As Consumer Power Goes Viral, Company Branding Quakes

  on January 06 2012 9:56 AM

(Reuters) - Corporate America's worst nightmare lives in a tiny one-bedroom apartment, loves browsing in flea markets and has a lop-eared brown and white pet rabbit named Crackers.

Meet Molly Katchpole. The 22-year-old Washington, D.C. resident has recently tangled with a couple of billion-dollar corporations, and cowed them into submission, without breaking a sweat.

Take Verizon Wireless, which had planned a $2 convenience charge for the privilege of paying a bill by phone or online. Katchpole, a Verizon user for eight years, was offended by the very idea that loyal customers could be penalized for paying what they owed. So she went on the website Change.org - organized a petition - and watched as it quickly racked up more than 165,000 signatures. As consumer outrage went viral, Verizon backpedaled within hours.

And how about Bank of America's infamous $5 monthly usage fee for debit cards? It too was kiboshed, partly thanks to another Katchpole petition and 300,000 of her outraged brethren, at a time when the Occupy Wall Street movement had been pressuring banks.

I'm not exactly sure what these companies are thinking, says Katchpole, who only graduated last spring from Roger Williams University in Rhode Island and now works as a fellow at the nonprofit Rebuild the Dream, an organization that lobbies against income inequality (her petitions are personal ventures, unrelated to her job).

It's so out of touch with reality and what their customers are going through. My Verizon petition was only up for about eight hours before they backed down.

Also forced into a recent and embarrassing climb-down was video-streaming company Netflix, which had planned to spin off DVD rentals into a stand-alone service called Qwikster. User objections became so deafening that the notion was killed before launch.

The Internet is the great equalizer, and that's a beautiful thing - even if it's not positive for us, said Netflix spokesman Steve Swasey. We made mistakes that hurt our brand, consumers let us know about it, and now we're rebuilding step by step.

Such is the growing power of social media, which can make consumer complaints go viral and cause serious brand damage within days or even hours. While one person can't topple a company, if that person is able to assemble an army of hundreds of thousands behind them, they become a force to be reckoned with.

Thanks to the increasingly savvy use of tools like Facebook and Twitter, the power balance between company and customer has been tilting in the latter's favor.

Consumers have always had a voice, but now it's louder and it spreads so quickly because of social media, says Laura Ries, president of branding firm Ries & Ries in Atlanta. Companies used to have a lot of time to think about strategy, to have meetings and studies, and to take time to respond. They don't have that time anymore. Now it's all about rapid response.

Consider the introduction of New Coke, one of the great marketing disasters of all time, which took almost three months to get reversed back in 1985. The Bank of America debit-card charge plan withstood a month of public fury before it was killed.

Our customers' voices are most important to us, Bank of America co-COO David Darnell said in a written statement (the firm declined comment for this article). As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so.

This time around, with Verizon Wireless, reaction was even faster. CEO Dan Mead scrambled to issue this statement: At Verizon, we take great care to listen to our customers. Based on their input, we believe the best path forward is to encourage customers to take advantage of the best and most efficient options, eliminating the need to institute the fee at this time. Translation: Verizon executives (who also declined comment for this article) witnessed the venomous public reaction, and backtracked within a day.

Someone at Verizon thought this was a reasonable way to add millions to the bottom line, and they were wrong, says Seth Godin, author of marketing classics like Purple Cow and Unleashing the Ideavirus. Consumers are speaking up more loudly and with more vehemence than ever before, and they're doing it in public.

Make no mistake, corporations are taking note of this sea change - and are often capitalizing on their rivals' foibles.

The credit union Mission Federal, for instance, responded to the bank fee controversy by offering to reward customers up to $5 a month for using its debit cards, said the credit union's CEO Debra Schwartz.

Companies are now saying, 'Wow, we have to be careful about how we do this,' says Jean-Manuel Izaret, a partner and pricing expert with management consultants Boston Consulting Group. Clearly Netflix, Bank of America and Verizon didn't apply best practices, and had their pricing moves rejected by the market. It used to be just the press putting pressure on corporations, but now we're way beyond that.

So now that consumers are realizing the power of the social-media megaphone, how are they going to wield it - and how are embattled companies going to respond? Here are a few predictions from the experts:

* Companies need to act at warp speed. Mistakes are made in the business world. But companies can limit any lasting damage to their brands by recognizing potentially devastating memes, and acting quickly to contain them, with their own equivalent of political 'War Rooms'. If you don't respond to a fire on the Internet, it only tends to get bigger, says Ries. But even though word can spread rapidly these days, if you stay on top of it, it can be forgotten just as rapidly.

* Rollouts will become more thoughtful. To avoid such out-of-control wildfires, companies should act preemptively and consider consumer reaction to boardroom decisions before the public does it for them. If charges are new and not shared by a firm's competitors, for instance, a backlash is entirely predictable. Focus groups and regional test rollouts could help companies gauge reaction before a casual decision morphs into a full-fledged disaster.

* Consumers should pick their fights. Activists like Katchpole have certainly notched some high-profile victories, but if everybody starts complaining about every little thing, then collective outrage could lose some of its power. As a result, make sure to focus on the meaningful instead of the petty.

* Get ready for more. Consumers still make up something of an archipelago, each pushing his or her own issue with an online petition here, a Twitter hashtag there. While some issues like the Bank of America debit-card charge catch fire in the public imagination, many don't. But if consumers do manage to get truly organized, watch out.

What would happen if all pricing was shared by all consumers, or if everyone stood up for the person who was being thrown out of their house, or if at the very moment you're choosing a wireless carrier, you could see an updated chart of customer-service wait times? asks Godin. If the volume of consumer outcry gets even louder, and the coordination gets even better, it will forever change what we do as marketers.

At least, that's what Molly Katchpole hopes. She's not sure which corporate decision she'll be targeting next, in between her trips to the laundry and the grocery store, but no doubt another one will be coming along soon.

You used to have to make phone calls and write letters, she says. But companies can't hide this stuff anymore; just take a look at their Facebook walls and all the angry comments. I really hope they take these lessons to heart.

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