Netflix: From Doghouse to Darling

netflix Netflix: From Doghouse to Darling

THE PR VERDICT: “A” (PR Perfect) to Netflix, for making its own luck.

Sometimes, the famously fickle PR gods send you a gift, and if you’re lucky, smart, or both, you’ll get a chance to use it. This week’s beneficiary: Netflix. Two years ago, the video streaming and DVD rental company was a case study – literally – on how to fail a thriving enterprise, with questionable pricing and business decisions that sent subscribers stampeding for the exits. Netflix became the poster child for PR ignorance and customer neglect, losing nearly one million subscribers over a matter of months.

Then, a chastened Netflix started to turn it around. It reversed unpopular business decisions and issued a sincere (and persistent) mea culpa. It aligned its communications strategy with its business plan, breaking new ground for a streaming service by providing original content. Today, its subscriber base surpasses HBO’s and its stock price is six times what it was only a year ago. Quarterly earnings are next week.

And the gift? Just a humorous online chat between a funny, friendly, and helpful Netflix customer service representative and a user with a video playback problem. A screenshot of the Star Trek-themed dialogue was posted online on Imgur and Reddit and is getting wider attention. Netflix is getting free publicity from it – earned the hard way, and through hard work.

THE PR VERDICT: “A” (PR Perfect) for Netflix, for a turnaround in tone, culture, and attitude that turned around its business.

THE PR TAKEAWAY: Good communication is contagious. Netflix’s earnest soul-searching two years ago, translated into words and actions, now appears to touch even the most routine business activities. Granted, maybe not all of Netflix’s help calls end as happily – customer service is a weak spot for many firms. But this exchange garnered publicity precisely because it speaks to a prevailing positive mindset that has formed about the company, one that seems to attract great employees as well as loyal, happy customers. Netflix provides an object lesson in how good conmunications helps throughout an organization. Its little PR gift also confirms that luck doesn’t just happen; you make your own.

Twitter CEO Won’t Duck Challenge (But Should)

costolo11 Twitter CEO Wont Duck Challenge (But Should)

THE PR VERDICT: “D” (PR Problematic) for Twitter CEO Dick Costolo.

Feisty Twitter CEO Dick Costolo never shies away from a flame war, slugging it out in 140 characters or less with all comers. His firm’s forthcoming IPO was apparently no occasion for him to consider toning it down. This time, he’s taken to task critics of Twitter’s virtually all-white, all-male leadership.

Going into its IPO, Twitter, as the New York Timenoted last week, has no female investors, no female board members, and only one woman among its top executives. And she was hired just five weeks ago. Those numbers aren’t rare in Silicon Valley, but that’s hardly cause to forgive the oversight, as Twitter’s critics noted. “The fact that they went to the IPO without a single woman on the board, how dare they?” said Vivek Wadhwa, a Stanford professor.

Twitter declined comment on the matter, but not Costolo. In a tweet, he reverted to name-calling, comparing Wadhwa to Carrot Top, an outlandish, hyperbolic comic. The battle was quickly joined, and while Costolo might have a point, is this really the story his company needs right now as its IPO filing comes under scrutiny?

THE PR VERDICT: “D” (PR Problematic) for Twitter’s Dick Costolo, for letting his ego get the better of him at a critical time for his company.

THE PR TAKEAWAY: Choose your battles, and your timing. For one, Twitter’s corporate demurral on the subject looks a little silly next to Costolo’s tweeted tirade. For two, why create needless distraction right now? Sure it’s not likely the kerfluffle will adversely affect the IPO share price, but what was gained? A more mature response might have given the opportunity to engage constructively on an important tech industry issue – the dearth of women in leadership roles. More generally, though Costolo has won praise for corralling an unfocused, wayward company, shouldn’t a CEO be striving consistently to raise the bar on level of discourse instead of knocking it down a few notches? One hundred and forty characters can be used for good, but it’s surprising how much damage can be done by one character’s bad attitude.

