Apple and Tylenol: A Study in Corporate Communication and Crisis Management

Apple has responded to these concerns in a hilariously inept open letter.  I’ve added a few paragraphs to the end of the post to discuss this.

I can say these with complete confidence as I type this on my MacBook Pro, while listening to music on iTunes and waiting for my brand new iPhone 4 to arrive in the mail: In the last year, Apple has laid the groundwork for its own downfall.

The old and new Tylenol bottles.

Crisis = Opportunity

In 1982, someone tampered with a number of bottles of Tylenol while they were on store shelves, adding small amounts of cyanide to the medicine.  As a result, seven people were killed—including 3 members of one family.  In response, Johnson & Johnson (the makers of Tylenol) acted immediately—they performed one of the largest product recalls in history, voluntarily reclaiming and destroying 31 million Tylenol capsules, at a cost to the company of over $100 million.  Johnson & Johnson then re-debuted their product with tamper-proof packaging, a practice which is now standard in the industry.

Despite the $100 million price tag, the Tylenol recall is today considered to be one of the finest examples of corporate crisis management in American history.  Tylenol sales immediately bounced back up to pre-crisis levels.  Suddenly Tylenol, which days before had been a poster-child for corporate negligence, was leading the way in consumer safety—and taking action which other players in that industry had to scramble to catch up with.  It is generally accepted that consumer confidence in the Tylenol brand was actually higher after the deaths took place than before.

Fast forward to the launch of the iPhone 4.  Just a few hours after the first purchasers got their phones home, users discovered a serious design flaw—when the phone was held in such a way that the holder’s palm bridged the gap between the two metal antenna panels on the bottom left corner of the phone (as is generally considered the only way to hold the phone), the antenna short-circuits and the phone loses reception.

This is a corporate crisis.  And like every corporate crisis, it is also an opportunity.  The question is, how is Apple going to handle it?

Well, it wasn’t long before Steve Jobs gave us our answer:

It’s not a big issue.

You are in a marginal cell area. It has nothing to do with the phone.

Just avoid holding it in that way.

Gripping any mobile phone will result in some attenuation of its antenna performance, with certain places being worse than others depending on the placement of the antennas. This is a fact of life for every wireless phone. If you ever experience this on your iPhone 4, avoid gripping it in the lower left corner in a way that covers both sides of the black strip in the metal band, or simply use one of many available cases.

There is no reception issue. Stay tuned.

If you read the Wikipedia article on crisis management, you’ll find a few examples of successful crisis management—but you’ll also find a number of examples of unsuccessful crisis management.  One of the examples cited is the Ford/Firestone tire fiasco that took place in 2000.  Regarding Ford and Firestone’s poor handling of the crisis, Wikipedia has this to say:

The two companies’ committed three major blunders early on, say crisis experts. First, they blamed consumers for not inflating their tires properly. Then they blamed each other for faulty tires and faulty vehicle design. Then they said very little about what they were doing to solve a problem that had caused more than 100 deaths—until they got called to Washington to testify before Congress.

Sound familiar?

Apple’s behavior in this crisis is a textbook example of poor crisis management.  In turn, they’ve refused to acknowledge that a problem exists, blamed their customers, blamed other companies (like AT&T), and finally been intentionally obtuse regarding what action they intend to take (if any) to resolve the crisis.  It remains unclear even now whether Apple intends to take any steps at all to resolve these problems.

In fact, Apple has created a corporate culture that is antithetical to the very idea of crisis management.  Successfully resolving a corporate crisis requires admitting error, requires apology, requires taking immediate action at visible cost to the company to make sure the user experience is a good one.  Apple’s entire brand strategy is centered around the concept that they simply don’t make mistakes.  Steve Jobs knows what’s best, and if you just trust him, then he’ll take care of you.  I know you say you want multi-tasking, but what you really want is task completion and widgets.  He has a long history of being right of course—that’s the reason for Apple’s success.  But Steve Jobs, and Apple, really have no idea how to handle being wrong.

Why Should Apple Care?

Now there is one obvious argument in favor of Apple’s current PR strategy: 1.7 million iPhones sold in 3 days. “What does this PR crisis even matter?”, Apple execs will say.  “There are a lot of complaints, petitions, funny images, 4chan memes and Hitler videos going around, but who cares as long as people keep buying iPhones?”

