A question I often ask in my marketing classes: which is more important, brand or product?
Those on the brand side often point to the success of Starbucks, the ultimate in “perception marketing” surrounding the perfect cup of coffee. After building a global operation based on that brand, the company managed to preserve it even after a racial discrimination incident at one of its stores went viral worldwide. In response, Starbucks quickly took ownership of the problem, publicly apologized, reached out to the affected men, and closed 8,000 stores across the country to hold racial bias training for employees.
Beleaguered utility giant Pacific Gas & Electric (PG&E) may be looking to borrow a page from the Starbucks brand playbook, touting a “renewed vision” as it tries to recover from its role in the 2018 California wildfires. But PG&E is not Starbucks.
Last week in a U.S. Bankruptcy court, an attorney representing beleaguered utility PG&E characterized the company as the “honest broker” in proceedings, to which the courtroom broke out in laughter.
If PG&E truly values its customers – and its future — it should stop focusing on elevating its brand and focus on rebuilding its operation. Here are some observations about PG&E that may serve as a lesson for other organizations in crisis mode:
First, organizations in the face of scrutiny need to consider the optics of their actions. Just last month, the PG&E Corporation proposed $11 million in performance-based bonuses to a dozen executives this year. The utility’s attorney said the bonuses were necessary to motivate the executives to achieve the company’s safety targets, leading the federal bankruptcy judge to observe that “there hasn’t been a single dollar given to the victims’ fund.” Understandably the reception of that news did not encourage customers nor wildfire victims.
Second, pay for past mistakes even when they may be costly. It’s hard for the public to believe PG&E is charting a new operational course when it seems to view its own stock price as a superior goal to accepting responsibility for its role in the wildfires. Given its history of involvement in many of the worst California fires since 2015, PG&E was aware of the risks associated with its electrical transmission network; a 2014 internal memo noted “the likelihood of failed structures happening is high.” But now the utility is backing a proposal that would allow them to issue tax-exempt bonds, ostensibly to be repaid by shareholders, to compensate the victims of wildfires. In fact, the ultimate costs will eventually fall on ratepayers, particularly if the California Public Utilities Commission approves a requested rate increase as part of their rate of return. It’s only fair that the current owners of the company – mainly Wall Street hedge funds – take a hit to their stock price through the bankruptcy process to pay for past mistakes.
Which brings me to my final point, renaming an organization must signal a genuine restart. Shakespeare wrote: “A rose by any other name would smell as sweet.” However, in this scenario, PG&E is not ‘grand flora.’ Renaming a business must serve the interest of the stakeholders, as well as the organization. In the case of PG&E, there is a scenario in which employees would be charged with coming up with a new name for PG&E. However, the newly named company must be earnest about starting over. Their transformation must be fueled by behavior readily identifiable as being authentic as evidenced by their actions, not just what they say. This is an option that could help the company separate from their past. However, the entity must be a new book, not just another chapter.
Will PG&E survive its operational and existential crisis? I’m encouraged by a mailer a family member recently received from PG&E that contained good, practical, non-promotional advice for preparing for and staying safe in a wildfire. As evidenced by the laughter in bankruptcy proceedings, the utility has a long way to go to earn back its trust from Californians. It will take something other than seeking bailouts and gamesmanship to earn a reputation as an “honest broker. “
Stephen Rapier, PhD, Assistant Faculty of Marketing at Pepperdine Graziadio Business School, has more than 35 years of experience providing strategic insight on brand and marketing, advertising, public relations, and market research to a range of organizations.