Addressing Consumer Boycotts: Crisis Management Tips & Techniques (Free Preview)

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Free Preview: Consumer Boycotts & Crisis Management [Transcription]

Good day. My name is Bill Addiss, and the topic we’re here to talk about today is consumer boycotts. Specifically, we’re going to talk about the impacts of consumer boycotts to corporations. The reason this topic is of such interest to me is for the last 15 years, I’ve been providing training and advice to corporations through my own financial firm, and prior to that, I had a 23-year experience at Lehman Brothers, where as a managing director and an executive vice president at Lehman, this was a topic that brought itself to the forefront there as well. I’ll be quite frank with you, this is a topic that has interested me both personally and professional for over the last 20 years, and it is not an unfair statement to say that literally the development of countries has been dictated by boycotts. As many of you are probably aware, the cohesiveness of the colonies to unify themselves against Britain was in response to the Stamp Act, and literally, this country was founded on boycotts.

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This is not just a U.S. domestic issue. Other countries have seen their development greatly impacted by boycotts. The textile boycotts of the U.K. by Mahatma Gandhi and the Indian government led to the economic malaise of the European economy for decades, and we’ll talk more about that in the future. What we’re here to talk about is the economic impact of boycotts. Companies have to be sensitive to the impact of boycotts because they can have serious financial implications, and we’ll be talking about illustrations of that as time goes on. To give you some illustration of that impact, a recent study that was done by YouGov in the U.K. shows that 55% of all consumers are likely to affect their purchasing patterns based on their feeling about that company. 55%. We are voting with our pocketbooks. Additionally, 80% of the respondents to that survey indicated that they would also be likely to try and affect friends and family relative to their purchasing decisions based on their feeling about that company.

These impacts can be dramatic. It was estimated by the Cooperative Bank in the U.K. that in 2007, there was approximately 2.5 trillion pounds of economic impact to the effects of consumer-led boycotts. The breakdown of that turned out to be approximately 1.4 trillion of economic impact to the travel industry, 817 million to the clothing industry, 338 million to food and beverage industry, so industries and corporations are being affected by the economic impact of boycotts. Boycotts additionally know no bounds. They know no bounds geographically, they know no bounds politically. Conservative groups, liberal groups, Democratic groups, Republican groups, pro-life, pro-abortion, can all be leaders of boycott movements, so it doesn’t respond to any one political or social spectrum. You can be vulnerable irrespective of what your boundaries are, and we’ll show you illustrations of all of that.

What we’re going to do over this four-part module is in Module 1 here, we’ll introduce the concept of what is an economic boycott, and specifically, a consumer-led boycott. In the second module, we’ll talk about what does it make to create an effective boycott, and how do we measure that effectiveness. In the third module, we’ll talk about how corporations can defend themselves under attack from consumer boycotts, and then in the fourth module, we will talk about other factors affecting a boycott, things like unintended victims, who are the victims of a boycott, and we could have unintended consequences affecting corporations, and I’ll give you illustrations of that as well. We’ll also talk about the effect of social media to boycotts, the rise of social media and how it is greatly impacting the entire boycott movement. That’s what we intend to cover over the course of the next four modules.

Talking about economic impact, just to stress, for example, in the state of Arizona, here in the U.S., approximately ten years ago, there was a boycott called against the state of Arizona based on laws that they had passed about anti-same-sex marriages. Consumer-led boycotts against the state of Arizona, it was estimated, in a six-month period, resulted in economic losses to the state of Arizona of $141 million in just six months. I might also point out, just as an allegory, it was rather interesting trivia that actually, the TV show Frasier, very popular show, that show was actually originally slated to be filmed in the state of Arizona and marketing the state of Arizona, but based on the negative impact from the consumer boycotts, the decision was made to move the Frasier show up to the city of Seattle, Washington, where it was broadcast for the next eight years. That’s just a minor trivia point, but the point is, more importantly, economically, we need to be looking at and understanding the economic impact of boycotts to corporations and how they can defend themselves against that.

Let’s first define what boycotts are. When we talk about boycotts, they really break down into three different categories. The first are commodity boycotts. This is consumer-led boycotts against a specific commodity, probably best illustrated here in the U.S. by the boycotts called by Cesar Chavez and the grape and lettuce growers in the 1970s, that had huge economic impact to that marketplace and resulted in changes to the laws about minimum wages, employee protection. Those boycotts were very effective. That’s a commodity boycott, also illustrated in the U.K. by the Indian government’s boycott of British textiles. Not only did they call for a boycott of all of those textiles, they implemented a 25% surcharge on all British goods, and that literally resulted in the textile industry in the U.K. having a 50% unemployment rate as a result of the, India boycotting those textiles had huge implications to the British economy. Commodity textiles are a consumer-led boycott, as the name implies, against a specific commodity.

