It could be said that this article is a little late coming. I am perhaps arriving at a party knife in hand, looking for my slice, only to find the cake has not only been cut, but already eaten. But I am determined to have my slice anyway. My cut won’t however be aimed at the Unilever brand which has already suffered enough. Instead it will be aimed at the marketing and business strategists (similar to those at Unilever) who fail to empathize with their customers.
My previous blog discussed how some companies treat their customers like cash cows to be milked for all they are worth. Well cows can kick back when treated badly. This blog serves as an example of what can go wrong when companies put appeasing the accountant before appeasing the customer.
I shall dispense a quick synopsis of events, for those unfamiliar with events. It all started when Unilever decided to increase their product’s prices by up to 10% in the months following the Brexit vote. They cited the move as a way to address the implications of a weakened pound for their business. Unfortunately (for them) many supermarkets were unwilling to implement these price increases. Supermarkets claimed it would negatively impact their customers.
In response, Unilever withdrew delivery of their products to these rebels until the issue was resolved. As shelves began to empty of customer favorites the issue reached the public domain. Needless to say, the public were not happy. The price increase plan then became national and global news. A PR disaster for Unilever, I feel would be an adequate summation of events.
Lack of empathy
I believe the root of this issue is a lack of empathy for the consumer. Price increases are part and parcel of the retail industry. It is a heavily incentivised and goal driven arena where KPI’s (Key performance indicators) must be met. The irony of this whole situation is supermarkets, who routinely implement price increases on their own brands, rejected increases’ for Unilever products. However the occurrence of Britain’s exit from the U.K has made the situation less dichotomous.
Unilever misunderstood the impact such a price increase would have on an already fragile, sensitive and vulnerable British public. It can’t be just me who has noticed, newspapers and media littered with doomsday predictions and general negativity for the British economy without European Union support. On top of this, the public are told of a well-known brand’s plan to hike the prices on all their products by up to 10%. This invoked a fear that this could catalyze other brands increasing their prices. Suddenly the cost of living is rising while the economy is on a downturn. At least that is the fearful thoughts such a move provoked.
Lack of market research
I feel that if a thorough PESTEL analysis was carried out, then the company could have been able to mitigate such a situation accruing. It might of helped them understand the current Political environment as well as the fears and worries prevalent about the nation’s economic future. The British public viewed the price move as a multinational company sticking the boot into their political situation. They also felt Unilever used Brexit as an excuse to increase prices. The reality often doesn’t matter in marketing, customers perception is all that matters.
Poor Crisis Management
This whole situation escalated the minute Unilever decided to halt delivery of their products to supermarkets refusing to implement price increases. News then reached the media. Suddenly a minor issue, that just required negotiation and thorough discussion, became a major issue. Tesco were the first supermarket to reject the new terms. They referenced protecting their customers as reason for their refusal. They received a massive PR boost as a consequence further bolstering their position on the matter.
It’s noteworthy to understand, that most price increases that occur in retail will be blamed on the supermarket selling the product. At least that is what i have noticed from working in retail. Customers assume that supermarkets set the prices and not the product manufacturers. Tesco suffered significant PR damage in recent years and it was important they did everything possible to protect their image. Rejecting the price increases was necessary not just to gain positive PR but to prevent future negative PR (if the price increases are attributed to them).
A war with supermarkets was one Unilever could never win. Supermarkets stock the product and attract a large consumer base. They reacted emotionally and not strategically when they withdrew their products from the shelf. Instead I think they should have retreated and rethought the strategy before finally re-entering negotiations.
We have already established the British public were in a fearful state and any perceived price increase would damage brand image. The move flew in the face of their latest branding and advertising efforts where they try to establish Unilever as a brand that cares about people.
Their latest advertising campaign “So long, old world” demonstrates how the company cares for the world. “When you choose Unilever you help create a bright future”. They integrated all of their products into an all in one marketing approach, putting all their brands (Hellmann’s, Surf etc) firmly under one Unilever brand image. This minimises the need for excessive advertising spend. Now however, the Unilever brand has been damaged. Consumers felt that they put profiteering before looking after people. Perhaps, this all in one advertising approach will now be scrapped before it comes back to haunt them.
All of their products are well established and brand loyalty is strong. The negative publicity i suspect, will turn some customers away from their products and damage sales. This opens opportunity for competing products like supermarket own brand products and others. They have opened themselves up to brand switching and punitive action by consumers.
The price increase might have been justifiable from a financial point of view – every retailer has targets they must meet. Businesses exist to make profit and are not charities for free food or supplies. Sometimes though, i believe you have to sacrifice short term profit to insure long term performance. If we alienate our customer base then we lose sales and brand loyalty. We must find a balance between keeping customers happy and reaching our targets. Customers are fickle. They can have long memories and short ones.
Only time will tell if Unilever’s relationship is now irrevocably damaged with some customers. I believe the Unilever brand and product range is strong however. They should recover their reputation with time. It will serve as a warning to them and the others in the future.