Analysis and Evaluation of Wal-Marts PR campaign

COMM 102 Foundations in Corporate Communications

Project Title: Analysis and Evaluation of Wal-Marts PR campaign Instructors ame: Professor Gregor Halff Class Section: G1 Prepared by: Koh Zhi Rong Winston

Analysis and Evaluation of Wal-Marts PR campaign

Introduction Wal-Mart, the largest retailer in America, has hired Edelman, a PR agency, to develop and run a PRcampaign in improve its negative public image. We will be discussing why this campaign is a lousy one and how Wal-Mart could have utilized a more effective PR strategy to improve its reputation. Why is Wal-Marts PR campaign a bad one? The terrible PR campaign delivered by Wal Mart will be analyzed and evaluated using the cappuccino model (Gregor Halff, 2010). The cappuccino model explains the basis of how an excellent PR campaign should be planned. At the first and bottom layer called the espresso, the company has to understand the public expectations and identify the stakeholder groups involved. At the second and middle layer called the steamed milk, the company has to identify what to communicate to its stakeholders. Finally, at the top layer, the company has to know how to deliver the message. The following subsections will explain why Wal Marts PR campaign has failed at each level of this model. Espresso (Publics Expectations) Wal-Marts PR campaign is not able to meet public expectations. As one of the largest corporations in America, the public poses a much higher expectations to act responsibly and ethically. The following materials taken from Wake-UpWal-Mart.com lists out the publics expectations and why Wal Mart has failed them (This also represents public opinion of the firm): Wal-Mart is a giant company with giant responsibilities. First and foremost, Wal-Mart has a responsibility to all Americans to set the standard for customers, workers and communities, and to help build a better America. The truth is that Wal-Mart has let America down by lowering wages, forcing good paying American jobs overseas, and cutting costs with total disregard for the values that have made this nation great. Wal-Mart has needlessly exploited illegal immigrants, faces the largest gender discrimination lawsuit in history, forced workers to work in an unsafe environment, and broken child labour laws. According to an internal study done by Zenith Management Consulting on Wal-Mart, it found that out of the five stakeholder groups, Wal-Mart has grossly underperformed when it comes to meeting the needs of workers, vendors and the community. The results are displayed below:

Analysis and Evaluation of Wal-Marts PR campaign

From the case readings, evidence that Wal-Mart is not meeting the needs of those stakeholders could be found: Wal-Mart faces an average of three lawsuits a day. The most prominent one so far is a class action suit by 1.6 million women workers in June 2004 on the basis of gender discrimination They have also been accused of driving local mum-and-pop stores out of small towns because of its anticompetitive practices By constantly forcing vendors to meet its demands for low prices, it has to outsource its production to low-cost countries such as China and India. Workers in those countries have to put up with miserable working conditions. Under the AGIL paradigm introduced by Talcott Parsons in the 1970s, workers and vendors can be labeled under adaptation as they are the ones who generate the resources in society. The community can be labeled under integration as it would be more concerned with the welfare of its people and making sure that they can fit in well. As the PR campaign is not designed to serve the needs of those stakeholders, they are not able to influence public opinion. These stakeholders can influence public opinion through the media. Much of Wal-Marts negative reputation could be attributed to bad press. For instance, a story featured in Business Week titled Is Wal-Mart Too Powerful? poses tough questions on Wal-Marts influence on the American economy. This has inevitably led to the great mistrust of the press by Wal-Mart. Public opinion could change if Wal-Mart decides to be more transparent and forthcoming with the media; journalists might be more inclined to portray Wal-Mart in a positive light. Unfortunately, the company has chosen to target another group of stakeholders; critics and special interest groups. These people do not have much vested interest in Wal-Mart. It is stated in the case readings that directing it to daily shoppers would have been more appropriate. Wal-Mart has access to those stakeholders groups that influence public opinion but the company is choosing not to utilize it. The most probable reason could be boiled down to its main business goal of maximizing profits. In the case readings, when Mona Williams, the chief spokeswoman for WalMart, is questioned why Wal-Mart does not give across-the-board raises to all its store employees, her answer is that Wal-Mart would lose two-thirds of its profits. And customers would lose out if Wal-Mart raises prices. The irony is that by squeezing so much out of its workers and vendors in the short term, it is actually depriving itself of making more money in the long term when people start to resist Wal-Mart from setting up shop in their community. To summarize this section, the main source of Wal-Marts reputational crisis came about because it is not able to manage the relationships with stakeholders. Interestingly, Edelman has identified it more as an identity problem and went about creating a new identity for Wal-Mart; that Wal-Mart is just not about low prices, it is working for everyone. Steamed Milk (What to communicate) Because Wal-Mart does not understand what the public expects, they cannot deliver the kinds of news that the public wants to hear. Consequently, the messages that Wal-Mart has been trying to deliver does not have any value-add to its reputation. 3

