As European integration continues apace, international
organisations which do not have a consistent European corporate
reputation are being held to account by a savvy public.
While new EU legislation is being considered to help iron out
country-to-country discrepancies in consumer deals, it has recently
emerged that certain companies have been happily exploiting loopholes in
the law in the areas of price fixing for years.
Although firms may be operating within the law, reputations can still
take a hit if they are seen to be acting unfairly or ’ripping-off’
customers.
Esme Page, chief executive of Herald Europe, says: ’Companies which
operate across Europe need to have a single corporate reputation.
Communications barriers are crumbling, distribution channels are
becoming more integrated, consumers and pressure groups are more aware
of what’s happening outside their own boundaries. The internet is making
everything transparent - it’s communications sans frontieres.’
Chris Genasi, CEO of Shandwick’s corporate division, believes consumers
are increasingly focusing on the company behind the business. ’They want
to know whether they can trust that company. Is it ethical, how does it
treat its employees, does it employ Third World labour, is the chief
executive a fat cat?’
He adds that quality of products is also an important element of
corporate reputation.
Car manufacturer Skoda has suffered from a negative corporate image in
the UK for decades, as PR manager Eilish O’Shea admits. ’In the 1970s,
Skoda was a music hall joke. But since its re-branding (following the
take-over by Volkswagen), there has been no problem with image in
regions such as Scandinavia, where Skoda didn’t have a history,’ she
says.
O’Shea says it is an uphill struggle in PR terms in the UK, but adds
that ’huge inroads have already been made. In communication terms, the
company’s corporate message - that Skoda cars are value for money,
robust and a reliable means of transport - has a pan-Europe an
focus.
Value for money is a key factor in European reputations and other car
manufacturers are finding their reputations coming under increasing
attack.
Brussels-based NGO the European Consumer Organisation (ECO) is working
towards equity in pricing and service for consumers in Europe.
Joanna Dober, head of communications, says loopholes exist in current EU
legislation which allow manufacturers to legitimately inflate their
prices: ’Manufacturers use the block exemption on EU legislation to
justify car price fixing in the UK. Although there is no actual proposal
yet to change EU law, British MEPs are keen this loophole should be
removed.’
Herald’s Page believes companies which operate different pricing
structures are harming their reputation in the short-term. ’Certain
European car makers have been raided by European Commission inspectors
investigating obstructive sales and pricing practices. The consequences
include a lack of faith in list pricing - with consumers delaying new
car purchases because they’re convinced that prices are about to fall
sharply,’ she says.
But in response to allegations that car manufacturers exploit loopholes
to fix car prices, John Gardiner, manager corporate affairs of Ford in
Britain responds: ’Customers are free to negotiate the best deal they
can from any Ford dealership in the EU and Ford can help them with any
necessary information.’
He adds: ’The UK is one of the most competitive marketplaces in the
world for new vehicles. Customers receive a fair deal compared to
continental consumers when the transaction price is taken into
account.’
However, Page believes price fixing will become a dead issue in the
medium-term. ’The marketplace simply won’t allow manufacturers to
operate differential pricing policies in different countries for much
longer. Although some price differential may be justified by local
differences in taxation, transport and distribution costs, the media is
now more European in its outlook and has stoked the public’s
considerable appetite for stories comparing lifestyle, wages, pricing,
living standards and working hours within Europe. The euro will help in
this task, allowing consumers to tell at a glance when they are being
’ripped-off’ in one country.
In the meantime, the European Parliament is considering making
amendments to several laws to make life fairer.
The EU Trade Mark Directive, for example, currently allows brand name
manufacturers to fix their prices across Europe at a higher level than
in other regions of the world by default, since they control the
distribution.
MEPs have yet to decide whether to amend the law and open up
distribution channels. Yet, depressingly for UK consumers, it appears
there exists a widely-held belief that the UK is a captive audience and
prices can be hiked that bit further than anywhere else.
’It’s all about what the market can bear,’ adds Dober. ’If the law lets
you get away with it, then why not? But consumers are becoming wise to
this kind of abuse, so reputations will suffer.’