Microsoft Gives Ballmer a Soft-Landing Sendoff

ballmer bw Microsoft Gives Ballmer a Soft Landing Sendoff

The PR Verdict: “B” (Good Show) for Microsoft and its long, slow farewell to Steve Ballmer.

Steve Ballmer’s slow exit as Microsoft CEO, announced last week, was either a surprise, or it wasn’t. Long-planned, or hastily arranged. Came at the “right time” or was long overdue. As always, it depends on the source. Tech’s original mega-gorilla, once disruptive but now doddering, did its best to give him a nice sendoff, while practically every other observer fell on the corpse to stick knives in for his decidedly mixed tenure.

Give Microsoft credit: Ballmer’s 13-year term at the helm, which will end sometime in the next 12 months, saw annualized profit grow 16 percent, but also a $600 billion market cap cut by more than half. The post-mortems dredged up other big misses – the Surface tablet PC, Windows Vista, and the Windows phone. Small wonder the company stock enjoyed a seven percent bounce on the day of the announcement.

Despite the rehash, Microsoft came away looking good. The company has been under fire for some time for having no clear transition plan. Now it does, announced in fairly orderly fashion. Transition management isn’t easy under the best of circumstances, and certainly Microsoft’s were far from that. The company needed to make a decisive but not too sudden move, and succeeded.

THE PR VERDICT: “B” (Good Show) for Microsoft, for sticking to a classic PR script that minimizes blowback and cements its key messages.

THE PR TAKEAWAY: Big news, even if double-edged, has its advantages. When breaking it, remember that you control the story and can pick your timing. The Ballmer announcement came on a Friday in late August, about the sleepiest time of the year, and in standalone form: It won’t be directly linked to Microsoft’s last sorry earnings announcement in July, which featured a $900 million product writedown. Nor will it distract much from its next product release, Windows 8.1, in October. The company made Ballmer available for one interview, and that will be the reference going forward. Finally, it left the exact timing of his departure vague, concealing behind an opaque corporate façade the likely fact that he is already gone.

Royal Bank of Scotland’s Hester No Fool

 Royal Bank of Scotlands Hester No Fool

THE PR VERDICT: “D” (PR Problematic) for the UK government. (Pictured: Royal Bank of Scotland’s Stephen Hester)

Government, it seems, is no match for bankers and executives who run the world’s most powerful financial institutions. The world got another reminder of this on Wednesday when Stephen Hester, Chief Executive of Royal Bank of Scotland, abruptly tendered his resignation. The news might have slammed Hester as another wealthy banker too arrogant to work under government supervision. Instead, Hester left his post like a hero, with lavish praise from the folks who fired him and the admiration of shareholders.

News of his departure sent the stock down, triggered headlines about bereft employee morale, and prompted a Treasury minister to address the UK’s House of Commons with a statement full of hyperbole about Hester’s success at getting the job done.

The reason for the departure? Apparently the government wants to “turn the page” on RBS and divest itself of the business it bailed out. Investors in a privatization deal will not view Hester’s leadership favorably, reckoned the bureaucrats. Instead, so their thinking goes, the market wants to see a leader who represents the future, not the past. Fair enough but for the unanswered questions: Who is Hester’s replacement? And if he’s as good as you say, why show your most capable leader the door? Why not let him help you through the “transition?”

THE PR VERDICT: “D” (PR Problematic) for the UK government for badly mishandling an announcement with a communications strategy that begs many questions.

THE PR TAKEAWAY: Before firing, have a replacement lined up, or suffer the consequences. The RBS privatization has a chance to succeed, but the government just raised its cost of capital unnecessarily by showing the current CEO the door, with no apparent plan for replacement. Once the press statements were finalized and the polite, politic resignation letter released, Hester told the truth that he’d wanted to stay after all. While he got to appear as though he’d orchestrated an effective career transition, Chancellor of the Exchequer George Osborne et al were left holding a bag of empty words. Next time, think before you pink slip.