Analysis and Evaluation of Wal-Marts PR campaign

If we observe Wal-Marts PR efforts, the core message that Edelman has designed for Wal-Mart is that We want everyone to know that there is absolutely nothing wrong with our employment and labor practices. Since their campaign is directed at its critics, they are not able to access opinion leaders to generate the opinion change that Wal-Mart wants to see. During the period of PR campaigns, there are many events which hindered their efforts to improve their reputation. They were caught hiring illegal immigrants, locking them in the stores and forcing them to work overnight at below-minimum wages until the store manager came in the morning. A movie, Wal-Mart: The High Cost of Low Price directed by Robert Greenwald alleged that the TV advertisements shown are misleading by showing the true facts behind it. Such negative events contradict the core message that Wal-Mart is trying to send out and destroys its credibility. How can the public be convinced that nothing is wrong when such negative events are occurring? It is clear that part of Wal-Marts PR efforts does not address its reputational issues. For instance, we can look at the green campaign created by Buckley Dach, Wal-Marts executive vice-president for corporate affairs and government relations. Under this campaign, the company aims to cut fuel, electricity consumption and to make its stores eco-friendly. Despite winning supporters and accolades for its environmental-friendly efforts, many wondered if Wal-Mart is really doing this to improve its public image. According to a recent interview done with Lee Scott, he admitted that the companys rationale for going green is purely economic and not for altruistic reasons. (CNET News, April 12, 2010) Milk Foam (How to communicate) The way that Wal-Mart chooses to communicate is also not effective because of the stance taken, the choice of instruments and how its executives presented themselves to the media. In general, Wal-Mart has taken a very defensive stance when carrying out their PR campaign. Initially, they have taken the silence stance, choosing not to address to the media about its labor lawsuits. Then, when they recognize they are facing a reputational crisis, they started using the non-existence method by attacking their critics and advertising that Wal-Mart is a great employer. They have also resorted to the ingratiation method, creating the Working Families for Wal-Mart group and utilizing the green campaign to gain supporters. Such efforts are superficial at best because astroturfing and generating spin can be seen as being insincere and trying to manipulate the public. An off-the-cuff PR by Wal-Mart to execute its PR strategy has little positive impact on its reputation. In the campaign, they have utilized TV, print ads and created a website, Walmartfacts.com, to respond to its critics. This approach is not an effective one because it does not allow stakeholders to support or negate Wal-Marts defense. (Grunig, J. et al, 2002) The last point to take is that the management seems to lack training and sophistication in communicating with the media. There were several instances in the case readings where executives have fumbled during press meetings or were tightly scripted for interviews. By not presenting themselves well to the press or the publics eye, it either means that they are incompetent or that they have something to hide. Either way, this does not help to improve the companys public image.

