Risk Rap

Rapping About a World at Risk

Hannah Montana Won’t Leave it to Beaver

I believe she might have said that she didn’t mean to do it. Or she may have apologized for a misinterpreted Annie Leibovitz artistic shoot of Girls Gone Wild. But clearly her deft handlers, publicists and other spinmeisters have shifted to overdrive to protect and maximize the equity value of Miley Cyrus Incorporated.

This is a classic study of taking a calculated risk and managing its effects. There is no damage control here. Ms. Cyrus and her management team made a calculated assessment and decided it was time to reposition the Miley Cyrus brand.At 15 years of age, Ms. Cyrus had a limited shelf life as the much beloved Hannah Montana. As she grew and matured into young adulthood her ability and believability of portraying a challenged 8th grader was straining credulity and the character was living on borrowed time. So her managers made the decision to begin transitioning the product to parallel the maturation of her target demographic market. Yes her fans will soon be putting away their Hannah Montana lunch boxes and dress up dolls. As they grow and require trainer bras, tampons and Clearasil she might as well continue as chief pitchman for these products as well.

In TV news coverage of this shocking incident, photos of Ms. Cyrus sitting on the lap of her strong protective father Billy Ray preceded the Annie Leibovitz shots. I felt the pain of his achy breaky heart as he symbolically gave his daughter away to an adoring public. Clearly Ms. Cyrus has fully entered the public domain of commoditization and she is now wedded to the fickle fancy of consumer markets. I believe Puff Daddy, Tommy Hilfiger and The Rockstar Formally Known as Prince also sold their names as a consumer market brand and have ever since continue a quest to discover who they truly are.

Unlike Jerry Mathers who was unable to transition his career from childhood star, the management team at Miley Cyrus Incorporated has no intention of mismanaging this valuable corporate brand. They see an opportunity. Ms. Cyrus has established a large brand following within a market demographic of young girls who will be consumers of products for the next 70 years. Miley Cyrus Incorporated (MCI) is moving with her market and her product life cycle is staggering.  When MCI goes public, her market cap will be impressive. As Ms. Cyrus’s target market enters retirement she’ll be well positioned to sell them an extensive line of rocking chairs to lull her fan’s to a well deserved sleep.

Risk: Reputational, Market, Demographics, Brand Marketing, Family Values, Art, Product Life Cycle

April 29, 2008 Posted by | branding, commodities, marketing, media, psychology | , , , , , , , , , | Leave a comment

Flying Unfriendly Skies

It’s hard to make sense of the mass grounding of American Airline jets this past week. The decision by AA management to implement an immediate review of its MD 80 aircraft caused great hardship to thousands of its customers, lost tens of millions of dollars in revenue, damaged customer loyalty and put a dent in the company’s brand. Readily apparent are two interpretive perspectives on the American Airlines grounding.

One interpretation is of a public company taking dramatic risk mitigation action to protect its brand and franchise through a rapid deployment of a full coverage compliance initiative. The other perspective is the growing political tension between commercial markets and the perception of regulatory incursion by a Federal Government Agency the FAA.

Some may argue that the thrust in the scope and enforcement power of Federal regulatory agencies have eroded over the past two decades. American Airlines failure to follow FAA compliance guidelines is an example of company’s dismissive approach to regulatory compliance. Further, the political zeal of regulators was tempered by a republican administrations Laissez Faire ideology and commitment to free markets. The AA grounding was a regulatory over correction by the FAA due to its lax standards when it failed to detect cracked fuselages on some Southwest Airlines jets.

The dance of regulating markets and the political will and apparatus to do so are issues of growing prominence due to the sub-prime mortgage debacle and the banking crisis. But we must give AA management credit for realizing the risk that non-compliance posed to the reputation of its brand. Some companies never recover from brand damage caused by a reputational risk event. This is particularly damaging when the risk event threatens a core value or perception associated with the brand.

Consider the accounting firm Arthur Anderson. Anderson’s could not recover from its lack of sound judgment and objectivity in signing off on fraudulent financial statements of Enron and Waste Management. The damage led to the extinction of a trusted and venerated brand. Trust, sound judgment and objectivity were core values associated with the Arthur Anderson brand and once those values were compromised the brand lost its value.

Same goes for American Airlines. As a premium provider of air travel services, clients expect the brand to offer enhanced assurance of safe travel due to superior operational expertise and resource devoted to service delivery. American Airlines admission of laxity in compliance practices with FAA inspection and wiring safety standards and the actions it took to rectify compliance deficiencies is a dramatic affirmation of the company’s desire to protect brand value.

Last weeks travails need to be incorporated into the branding story of AA. Its marketing message will convey its uncompromising commitment to the safety of its clients. In so doing AA’s management made a wise investment decision to protect the long term equity value of the company.

Risk: reputation; compliance; market, regulatory

You Tube Video: Eastern Airlines Commercial, Wings of Man

April 15, 2008 Posted by | marketing, regulatory | , , , , , , , , , , , | Leave a comment