CNN Money recently featured a list of 14 “brand name companies” that are going bankrupt.  Among them were Crunch (the chain of fitness clubs), Tribune Co. (owners of the LA Times and the Chicago Tribune), and Hartmarx (the maker of mens’ suits).  The breadth of companies on the list indicates no business is immune to the possibility of bankruptcy – the list included businesses in the private and public sector, from packaged goods to online services, both national and local brands.

If the bad news is that bankruptcy filings are on the rise, the good news may be that the stigma which used to accompany them is on the decline.  Whether because more people are having personal experiences with bankruptcy or because news of companies undergoing bankruptcy now regularly populate the business media, it seems bankruptcy is no longer viewed by the public as negatively as it has in the past.  And GM’s highly publicized bankruptcy was even heralded by some as the best thing that could have happened to the company.

With bankruptcy more commonplace, more business owners and leaders are considering it as a solution.  It’s important to understand, however, bankruptcy is not simply a financial transaction.  It’s a brand event as well and should be managed as such.

Here are a few thoughts on how to mitigate the negative impact of bankruptcy on your brand:

1.    Be as transparent as possible. Strong brands are built – and rebuilt – on trust.  One of the most important and urgent imperatives is to retain customer confidence in your brand.  Bankruptcy calls into question a product’s quality (is the company cutting corners in order to address financial woes?), as well as a company’s ability to address customer service needs now (are they going to pay attention to my needs or are they distracted by their own business problems?) and in the future (are they going to be around when I have a question or need a repair?)  You need to regain customers’ trust.

By communicating clearly what you’re doing, why, and how, you are demonstrating you are worthy of their reconsideration.  This is not to say that you should dwell on the details of the bankruptcy or your recovery plan – but rather, you should ensure the information is readily available to those who want it and you should proactively manage the conversation in the marketplace and with customers with open, honest communication.

2.    Follow-up as soon as possible with new tangible benefits for your customer and visible evidence that the business has changed. It will take awhile to regain any lost brand equity, but making bold moves quickly jump-starts the process.  By initiating a dramatic change, you deliver increased/improved brand value to customers and signal your intention to continuing building a strong brand.  Plus you give people something besides the bankruptcy to talk about.  A breakthrough new product — or new operating practices or innovative service policies – can go a long way to renewing excitement about the brand.

3.    Engage all of your stakeholders. Employees, board members, business partners, etc. are all stakeholders in your brand – and they’re often your most influential brand ambassadors.  As such, you should inform, inspire, and instruct them during the duration of the bankruptcy and recovery.  Ensure they are kept up-to-speed on the business status, recovery plan, and current priorities.  Motivate and encourage them by communicating a compelling vision for the future.  And empower them to communicate with others about the bankruptcy by providing them with the information and guidelines on how to do so.  If your stakeholders are focused on building the brand, it’s likely your customers will be also.

Companies may no longer need to vigorously avoid bankruptcy, but they do need to understand its brand implications and act accordingly.

Related posts:

• brands we would miss — a series
• notes on a crisis

U.S. News & World Report’s interview with Susan Docherty, North American Vice President for General Motors provided some valuable insight into the troubled car company.  Her comments made it clear that GM is operating from a reactive, backward looking stance.

Here are 5 things she said and the problems they point to:

1. “If [new CEO] Fritz [Henderson] says he’s giving a press conference, we all stop work and put on the TVs. Then we do a debrief and make sure everybody understands what the message is.” — So the Vice President of one of the company’s largest divisions is getting direction from her new CEO via the press conferences he gives?  It’s concerning that the information any CEO covers in press conferences would be new news to any companies’ employees — shouldn’t they be involved in crafting those announcements?  Not only should the people who are running the business be driving the strategy, but also they should be initiating news that is press conference-worthy in the first place. (n.b., I recognize there was probably a lot of confidentiality surrounding the leadership change, so it’s understandable that that announcement would have been a surprise — but Docherty’s comments seem to indicate this is a regular occurrence now.)
2. After President Obama announced the company’s leadership change, “Fritz Henderson held his press conference, and he said that what we’ve provided is not good enough…Then right after that we launched Total Confidence.” (Total Confidence is GM’s version of the Hyundai Assurance program.) — So it took a shocking management shake-up to get the company to realize it needed a bold promotion like Total Confidence?  It seems the company should have introduced consumer confidence-building strategies and tactics back in November when it first went trolling for bailout money.  Also more wholesale changes have been needed for quite awhile now — but the company has waited to a breaking point to seriously considering them.
3. “It’s too early to see if interest in our brands has dropped off completely from all the news…The buyer behavior data come out quarterly, and we don’t have the first quarter’s data yet.” So the company is relying on slow, standard methods to evaluate what’s going on with consumers?  As a reminder, the interview with Docherty took place on Friday, 04.10.09 — and she’s saying she doesn’t have data to gauge consumer reaction from January?!  In today’s environment, such a time lag is unacceptable.  The company needs to implement methods that allow it to keep its finger on the pulse of the consumer and to respond quickly to the learning from the research.
4. “The real wake-up call for us was the Congressional hearings in December. It was very clear from the questions they asked, and also from the questions the press asked, that the perception of our company and our brands was at least a decade old.” So prior to the Congressional inquiry, the company didn’t have an accurate view of the public’s perceptions of its brands?  Like it would have been that hard to figure out.  A company like GM has to have on-going, in-depth brand tracking research that monitors consumer sentiment towards its brands, right?  So was their research wrong?  Or were they just not listening to what the research was telling them?   Or??
5. “I had tickets for my husband and I to go the Final Four…on the day we were supposed to leave for the Final Four, we got a request from the team in Washington…I called my husband and said, ‘you need to find a friend to go with you.’” and “I was at the Detroit opera with my daughter and husband that Sunday afternoon [when former CEO Rick Wagoner resigned.]  And I looked at my daughter and my husband and said, ‘I have to go.’” So Docherty uses the stories of her sacrificing the Final Four and leaving the opera early to demonstrate how seriously she’s taking the company’s recovery plan and how emotionally impacted she’s been by the management changes.  Her comments seem to suggest that the company’s answers to the crisis are to ensure everyone understands how serious it is and to put in long hours to respond to requests from Washington.  Not quite the positive, proactive, productive stance the company needs to adopt.  (Also I must point out that any savvy media-trained leader should know to use an interview like this to talk about new innovation processes they’re developing or even ways they’re managing their teams through a leadership change — instead of relaying anecdotes about sacrificed personal luxuries that may be offensive to folks who are personally struggling to simply keep a roof over their heads.)

If I didn’t know any more about GM other than what was covered in this interview about how it’s “fighting for survival,” I would be skeptical about the company’s chances.  Docherty’s comments alone reveal some of the systemic changes that the company must address in order to survive, including:

• robust, two-way internal communication
• more proactive, forward-facing posture in developing turnaround strategies and programs
• up-to-the minute metrics, including a system for monitoring brand perceptions and responding to issues

The problem is, I do know more — and it doesn’t assuage my concerns.

Saturn joins the ranks of formerly esteemed brands like Vonage and Dairy Queen in this series on brands that have failed to live up to their potential.  While practically every domestic automotive brand seems to have fallen short of consumer and/or investor expectations lately, I picked Saturn because the brand clearly had (has?) so much potential and so the stakes seem higher.

Remember back in 1985 when Saturn first launched?  The company was positioned as not just a different kind of car — but “a different kind of car company.”  Company officials explained their singular focus on the people who buy and drive cars.  They instituted a “no haggle” policy at their dealerships; their advertisements expressed the uniqueness of their brand platform.  The company even entered into a groundbreaking agreement with their union workers.

The Saturn cars themselves won all sorts of awards and, more importantly, fanatically loyal customers.  In 1992 Saturn achieved the top rank of new car sales, the first time a domestic brand topped the list.  In 1995 Saturn was ranked #1 in J.D. Powers’ Sales Satisfaction Index Study, a position it would hold for 4 consecutive years.  As testimony to the equity the brand enjoyed, Saturn “homecomings” became legend.

Then Saturn’s parent, General Motors, started to falter.  They cut investment in Saturn,  creating a downward spiral of limited new models and limited marketing spending — so much so that the division was integrated back into GM, despite the leaders’ original promise to operate it separately in an attempt to nurture the brand and shield its operations from the rest of the company.  (Read more of Saturn’s history here.)

After a series of failed new model launches and incongruous brand positionings, G.M. announced last December that it was “exploring alternatives” for Saturn — basically they are looking to sell it or relegate it to a much smaller role in G.M.’s lineup.

Recently an interesting possibility developed:  Saturn dealers are making a move to spin off as an independent distribution arm of the company so that they can sell other automotive brands.  While this may give the impression the dealers have given up on Saturn, it actually might save the brand.  As Martin Bishop, Landor‘s brand strategist and author of a great blog, explains, “It’s the dealership experience that has always been the true differentiator for Saturn…So to create a new business that focuses on the dealerships and allows them to source cars from different manufacturers makes a lot of sense. It plays to the real strength of the brand’s equity.”

Who knows what the future holds for Saturn.  As someone who believes in the power of brands, I certainly hope the company can turnaround the current situation and reclaim its leadership position.  But in the words of a fellow blogger Nigel Hollis (Chief Global Analyst with Millward Brown, the market research company), “In 1994 people bought Saturn for what it stood for. Today it is just another make to be judged on quality and price alone.”

That’s why Saturn is this week’s brand disappointment.