Like the motor industry, the airline industry has come under fierce
scrutiny in recent months following allegations that UK consumers are
being ’ripped-off’. Under the 1976 Bermuda II agreement, four airlines
(currently British Airways, Virgin, American Airlines and United
Airlines) enjoy the right to fly transatlantic services from Heathrow
Airport. This monopoly has led to higher transatlantic air fares being
levied against UK customers, compared to their continental
counterparts.
Charles Barker BSMG is co-ordinating the biggest ever PR campaign for
’excluded’ airline British Midland. It hopes to harness public support
for its challenge to the monopoly held by the four and thus bring about
cheaper transatlantic air fares, and to persuade the Government to
renegotiate the agreement.
If it succeeds, British Midland will emerge as a consumer champion,
boosting its corporate reputation. However, the time frame for success
is just six months - before Washington goes into ’meltdown’ in the run
up to the next presidential election.
Campaign co-ordinator at Charles Barker BSMG Toby Nicols says: ’Getting
an open-skies agreement is fundamental to British Midland’s growth over
the next 15 years. We announced our plans in February 1998, but after 18
months of behind-the-scenes negotiations with airlines and Government,
we were no further forward.’
All elements of the campaign, including advertising, are being
co-ordinated by Charles Barker BSMG.
In the case of Levi Strauss, wholesale prices across Europe are more or
less the same, but the company has had to deal with criticism about the
wide difference in prices between Europe and the US. The company has
worked within the British Branding Group to produce a report on the
issue, and has also been involved with UK and European government
debates.
Head of European Communications Mark Elliot says: ’We don’t recommend or
set retail prices - that’s down to retailers. We are working on a number
of fronts to explain to jeans buyers that there is more than meets the
eye when it comes to label prices. US stores are eight times bigger than
European stores and they buy in bulk, but make the same overheads as
stores in the UK.
Unlike other areas, where manufacturers are under fire for exploiting
prices, tobacco companies have been very active in letting consumers
know the problem is directly linked to taxation, and they are doing
something about it.
’On a pounds 3.80 pack of cigarettes, three pounds goes to the
government in tax,’ says Philip Morris UK and Ireland public affairs
manager Martin Liptrot. ’Our consumer is being asked to pay more and
more, and the level of tax is astronomical compared to European
countries. ’
But while tax on tobacco continues to escalate, there has been some
success, with the Government recently appointing a ’smuggling tsar’ to
look into the tobacco black market.
Tari Hibbitt, chief executive of Edelman, believes there is a dichotomy
at the very heart of managing a corporate reputation across Europe, no
matter the industry. ’In certain sectors, business practices and modes
of behaviour must be seen to be local in order for consumers to identify
with the brand,’ she says. ’However, these organisations still need
international credibility.’
Stuart Handley, director of Europe for hi-tech specialist Text 100
mainstream spin-off August.One, agrees. ’At an international level,
organisations must articulate their corporate message, but the smarter
ones use it as a starting point to give it a national spin.’
Pointing to the success his client Microsoft has had in this field,
Handley adds: ’There is no such thing as a European consumer -
international companies must be aware of the cultural differences which
exist between countries.’
The challenge is to manage the reputation of a global brand in a local
market. Hibbitt believes brands cannot afford to ignore criticism -
about prices or otherwise - in a small market. ’Global brands can’t say
’no one will notice because it didn’t happen in our main market’. The
reverberations are quickly felt for a global business when something
happens in any corner of the world,’ she says.
The pitfalls of managing a single corporate reputation throughout Europe
are many. The role of PR is to help steer organisations through the
difficult times ahead leading to European integration.
Key to this is helping them wise up to the fact that politicians and the
media are scrutinising their behaviour. If there are genuine reasons for
discrepancies, in price, for example, it is the job of PR to explain
them to the public and the media.
’There is a considerable risk the ’Rip-off Britain’ mantra will reach
unreasonable volumes,’ says Gareth Zundel, group PR manager at
Harvard.