 Royal Bank of Scotlands Hester No FoolPRV Contributor Pen Pendleton is a communications professional with 20 years experience in business and financial public relations. He began his career as a newspaper reporter and now works as a consultant in New York. 

Yoga Apparel Company’s PR in Downward (Dog) Spiral

 Yoga Apparel Companys PR in Downward (Dog) Spiral

THE PR VERDICT: “D” (PR Problematic) for Lululemon. (Pictured: Former CEO Christine Day)

Off with their heads! That may have been the cry from yoga apparel maker Lululemon‘s board of directors, which was likely behind the resignation of two key executives after an embarrassing and costly incident. The company had to recall their signature Luon yoga pants after customers complained that they revealed more than just good form in yoga classes. The switch from opaque fabric set Lululemon back to the tune of $140 million, with a drop in stock prices. As the sheer pants exposed more tails, heads were sure to roll.

First to go was Chief Product Officer Sheree Waterson, who left the company in April. And yesterday, Christine Day announced she would be stepping down from her position as Lululemon’s CEO after nearly six years. PR was spun far thicker than the fabric that caused the problems in the first place. Day calmly called the move a “personal decision,” adding that she would stay on until a successor was named. This was, of course, meant to sound like all were in agreement and yogically serene.

The stock market was not quite so zen. Lululemon’s shares fell 12 percent in the wake of the news, which brings up the question of not only when to fire, but if. Yes, this was a costly mistake, and certainly an embarrassment for one of the most successful athletic apparel chains around. But the beheading, following the mistake, may have taken things from bad to worse.

THE PR VERDICT: “D” (PR Problematic) for Lululemon. Too much unrest in this high-end clothing company is making them look bad.

THE PR TAKEAWAY: Sometimes, it’s better to let sleeping (downward) dogs lie, at least for a while. A given in any business is that mistakes will be made, and a large part of any good PR department’s work is cleaning up after the initial mess. But once that’s done, why create another mess, just as the public is forgetting about it all? It’s the job of any good PR to advise execs about potential fallout resulting from drastic moves. They won’t want to hear it, but they’re sure to look for someone to blame when they find themselves in an even more painful position.

Is Apple’s PR Bruised?

 Is Apples PR Bruised?What to think of Apple? To hear stock analysts and business anchors talk, one would think Goliath had just taken a severe hit to the head. Apple has been the undisputed giant of tech for so long that the slightest waver on its feet has everyone talking about how the mighty may soon be falling.

True, profits are down – about 18 percent this quarter, and the first decline for Apple in a decade. Speculation that the company might slope downward following the demise of leader Steve Jobs didn’t come to pass immediately, but the birth of competitive, and cheaper, products are starting to pose a threat. And there are no new products coming from Apple, which is bad news for a company that caters to consumers mad for the latest in tech devices.

Another first for Apple is having to borrow money. The explanation? Rather than face taxes on bringing in offshore assets, Apple will take a loan to pay $100 billion to shareholders by 2015, which pleases some, but perplexes others. Bottom line: should Apple be in crisis mode or business as usual?

THE PR VERDICT: “C” (Distinctly OK) for Apple. The news isn’t good, but then again it isn’t all rotten.

THE PR TAKEAWAY: A company’s reputation can precede, and quiet, speculation. Apple may be wavering in its long-held number one slot, but one of the company’s priorities has been building a brand. People don’t speak of phones; they talk about iPhones and lead iLives. Consumers still see Apple products as cool and a cut above the rest despite their ubiquity.  While cheaper products may come around, it will take far more than that to put a dent in Apple’s brand loyalty. Apple’s PR should continue to polish its image and brand and let the stock price see-saw of its own accord. Apple’s upward unrelating share price climb had to come to an end at some point. Best thing is to pause and catch a PR breath.