Analysis and Evaluation of Wal-Marts PR campaign

How should Wal-Mart serve its cup of cappuccino? There are many fundamental mistakes that Edelman has made in this PR campaign for Wal-Mart. Major changes would need to be made to all three layers of the cappuccino model to launch an effective campaign to address its reputational crisis. Espresso (Publics Expectations) Wal-Mart has to recognize that the stakeholders that they should be dealing with are the workers, vendors and the communities. Any of its PR efforts should be directed towards these stakeholders since they are the main sources of its reputational problems. This would require a major overhaul in the way that Wal-Mart operates. For workers, this would mean that labor policies have to be more employee-friendly; they should be given equal opportunities as well as fair wages and sufficient health benefits; they should also have a reasonable work schedule and be paid overtime. For vendors, this would mean treating them fairly and not pressurizing them to keep cutting costs. To get vendors to outsource their production is not an issue but they have to be upfront about it. Putting Made-in-America tags on goods that are made overseas can be perceived by the public as being dishonest and unethical. For communities, they have to come in on a fair playing ground. This means that they should not be accepting tax subsidies and resorting to anti-competitive practices to drive out other retail businesses. The major challenge then would be how Wal-Mart could retain its identity of providing low prices while implementing all these strategies. After all, low prices came about at the expense of its employees and vendors. A bold move would be to cut the compensation of the executive and to tie their performance to non-monetary indicators, such as employees satisfaction rates. A less radical approach would be to increase its efficiency of how its stores are run. The green campaign is a good example. They should present this campaign as a cost-cutting measure rather than a publicity maneuver because it is consistent with their identity. According to Post, J.E. et al. (2002), The long-term survival and success of a firm is determined by its ability to establish and maintain relationships with its entire network of stakeholders. If Wal-Mart does not recognize who they are dealing with, no amount of money spent on its campaign can solve its reputational problems. Steamed Milk (What to communicate) Once Wal-Mart starts to take active steps to repair relationships with its stakeholders, it is relatively easy to get the word out about what is being done. However, this would require a major shift in managements mindset and Wal-Marts culture. Wal-Mart should desire to have an opinion change among its key stakeholders. The success of these changes could be measured by surveys in the satisfaction levels of its workers and vendors as well as the number of new communities that are willing to welcome them in during the period of campaign. The best channels to reach out to these stakeholders would be social media. Through the social media, it allows them to design a two-way and symmetrical PR program. Wal-Mart can get feedback about how it is doing and what it could do better. Social media will allow them to have access to 5

Analysis and Evaluation of Wal-Marts PR campaign

opinion leaders who could help generate buzz and lift up their reputation. When the spiral of silence (Neumann, 1974) comes into play, the negative image of Wal-Mart will eventually dissipate; people increasingly think that the majority of people think that Wal-Mart is getting its act together, they will be more inclined to change their negative perception of Wal-Mart. The core message that Wal-Mart wants to send out is that It recognizes the concerns of the community, its employees and suppliers and it is willing to resolve those issues while preserving its identity. This differs significantly from the core message that Wal-Mart had. This message forces them to confront any existing issues rather than being dodgy about it. Milk Foam (How to communicate) Wal-Mart should be taking a mortification approach to communicating with the public. By coming out and recognizing the problems, apologizing for it and resolving to make good, the public will be more forgiving and receptive to the messages that the company is sending out. Taking a silence stance and then coming out so defensively will never help Wal-Marts cause. We just have to contrast the proactive steps that Johnson and Johnson took to handle its Tylenol crisis versus the reactive way that British Petroleum handled the recent oil crisis. The results between these two crises will speak for themselves. The management should also be trained to deal with the press. They should be equipped to have all the facts and figures at hand to answer questions posed during press releases and interviews. When it comes to accusations against the company, management should have a team to handle and address it. If the claims are valid, admit and do something about it. If not, substantiate it with the research that the team has come up with. With such a system in place, Wal-Mart can deal with negative publicity head-on. Executives should also not be restricted in giving out information that the public has a right to know. By showing that Wal-Mart has nothing to hide from the public eye; they can avoid claims of hypocrisy or hidden agenda from its critics. Conclusion By knowing how to serve the right cup of cappuccino, Wal-Mart can mount a PR campaign that can not only solve their most pressing reputational worries but even boost their reputation in the process.

Analysis and Evaluation of Wal-Marts PR campaign

References 1. Wake-Up Wal-Mart, http://wakeupwalmart.com, accessed on 18th October 2010 2. Wal-Mart strategy, Zeith management consulting, http://www.zenithconsulting.com/research/walMart/Wal-Mart-Strategy.pdf, accessed on 18th October 2010 3. Parsons, Talcott (1970). The Social System. London: Routledge & Kegan Paul Ltd. ISBN 0 7100 1931 9 4. Wal-Mart: The High Cost of Low Price, directed by Robert Greenwald 5. Grunig, J. et al.: Excellent public relations and effective organizations, Mahwah, 2002 6. Post, J.E. et al.: Managing the Extended Enterprise: The New Stakeholder View, in: Califronia Management Review, 45, 2002, pp. 6-28 7. Stephens, K. et al.: Communicating With Stakeholders During A Crisis. Evaluating Message Strategies, in: Journal of Business Communication, 42, 2005, p. 390-419 8. Wal-Mart chairman: Go green for money, not image by Martin LaMonica, CNET News, April 12, 2010 9. Noelle-Neumann, E. (1974). The spiral of silence: a theory of public opinion. Journal of Communication, 24, 43-51 10. Case A Dent in Wal-Marts Public Image. The PR Strategy (ecch 505-043-1) 11. Article Selling Wal-Mart (New Yoker, April 2, 2007)