A brand name boycott is a boycott, as the name implies, against a specific product, against a specific name. A good illustration here in the U.S. is when the tomato growers wanted to raise consumer awareness about the plight of tomato growers here in the U.S. Rather than suggest boycotting all tomatoes, they specifically targeted Campbell Soup as one of the leading consumers of tomatoes, buyers of tomatoes, they felt that by boycotting Campbell’s, they would be sending a message about the entire industry. More recently, Nestlé’s, relative to infant and child formulas. There was growing concern about the use of formulas in the third-world nations. Rather than boycott the entire commodity, the decision was made by boycott leaders to specifically target the leading provider of that type of product, and that was Nestlé’s at the time. We’ll talk more about that. A brand name boycott is where we manifest the boycott against a specific product to raise awareness.

The third type of boycott is what we’ll refer to as a single name boycott. Under a single name boyott, we are targeting a specific corporation relative to either economic or social programs we don’t agree with. Certainly a recent illustration of that that got a lot of press here in the U.S. was the recent boycott of Chick-fil-A based on their contribution to certain social causes, based on statements that leading officers of the company had made regarding certain social issues, same-sex marriage, the decision was made by consumers to boycott Chick-fil-A. Another illustration of that was the boycott of Johnson & Johnson relative to their use of animals in testing.

Again, the three categories we’ll be talking about over the course of this program, commodity boycotts, brand name boycotts, and single firm boycotts. Just to give this topic a little bit of context and historical, the name Charles and Anne Boycott are certainly well-remembered in history, over 150 years past their death. Because, to give you the history of the situation, in the 1880s, there was not uncommon, the large landowners in the north of England retained what were called “landlord’s agents,” and these were individuals who were charged with collecting rents and fees from the sharecroppers that were farming the property owned by large landowners. Charles Boycott had just such a responsibility. He was the tenant’s agent for Lord Earl, who was a major landholder up in the north of Ireland at the time, and at the time, the economies were going through great distress. Crops were bad, income was down, and the tenant farmers were protesting, looking for a reduction of the wages that they had to pay and the percentage of the crops that they had to pay to the landowners. Needless to say, this became rather contentious as the economies got worse.

As a landlord agent, Charles Boycott and his wife Anne were charged with collecting those tariffs, and Lord Earl refused to reduce those tariffs, which, needless to say, put Charles in a rather difficult spot. There was an agency that was created of the local farmers at the time, which became rather large, called the Irish Land League, and the Irish Land League was a movement of trying to reduce wages and fees that the sharecroppers had to pay. At the time, the president of the local land agency, a gentleman by the name of Charles Parnell, what Mr. Parnell advocated is that what the locals should be doing is that what they should do is that to the land agents, “they should shun them in the streets of the town, they should shun them in the shops, they should shun them in the fairgrounds and in the marketplaces, and even in places of worship. By leaving the land agents alone, by putting them in a moral Coventry, by isolating them from the rest of the country as if they were lepers of old, we must show our anger towards the landowners.”

Charles Boycott took it upon himself to publish a letter in the London Times complaining about the treatment that he was getting, he and his family being totally and socially ostracized in the local community, unable to get their mail delivered to them, unable to have their clothes washed, unable to buy food, even in neighboring communities. In response to the shunning, Charles Boycott sent this letter to the Times looking for sympathy, and he also had, the local farmers were unwilling to harvest the crops for Lord Earl. It’s kind of worth noting that the authorities in London, rather than have this situation go untended, the authorities in London sent one thousand troops to the north of Ireland to harvest the crops of Lord Earl. They literally incurred at the time over 10,000 pounds of expenses to harvest only 500 pounds’ worth of crops, to make the point.

By raising the visibility that Charles Boycott did, the term “boycott” has come to represent that ostracizing, that isolation … I would point out, Anne Boycott, his wife, deserves notorious merit as well, because she actually made a plea directly to the farmers, pleading and imploring them to please bring in the crops, and once they did, she and her husband turned around and evicted those farmers rather than even paying them. I think it’s worthy to note that their notoriety is well-deserved 140 years later. Needless to say, the term “boycott,” which was then used in the London Times in 1880 for the first time, has evolved a little bit. Whereas “boycott” originally was a social ostracizing, it has now come to represent much more an economic ostracizing, an isolation from an economics point of view, much more than the social impact that it had in the 1800s. The term has evolved, and they certainly deserve the notoriety they have today.

In the next module, we’re going to discuss what does it take to create an effective boycott, so that we can then move on to the defensive measures as to how we might immunize ourselves against the impacts of a consumer-led boycott.

ExecSense Speaker

Bill Addiss
Owner and Principal, Amherst Financial Training
Fixed Income, Capital Markets, Derivatives, Portfolio Management and Options Trading


Bill has over 30 years of management experience in the finance industry.

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Currently, the principal/owner of Amherst Financial Trading, Bill develops and facilitates training programs in fixed income, derivatives and capital markets targeted to banks, broker/dealers, regulatory authorities and asset management firms. These include Deutsche Bank, Citibank, Kuwait Investment Authority, the SEC and FINRA.

Prior to Amherst Financial Trading, Bill was the managing director/executive vice president for Lehman Brothers, he was responsible for marketing, trading and distribution of fixed income securities.

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