhead -- that focuses on strategy, technology, and Internet TV. Based in Saratoga, California, near Silicon Valley, he's witnessing his share of calamity both in the Bay Area and among his clients. He also is seeing a lot of egregiously poor crisis marketing. In challenging times, he says, many companies fall victim to predictable and avoidable marketing errors. Here, Lochhead describes the 13 marketing blunders companies make in a downturn -- and tells what managers can do to steer clear.

Attempt "business as usual."

It won't be. When a company misses Wall Street expectations, institutes layoffs or closings, or announces some other bad news, it needs to rebuild lost confidence. Your brand has been damaged. Your stakeholders will look at you with a more critical eye. People will doubt you in ways they never used to. It will take time to rebuild.

You need to create an action plan that includes cost reductions and sales-execution improvement. That's the easy part. Then you need to figure out how to get aggressive. The shakeout in the economy is a big opportunity for those who can seize it. The time to hit the hardest is when the competition is capitulating.

Couple your progress in lowering costs and raising sales with a bold strategy and aggressive marketing, and you have a shot out of the hole. Once you have a plan on both of these fronts, you need to start communicating it. It's going to be tough. That's the bad news.

The good news is everyone loves a comeback kid.

Let the bad news trickle out over time.

This is akin to slow dental surgery with no anesthetic. Recently, dozens of corporations have given us a lesson in the damage wrought by slow disclosure of ongoing bad news. Nortel Networks has announced four different layoffs in the past 12 months, and its stock has fallen to a historic low. Revenue and stock prices erode as the market loses faith in management. Deal with the problem fast, and announce what you are doing. Take all the pain in one big shot. Only once you get all the bad news out can you begin the rebuilding process.

Promise "just one bad quarter."

This is almost never the case. It takes most companies time to recover from a misstep. You often have to cut deeper and make bigger changes than you think.

So do two things. Make all of your changes faster and bigger than you think you have to. And tell the outside world that you project rocky times for the foreseeable future. If you pull off the turnaround in one quarter, you'll look like a genius. If you don't, you will have told people the truth. Revising bad news with good news always works.

Lie, mislead, and otherwise obfuscate.

Lying never works. It sounds obvious, but companies and executives do it all the time. It can land you in jail or ruin your career. People hate delivering bad news, so they tell a "white lie," which they often rationalize as somehow doing good for others. Or, some people don't tell the whole truth. They only state the minimum they have to.

Be honest and direct about the facts. Brutally honest. It starts by being honest with yourself about the condition of the business and your role in what has happened. Get clear about this. Then you can decide how best to handle the situation.

Be honest with your stakeholders. If you are laying 25% of your people off, then say that's what you are doing. Don't say, "We are laying off 15% and expect some additional headcount reductions through normal attrition."

Overspin.

People know bullshit when they hear it. Resist the urge to say things like "We anticipate the possibility of negative revenue growth going forward." Be direct. Say instead, "We believe that our sales will be flat or down next quarter."

Instead of saying things like "We are a leading developer and global supplier of innovative high-speed, world-class infrastructure platform solutions worldwide to Global 2000 customers," state clearly what you do: "We develop and market wireless telephone products that are used by major corporations and telecommunications firms."

If you are bringing in a new CEO, don't tell people that the current CEO has been planning to leave for a long time and that the change in management has nothing to do with the downturn in the company's fortunes. Even if that is true, it will sound like garbage and undermine you and the company. Simply state that the old CEO is leaving to pursue other interests. Then move on fast. Talk about why the new CEO is so great.

Don't communicate.

The truth will never be as bad as the rumors will become. "No comment" will increase the untruths and gossip. It will also unleash the venom of the people you used to be forthright with. The press will attack harder, and your employees' distrust will grow deeper. Both will undermine your efforts with customers and drive your stock price down. It doesn't matter how much it hurts. You must overcommunicate.