This is flawed thinking, and Apple—the masters of brand management—should know better.

I work for a website called Wowhead.  We are currently the market leader for World of Warcraft database sites.  This is a space that’s crowded with competitors, including Thottbot, Allakhazam, Wowdb, and to a lesser extent WoWWiki.  We have the tireless efforts of our team to thank for our continued success.  But for initial success, we have to thank someone else entirely: Thottbot.

At the launch of WoW, Thottbot was king.  The site was ultra-fast, the interface was simple, and you never had to work too hard to get to the content you wanted to see.  Over time, though, anomalies crept into the data—monsters would appear in the wrong zones, bosses would be listed as dropping flowers amongst their normal array of loot.  User confidence in Thottbot began to weaken—people would complain about the inaccuracies to their friends, or laugh and make jokes to their guildies.  But Thottbot’s traffic didn’t decrease—in fact it increased over time.

The reason is simple: There were no adequate competitors.

The fact is that even though Thottbot had its share of issues, for most users it was still the best option available.  People forgave the anomalies in exchange for the simplicity and ease-of-use of the site interface, and this continued for a long time—until a competitor did come along: Wowhead.

Wowhead had cleaned up the data, and had designed a new interface from scratch with ease of use in mind, and over the course of the next year, traffic slowly bled off from Thottbot to Wowhead.  Today, Wowhead gets around three times Thottbot’s traffic.

But here’s the trick: Making a product that’s a little better than your competitors isn’t enough.

Some time later, the Curse Network launched Wowdb, another competing WoW database site, in the hopes of duplicating Wowhead’s path to success.  While the Wowdb project has been a boon to Curse in other ways (most notably providing a framework for them to expand easily to other games, like Aion or Warhammer Online), as a competitor to Wowhead it failed utterly.

Why?  Wowdb did everything right.  They had a solid development team.  They rolled out some exciting new features that Wowhead didn’t have, several of which Wowhead wasn’t able to develop until months later.  Their design was familiar, but still new.  They had the support of a well-established MMO network.  Why did they fail?

They failed because unlike Thottbot, Wowhead users weren’t looking for a replacement.

It’s hard to change an old habit.  Once you’re used to getting your news from Digg, it’s hard to switch to Reddit—even if someone gives you a convincing argument that Reddit is better.  Even if I can make a convincing argument that Android phones are superior to iPhones, people still don’t want to switch—if their iPhone works fine, why do I need a new one?  If Wowhead has all the info I ever need, why would I switch to Wowdb?  Wowdb failed because they didn’t have a compelling answer to that question.  Wowhead succeeded because Thottbot’s users already had a reason to switch—they just didn’t have another site to switch to.  Wowhead filled a need that already existed.  Wowdb tried to create a need where there was none.

The Straw That Broke the Customer’s Back

The first signs of a collapsing brand are never sales numbers.  Once sales start dropping, it’s already too late.  Anyone who’s read The Tipping Point knows that the spread of ideas and behaviors isn’t linear—it’s logarithmic.  Communities withstand a certain amount of pressure, and then they break.

This is an idea that people who work online frequently deal with.  If I run an ad-supported site, how many ads is too many? How intrusive should the ads be?  How do I balance the desires of the advertisers to get clicks with the desire of the users not to be irritated, so that the business is its most successful?  This is a difficult question, because communities don’t work on a linear scale.  You can’t just turn up the “annoyance meter” one click at a time, watching users leave your site in dribbles until you find the point where revenue is the highest.  What happens instead is that your pageviews stay near-constant as the annoyance meter gets higher and higher, until it finally reaches a particular point where it becomes too much—your community gets up and leaves en masse, leaving you scratching your head and wondering what happened.

The true danger of this situation lies in the fact that it’s often difficult to predict where this point is, even after you’ve crossed it—and once you’ve crossed it, you can’t go back. Thottbot’s users had already decided to leave before there was anywhere to go.  Curse made the mistake of assuming that Thottbot users switched to Wowhead because they thought Wowhead was better.  Wowhead was better, but Thottbot’s users switched because they thought Thottbot was bad.

