A Case Study: VNU as its Competitor’s “Best Promoter”
August 11, 05“Defending a reputation starts with thinking the unthinkable and then planning for that eventuality.” That’s nicely said in an academic context. The question, which the media giant VNU’s managers must have asked themselves over and over again in the past week, is how do you prevent managers making stupid decisions which, in a matter of minutes, can send a company’s image, reputation, customer loyalty, and even staff loyalties simply down the drain. What happened to the owners of National Jewelers and of the Couture International Exhibition in Las Vegas this week will still be discussed in boardrooms and business schools long after the storm has passed.
So what happened? The annual JCK show in Las Vegas normally starts on a Friday. The next JCK show would have started on the Jewish religious holiday of Shavuot (literally meaning “weeks” as it takes place 7 weeks after Passover), a festival of grain harvest and a commemoration of the giving of the Law on Mount Sinai. JCK management, out of respect for the religious sentiments of their Jewish exhibitors and show visitors, decided to postpone the opening of the show by one day. So far – so good.
One of JCK’s fiercest competitors, VNU’s Couture International Exhibition traditionally schedules its show for the Tuesday, Wednesday and Thursday preceding the JCK show. Upon learning that JCK was not going to do business on the Friday, VNU quickly announced that they would reschedule their show dates to specifically include the Shavuot religious holiday. In short: it capitalized upon the void created by the respect shown by JCK for its Jewish customers and exhibitors.
Exhibitors were furious. Fifteen exhibitors informed VNU that they “would not participate in next June’s Couture show because of your decision to move the show to conflict with the important Jewish Holiday of Shavuot. As a result, the exhibitors that have agreed to participate in the September Diamond Conference are also withdrawing from this conference, as the conference is no longer attractive without the concurrent participation in the Vegas show. ”The fifteen said further that they “have decided that we will no longer participate in any future VNU events.”
The exhibitors stressed that “all of the other jewelry trade shows have been mindful of religious holidays in planning their event schedules. Basel, Vicenza, Hong Kong, and now JCK have all demonstrated sensitivity and understanding of the needs of all of their exhibitors.” They left the door open by ending that “we would happily continue to support VNU, as we have all faithfully done in the past, if you are willing to reconsider your position with regard to the June show.”
By the time this gets published, we assume that VNU will already have rescinded their decision so I expect that, from a VNU and exhibitor perspective, the “crisis is over”.
But is it? International conglomerates like VNU spend millions on the development of Business Codes, Best Practices, Mission Statements, Sustainable Development Policies, etc. All of these policies are meant to protect the reputation of the firm, its brand, and its standing (also in the financial markets). As a consumer oriented firm, VNU wants to maintain its customers’ goodwill, their business and their loyalty. The question for business school students to address is what went wrong with the decision making process of a firm when it led to making a decision that contradicts all the principles for which the company stands – and which seriously damages its reputation and, possibly, lethally so in the case in hand. Will the Couture Show still have a future?
According to its own Code of Conduct, “VNU strives to do business in an ethical, honest and responsible manner. These attributes,” says the code, “are essential to building and maintaining long term, mutually beneficial relationships with our clients, suppliers, shareholders and other stakeholders. To achieve this it is important that each employee is able to make the right decisions and act accordingly. This Code of Business Conduct (the “Code”) has been formulated with this objective in mind.”
VNU tells its staff and managers that these are guidelines for the conduct of the company’s business. The Code “reflects our primary responsibilities, our core values and our rules of conduct.”
Though at the time of writing we haven’t yet received VNU’s official response, there is not likely to be any disagreement on the fact that some bad decisions were made. Many large companies often encounter a gap between top management expectations and actual performance. The unfortunate decision to move the show basically represents a failure to execute stated policy objectives.
In the case of the Couture International Show, the general competitive environment has become so hysterical that accidents were bound to happen. Two large conglomerates each organize two separate shows aiming at various niche markets, and exhibitors and visitors must pick from four different shows all in the same time span. Weekends tend to attract great retail traffic. The difference between Thursday and Friday may, from a commercial perspective, be gigantic.
Exhibitors are confused. They find it more difficult than ever to decide in which show they should or shouldn’t participate. Against this setting, show management must be very cautious in their marketing approaches – be careful in their promises and be most conscious of the exhibitors’ sentiments. Those who are not sure which exhibition to attend may well be relieved if some “external event” makes the decision for them. Even if VNU cancels its ill-fated decision, much of the damage has been done – and will be lasting.
VNU could not have done more to promote the competitor JCK shows so effectively … What is left is to find out why it happened.
Not the End of the Story
Companies need to deal with crisis management. Crisis management textbooks define “crisis as an event or series of events that can damage a company’s reputation. Typically crises interfere with normal operations, attract external, particular media attention, damage profitability, and escalate if not well handled.”
VNU management should not only review its decision-making process, but also its ability to handle a crisis – unless, of course, the 15 major diamond jewelry exhibitors’ signed undertaking NEVER to attend a VNU is seen as a routine manner, not worthy of any special attention.
The writer of this column asked VNU spokesmen in Europe and in the United States for a response. Our e-mail was dated 09:55 am, Wednesday morning, Israel time. We received an interim response asking about our deadlines and we indicated that IDEX Online had agreed to delay the weekly newsletter to facilitate VNU formulating a response on Thursday morning, New York time. About 32 hours after we had asked for comments, we received the following e-mail from Deborah Patton, the head of Corporate Communications for VNU Business Media: “I cannot respond until at least noon today, and perhaps later. I apologize, but I will not be in the office until 10:00 this morning. It would appear that is too late for your deadline.”
Never mind our deadline. Ms. Patton is too late for VNU.
Late Developments – Adding Insult to Injury:
Well after publication of the above article, VNU’s Deborah Patton was “pleased to announce new dates as well as an extended day of exhibiting at no expense to exhibitors for the 2006 Couture Jewelry Collection and Conference. The show will extend from three to four days, Tuesday, May 30th through Friday, June 2nd, with the additional day at no additional exhibit expense to exhibitors. "The change was made," says the statement, “in deference to the Jewish holiday of Shavuot which conflicted with the original show dates, and now allows those who observe Shavuot three exhibit days at Couture.” Patton’s statement also quotes Vice President of the VNU Jewelry Group, Nancy Robey’s observation that “the original dates were an unintentional oversight on our part, and we are pleased to be able to add a full day of exhibition to our schedule to accommodate all exhibitors and attendees.”
The 15 Exhibitors who had announced their withdrawal from Couture and Diamond Conference were not consulted in this decision – they read about the unilateral VNU statement on the internet, even though they had appointed a representative to negotiate with VNU. They were shocked. They see the new VNU position as a cheap way to “buy them off” – as if giving all an “extra free exhibition day” would suddenly change their opposition to VNU’s callous adding the Friday (that JCK had vacated out of deference to Jewish exhibitors and visitors) to their show dates.
The just announced VNU “change” sadly adds insult to injury: it leaves the Friday in the new dates…. It only gives, at no expense to the exhibitors, an “extra day”. It is incredible how VNU, in its “damage control exercise” has tried to turn the religious and principle issue into a “money pay-off”.
Needless to say that the 15 Exhibitors are angry – and they remain united. No Friday. Their boycott of VNU stands. As do all our editorial remarks about the decision-making process and the total absence of effective crisis management at VNU. The only thing that is worse than making a late response is making an utterly wrong response.