Don't be surprised if the press and analysts misquote you, or only use part of what you said to make you or your company look worse. It happens. Get over it. That comes with the job of being a senior executive. The bottom line is, if you don't explain the condition the business is in and what you are doing about it, things will get much worse.

Communicate confusing messages.

When you're in trouble, get clear about what you are going to say before you open your mouth. Rambling or trying to make 16 points will make you look confused, defensive, or stupid.

Appoint no more than three executives to do the talking: your CEO and two others. Then get clear on three -- and only three -- key messages for them to deliver: the facts as you know them, the actions you're taking now, and how your actions today position you for future success. Write these messages down, and practice saying them.

Write down every possible question you can anticipate from customers, employees, partners, shareholders, press, and analysts. Underneath each, write the number of one of the key messages that best answers the question. Practice answering those questions with a key message until you can recite them in your sleep. Then practice them again.

Evade tough questions.

When asked a question, answer it quickly and concisely with one of the three key messages. If you have something to add, add it after you have answered the question.

If you don't start with a clear answer, it will make you look like a liar or a loser who can't run a company. The best way to teach yourself to do this is by answering questions with yes or no and a pause -- and then elaborating.

If you are asked a loaded or insinuating question that implies something you don't believe to be true, do one of two things: Tell the questioner that you don't agree with the premise. Or answer the question the way you want to answer it.

Fire your public-relations firm.

Stupid move. You may be cutting costs, but this is the worse place to do it. Why?

  • You need PR advice when things are bad.
  • You need the point of view of smart outsiders.
  • You need to get retrained on dealing with the media.
  • You need people with crisis-marketing experience.
  • It sends a very bad message to the press.
  • After you deliver the bad news, you will need to start rebuilding with a steady stream of good news.

Cut the advertising budget.

The worse thing you can do to a brand that you just damaged with bad news is damage it more by making it disappear. If you announce bad news and there is a noticeable drop off in your brand presence, people will think that the company or brand is dying. Smart competitors will use that as proof of your impending demise. It will become a self-fulfilling prophecy that you won't be able to stop.

You have to be fiscally responsible. That may lead you to curb some ad spending, but don't cut it to the bone.

Believe confidential and internal communications are internal and confidential.

Write every email as if it will be printed in the morning newspaper and posted on the Internet. It will be. Don't kid yourself about this. It doesn't matter how much you trust the people you are working with. Someone absolutely will leak the information. Assume that all of your stakeholders and competitors will be on every internal video or audio conference call.

Understand that your executive management, board of directors, auditors, lawyers, consultants, and friends will leak information. No matter how much they promise not to. No matter how many confidentiality agreements they sign. Forget this, and you'll get stung.

Don't market to your own people.

Marketing makes an incalculable impact on the psyche of your people. After a misstep, when employees read negative articles, their morale will be hurt. If they see the ads disappearing, they too will assume that the company is in terrible shape and will focus on their personal futures, not helping to create a future for the business.

If your people see the company being marketed as a powerful leader with great products and services, it will help mend their broken faith. It will also appeal to the fighter in them. No one likes losing. If their leadership provides a compelling vision for the future of the business and the industry, they will feel challenged to make it happen. It will also demonstrate that the executives in the company are worthy leaders. That will fuel the turnaround.

Play defense.

Within three weeks of your bad-news announcement, you must launch a strong marketing offense. Why three weeks? First, people need time to digest the bad news and recover from what happened. Second, if you wait much longer, your stakeholders will assume that you have no future and will start bailing on you. And your competition will be holding a wake.

Launch an integrated marketing offensive targeted at customers, prospects, partners, shareholders, employees, and competitors about the future of your business. It should include: three keys to the turnaround, a vision for the future of your industry, and a vision for the future of your business as an industry leader.

This article was adapted from "The 13 Marketing Blunders Companies Make In A Downturn: And How To Avoid Them," available at the Lochhead Web site.

Keith H. Hammonds (khammonds@fastcompany.com) is a Fast Company senior editor. Contact Christopher Lochhead (chris@lochhead.com) by email.

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