More brands may face public humiliation in 2013
This is a very expensive time of year. Not just for you and me, buying gifts for the festive season, but for the brands currently facing big payouts as a result of their behaviour.
HSBC is paying an enormous £1.2bn to settle a probe by US authorities into money-laundering by Mexican drug cartels. The entire episode has been deeply embarrassing for the bank, raising questions about its management. Meanwhile, fellow bank Standard Chartered admits it has paid £415m to US regulators for breaking sanctions on Iran.
It isn’t just the banks that are being publicly named and shamed. The scandal surrounding Starbucks and its UK taxation payments is rumbling on. Although there’s no suggestion it has broken any laws, its tax arrangements has meant it has paid only £8.6m in corporation tax since 1998. Whereas its competitor Costa Coffee, which saw similar 2011 turnover, paid £15m in tax in that year alone.
Starbucks has now agreed to pay £20m over two years to the treasury after growing consumer anger. Our columnist Mark Ritson warns that this may not be enough, setting out 11 mistakes the company has made while we track Starbucks’ reputation.
It may seem on paper that Starbucks has less to worry about than brands like HSBC. It hasn’t done anything wrong legally and it’s being penalised far less financially. But brand equity is vital for a business like Starbucks. While banks do not expect to be liked, it’s vital that if you are selling a coffee at a premium price, the consumer must feel good about paying that much.
Starbucks was the poster child for globalisation as a result of its international success, receiving smashed windows on May Day protests around the world. But in recent years, it has rehabilitated its image as a community-minded brand, especially when it announced that 100 per cent of its espresso roasts in the UK (forming the base of most coffee drinks) would be Fairtrade certified. Until now.
I predict that 2013 will see even more brands put under pressure for their behaviour. Marketers always talk about how vital transparency is but I think it will soon have even more effect on companies’ bottom lines.
It’s a far more festive time for those brands carrying out thoughtful, clever work that genuinely benefits their customers. The shortlist for this year’s Data Strategy awards are revealed (appearing online shortly). After a record number of entries, the winners will be announced on 7 February at the Lancaster London. Visit Datastrategyawards.co.uk to join us, celebrating the best of strategy.