J.C. Penney: Everything Old is New Again

 J.C. Penney: Everything Old is New Again

THE PR VERDICT: “F” (Full Fiasco) for the board of J.C. Penney.
(Pictured: ousted CEO Ron Johnson.)

Shareholders may be asking the board of J.C. Penney “Penny for your thoughts?” Or perhaps demanding it, after the startling news of a CEO switcheroo this past Monday. That CEO Ron Johnson was ousted is not a surprise. The real surprise came when the board announced Johnson’s replacement: his predecessor, Myron Ullman, who was fired by that same board in 2011.

When Johnson arrived he moved forward with a radical makeover for Penney: boutique stores under one roof. This idea included securing Martha Stewart, who assured Johnson she could step out of her exclusive contract with Macy’s. That plan blew up like a bad soufflé, with Johnson in court admitting he’d never read the fine print of Stewart’s contract with Macy’s, and thousands of Martha’s products being court-barred from shelves.

Now comes news that Johnson is being replaced by the very predecessor he took over from, ostensibly because the man wasn’t doing a bang-up job to begin with. JCP’s price tumbled 10.3 percent after a brief spike when Johnson’s termination was announced. Shareholders aren’t just calling for a replacement for him, but for the entire board. This is practically a textbook example of PR “dont’s.”

THE PR VERDICT: “F” (Full Fiasco) for the board of J.C. Penney.

THE PR TAKEAWAY: When playing poker, keep your hand facing in – no need to show all cards to the other players. A new CEO, a drastic new plan; where were the checkpoints along the way? With only one of the ten J.C. Penney board members having retail experience, no wonder the organization is in trouble. The board clearly realized that it needed to oust Johnson to stem the falling revenues and bad publicity, but the answer is rarely to go back in time. As Plan B is nothing more than a return to former issues, then it may be worth delaying until a more palatable alternative is found. If the board insists on reuniting with a former CEO, then coach the ill-chosen replacement not to admit that he was re-hired only last weekend and has no plan to speak of. Showing the losing hand is always a losing tactic and in this case, likely to cost JCP a pretty penny.

A Sweeter Apple?

 A Sweeter Apple?

THE PR VERDICT: “C” (Distinctly OK) for Apple’s apology to Chinese customers.

What a difference a CEO makes. The change in Apple Inc.’s executive suite was evident this week when the company posted a fulsome apology from CEO Tim Cook on the Apple China web site. Apple, it seems, was not properly responding to complaints about its warranty and repair programs, prompting the Chinese government and state-run media to launch a fortnight of blistering criticism. In Cook’s mea culpa, which ran 12,000 Chinese characters (about 800 words), he apologized for appearing arrogant and outlined several changes the company will be making in China.

This is the second time in recent months that Cook has taken the higher road. Last September, he acknowledged the failure of Apple Maps, a cartographic catastrophe so inaccurate it stranded several iPhone users in an Australian desert wasteland with no food or water for more than 24 hours.

The softer approach is a departure from that of Apple co-founder and longtime leader Steve Jobs, who was called egotistical as often as brilliant. When customers complained in 2010 that holding the iPhone at a certain angle obliterated reception, Jobs snapped “Just avoid holding it that way” before eventually, begrudgingly, apologizing and giving away free cases.

Apple’s most recent apology seems to be smart. China is Apple’s second biggest market today and, as Cook told state-run Xinhua news agency in January, he believes it will become its first. All the more reason to keep customers extremely happy.

THE PR VERDICT:  “C” (Distinctly OK) for Apple. While the apology was the right move, it came two weeks into a negative PR blitz. It will be interesting to see if Apple sales in China have been affected.

THE PR TAKEAWAY: Markets change, and so must marketing strategies. Part of Apple’s early allure was that its groundbreaking technologies and higher pricetags created an air of exclusivity; the attitude that occasionally exuded from leadership contributed to the appeal. Today, however, the competitive landscape is much more crowded, and Apple can’t afford to alienate buyers in such fertile ground as China. An apology today helps pave the way for a bigger footprint tomorrow.