Price wars have a nasty habit of undermining product quality and the
public is capable of making a balanced purchasing decision on the basis
of price, quality and service. But it can only do so if it is properly
informed. This is the real task for PR.’
AUDITING HELPS BRIDGE THE GAPS PRIOR TO EUROPEAN INTEGRATION
Company-wide audits can help firms protect their reputation from the
pitfalls which line the route to full European integration.
Chris Genasi, chief executive of Shandwick’s corporate division, says he
has noticed an increasing number of businesses requesting audits in
recent months.
’Audits help companies understand what is expected of them from
governments and the media. The risk assessment carried out gives an
organisation an idea of where it may be exposed in the light of further
European integration,’ he says.
’It also helps us to envisage scenarios which might occur. It’s all
about closing up the gaps where a risk is exposed.’
In the early stages, Genasi says desk research is carried out on key
factors which may have an impact on the organisation. These include
areas of EU policy, such as price, labour rates, employment policy,
health and safety, and environmental issues.
A numerical rating is then carried out into each area of risk, revealing
how exposed the company is. Following this, key stakeholders, such as
pressure groups, journalists and ministers are identified.
The final stage is proactive and involves bridging the gaps
identified.
This includes establishing contact with key stakeholders and attempting
to transform them into advocates.
TESCO TAKES ON ’RIP-OFF BRITAIN’ CAMPAIGN
’Not so long ago, there was this myth that we lived in Great Britain,’
says Mark Dober, joint managing director of APCO Brussels, ’and that we
had great prices and a reputation for fairness, supported by great
standards.’ That myth is now in shreds. The Sunday Times has arguably
done more than most to expose the myth with its ’Rip-off Britain’
campaign, spearheaded by the paper’s Insight Team.
Paul Nuki, deputy editor of the team, explains that the campaign is a
continuation of the hard-hitting exposes of the early-1990s, under the
then-editor Andrew Neil.
The ’Rip-off Britain’ campaign began in April 1997, when Nuki was
consumer affairs editor, with an expose of the UK electrical
industry.
Since then, journalists have upped the ante by exposing ’rip-offs’ in
the motor industry, supermarket trade, alcopops, sports and watch
industries.
The car industry investigation was particularly successful, according to
Nuki, since it ’hit a chord’ with readers. Journalists posed as
retailers offering manufacturers the service of supplying cars bought on
the Continent to UK customers. Not surprisingly, manufacturers rejected
the offer because of the substantial price differentials between cars
manufactured in the UK and those manufactured in mainland Europe.
Most recently, the Insight Team revealed that UK businessmen and women
pay almost double the prices for air tickets to the US compared to their
continental counterparts. The story has since been picked up by other
newspapers.
Nuki promises there will be more exposes in the future, but only ones
which are relevant to the Sunday Times’ readership.
’Our readers are generally well-off, but they are concerned about
getting value for money,’ he says. ’Our aim is to inform them when they
are being ripped off.’
Nuki adds that although the response of the Government has been
reasonably positive, ’the bureaucracy of the DTI, in particular, makes
any change slow going’.
But Bernard Hughes, who runs the Government and EU unit at Tesco, argues
that the ’Rip-Off Britain’ tag is tarring all UK retailers with the same
brush.
’Accusations that UK food retailers are charging more than their
continental counterparts just do not tally with the facts,’ he says.
Tesco commissioned market research company AC Nielsen to compare the
prices of 133 of its products with those charged by continental
retailers.
Hughes says this independent research concluded that the prices were
broadly similar, although he does point out the strong pound gives the
perception that goods are more expensive in Britain.
’We take our reputation very seriously and through an ongoing public
relations programme we have been informing the Government and the media
that we are not ripping off our UK customers. Clearly it is a careful
balancing act between knocking down the myth and giving the story
oxygen,’ he says.
Hughes adds that far from short-changing customers, Tesco has been
championing consumers’ rights in Europe for the past two years on a
campaign with public affairs agency APCO to support changes to the Trade
Mark Directive.
If amended, the ruling would see supermarkets given the green light to
sell goods bought on the grey market at lower prices in their own
stores.
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