Over the few years, Apple has dropped a huge number of straws on the backs of its users.  Apple rose to prominence on the power of its hipster charm, portraying itself as a creative, irrepressible minority struggling against the soulless corporate drones of IBM and Microsoft—their classic 1984 ad being a striking example.  Yet in the past few years, Apple has increasingly come off as Big Brother itself.  iTunes music files aren’t designed to play on other players.  They’ve fought to keep down Skype and Google Voice to protect their relationship with AT&T.  They’ve remotely disabled jailbroken phones.  They’ve maintained such tyrannical, arbitrary restrictions over iPhone app development that some of the best have resigned in disgust.  They’ve created an advertising API built directly into iOS so that app developers can run rich media ads using their closed app system, then built ad-blocking software into the browser they claim to use to support the “open web”. They even questioned a Foxconn employee about a leaked iPhone prototype using such “unbearable interrogation techniques” that the employee was supposedly driven to suicide.

The fact is, these days even the most hardcore of Apple fan-boys—like myself—are no longer comfortable admitting that they use Apple products.  A few days ago I noted that a game was causing my MacBook pro to overheat.  I posted it on Facebook, Twitter, and Google Buzz, and within seconds I had received responses in all three mediums raking me over the coals for owning an Apple product:

I think the solution here is simple: Get a PC, you tool :P

Take a hammer to the top of your MBP. Then hire a moving company to take something from one place to another. Smash some other shit for good measure. Then claim that they did it, sue them, settle out of court, and use that money to buy a PC with decent fucking cooling.

Get away from Apple….only way to fix that problem

Get a computer that was designed for something besides looking pretty?

Apple products are no longer the aesthete’s badge of honor.  Now they’re for blind, corporate sheep—people who are unwilling to look past the shiny design and see the at best kludgy, and at worst downright insidious, hardware that they’re using.

Apple sold 1.7 million iPhone 4s in the first 3 days, their biggest product launch of all time.  Apple’s bad corporate behavior hasn’t stopped their core audience—myself included—from buying their products.  But we used to be devoted fans.  We used to wear our iPods like badges of honor.  We were willing to buy any Apple product, no matter what it was, just because it was an Apple product.

Those days are gone.  Apple’s core userbase is starting to look a lot like Thottbot’s—they’re looking around for an alternative.  And as it is now, just like with Thottbot—there is no alternative.  As much as I respect the work that has been done on Android phones, they still haven’t released a product that can compete with iPhones in the places where it matters—design, responsiveness, and ease of use.  But eventually, the day will come.

How It Should Be Handled

If Apple wants to recover from this crisis, they need to take a page from Johnson & Johnson’s approach to crisis management.

Make a public apology. Jobs and crew need to acknowledge that there is a fundamental design flaw in their phones.  Acting as though it’s not a big deal makes it worse, not better.  My father is an actor, and one of the things he taught me was this: “Never laugh at your own joke.  If you laugh, the audience doesn’t have to.”  The same is true when you’re acknowledging a mistake.  If you acknowledge and publicly own up to a mistake, then there’s no longer any need for the legions of Mac-haters on the Internet to do it for you.

Recall the first generation of phones. I know it’s expensive—more than $100 million expensive.  But the quality of Apple’s brand is at stake, and if Apple takes a moment to knowingly and publicly put customers before immediate profits, it will spell greater revenues for them in the long run.  Imagine for a moment what a juggernaut Apple would be if they had the kind of customer faith and goodwill that Google does.  The only way to earn that goodwill is to be straight with your customers.  Re-debuting the phone with a non-conductive coating on the antenna band is a tiny investment compared to the level of profit that Apple could reach if they were once again able to convincingly argue that they were on the customers’ side.

I don’t expect that Apple will do this—it flies in the face of their whole corporate culture.  But if they don’t, it won’t be long before a competitor that honestly beats the iPhone will appear.  And when that happens, Apple’s core customer base will dry up overnight—and Apple execs will be left scratching their heads, wondering what went wrong.  Apple will tell their shareholders that it was the competitor that destroyed their business, but they’ll be wrong—it was Apple.

Edit: Apple has responded to these concerns in an open letter, which you can read about here.