Lululemon Bends Over Backwards After Yoga Pants Recall

 Lululemon Bends Over Backwards After Yoga Pants Recall

THE PR VERDICT: “D” (PR Problematic) for yoga apparel company Lululemon.

Yoga outfitter Lululemon has found itself in a compromising position. The company, a fast-rising star in the competitive world of athletic apparel, had to recall its signature black Luon yoga pants after they were found to be “too sheer” causing embarrassment for yoginis showing off more than a good downward dog.

The recall generated widespread coverage in the business and general press, not only because it gave rise to some great headlines but because there is stiff competition in the world of yoga apparel. Lululemon after all, is well known for keeping stocks deliberately lo, to create buying fervour. Well-known yoga instructors are enlisted as “Lululemon ambassadors.” One does not merely buy clothes at Lululemon; the company is known for its cult-like following and creation of a lifestyle brand.

Lululemon’s stock took an 8 percent hit on the news of the recall and as the company looks to expand beyond it current 200 stores in Canada and the US, there are signs of ongoing growing pains. See-through pants and non-colorfast tops have led to questions about management and some worrying financials: a $20 million loss in first quarter sales, and stock price that is down 18 percent for 2013. The company’s plans for future expansion look like they could be running into trouble.

THE PR VERDICT: “D” (PR Problematic) for Lululemon and the stresses it has placed on yogini brand loyalty.

THE PR TAKEAWAY: Own up, take action, and restore quality quickly. When  a company positions its brand as a “friend” it must bend over backwards to avoid making  enemies and in this crisis Lululemon didn’t hesitate to apologize, clear shelves of the sheer pants, and offer refunds. But as Lululemon’s yoga pants retail for $98 a pair; fans are buying the promise of high quality and when that fails, watch the cult-like following turn and buy the competitors’ less expensive apparel. What’s needed now after the refunds and recalls are completed,  is to assure yoginis and stockholders, that a review of suppliers and management controls is taking place and permanent changes have been made. In other words, strike a pose of action.

SAC Capital and the Art of Halting an Investor Stampede

 SAC Capital and the Art of Halting an Investor Stampede

The PR Verdict: “A” (PR Perfect) for SAC Capital. (Pictured: Steven Cohen)

The clock is ticking for SAC Capital Advisors, the hedge fund run by Steven Cohen, now linked to an insider trading case that the government is touting as one the largest of its kind. As regulators are said to be “closing in” on the fund, SAC clients, whose money is managed by the firm, now have 90 days to decide if they’ve had enough and want their money back. Should they redeem, or keep their money there?

SAC, which manages over $14 billion, recently confirmed to investors that the firm might face civil charges over the alleged insider trading scheme that has already led to the arrest of a former employee. Normally, news like this would have investors rushing for the exits, provoking a disastrous run on the fund. But if the firm intends to emerge from its latest legal worries with an ongoing business, reassuring investors while being transparent about its legal woes is the immediate PR challenge.

Not all investors are happy; some have indicated they want to redeem. One French bank has reportedly cashed in its chips already. But other large investors are on the record as saying they will reserve judgment and keep their money with SAC, reiterating their faith in the firm and its management. To SAC investors wavering about what to do, public confirmation from co-investors that their money is staying put is just the sort of signal they’re looking for. At the moment, some clever PR is calming a situation that could otherwise become very risky.

The PR Verdict: “A” (PR Perfect) for SAC Capital. Endorsement from others is always better than tooting your own horn.

The PR Takeaway: If you want the message about you to be heard, let your friends say it. SAC ‘s recent coverage contains a surprising number of reputable and well-known investors confirming that they are sticking with the firm – at least, for the moment. For SAC management seeking to reassure investors, it’s the best sort of message, and one that it couldn’t deliver itself.

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