Apple is addressing the issues by claiming that in fact, every iPhone launched since 2007 has been incorrectly calculating how many “bars” of connectivity to show at all times.  Gripping the iPhone incorrectly does cause the signal to drop, but no more than any other phone—it’s just that the phone was showing you bars you didn’t actually have, and when you grip the phone incorrectly, it (apparently) stops displaying those fraudulent bars.

There are two reasons why this response is hilariously insufficient.  One is that it seems willing to say anything, as long as that statement is not “You’re right.”  Apple is even willing to admit that they have made a mistake—as long as it’s their mistake and not the one you thought they made.  But the other, and the more significant, is that this doesn’t address the problem at all.

I recognize that the lower bars are the symptom by which we recognize the problem.  But the problem itself is the fact that when you hold the phone wrong, you drop calls. This has been tested and verified by measuring internet connectivity, and regardless of how many “bars” we’ve lost, the phone still becomes nearly unusable when you hold it normally, and that’s the problem Apple needs to solve.

This is exactly what we should expect from Apple: It’s more important for them to be right than for their users to be happy.  Frankly, I wouldn’t be surprised if we discovered the “bars” problem Apple claims doesn’t exist at all—that Apple is releasing a software update which will do nothing except break the formula they use to display connectivity, just to make it harder for their users to identify the real problem with their phones.

Published by Malgayne

Community Manager at Google. Formerly at Sourcebits, Spark Plug Games, Zynga, and I like chiptunes and hefeweizen.

6 thoughts on “Apple and Tylenol: A Study in Corporate Communication and Crisis Management

  1. First off, let me say that this was one very well-written article. It flows through each idea at just the perfect pace, not skimming over thoughts and not getting bogged down in too many details. A lot of times I find blog posts are too short or too long, and not quite properly laid out in terms of content structure. This was clean, efficient, and easy to follow, while still providing large amounts of information.

    Secondly, your arguments are exceptionally well thought out and beautifully given. I’ve had many a discussion on this basic topic, but none of them have laid out the facts in such a clear way. Your primary example (in Wowhead) takes the cake here. I can honestly say I learned something today by reading this: a clarification of what before were merely my own muddled thoughts.

    Thank you for taking the time to present this as you did. I will definitely be referring back to this article in future discussions of related topics.

  2. I use a Macbook Pro as my main computer, I own an iPod, and I would probably own an iPhone if I had AT&T and/or could afford it. But I don’t consider myself an Apple fanboy. I use these products because I prefer them over the competition. However, if the competition came out with something better, I’d switch over without even thinking about it.

    We see a similar phenomenon in video games all the time. I mostly play Xbox 360, but this isn’t because of some blind loyalty to Microsoft. I actually owned a Wii before I owned an Xbox, but I haven’t even turned on my Wii in months because Xbox has all the games I like.

    Fanboyism is a waste of time. Apple should ignore the “fanboys” and concentrate on making the best products they can, and I think that would include the recommendations you make in this post.

  3. I respectfully disagree. From the consumer’s perspective, it’s naturally best to avoid fanboyism completely—it doesn’t serve any purpose for the consumer, except to feed our desire to belong to a tribe or peer group.

    For the consumer, fanboyism is a waste of time. But for Apple, fanboyism is critical to their business model—and it’s more valuable to them than having a superior product.

    Xbox vs. PS3 is a perfect example. The two are so close these days that there are very few appreciable differences between them. The #1 reason to choose one over the other is fanboyism—so Microsoft and Sony will live and die by the quality of their branding. You don’t win in a competitive environment just by making the best product. You win by offering the best experience, and the quality of your brand is just as important a factor in that as the quality of your product.

    Have you ever had Christian Brothers’ brandy? Back in the day, it was served in a tall bottle vaguely resembling a wine bottle. Some competitor—I can’t remember who—was muscling in on their territory, and they were losing market share. So they did a series of taste tests to try and figure out why people seemed to prefer their competitor. Here were the results:

    —In a blind taste test, tasters preferred Christian Brothers. This means Christian Brothers tastes better.
    —In an open taste test, where both brandy’s were provided in a normal glass but the tasters knew which one was which, tasters preferred Christian Brothers even more strongly. This means that people have a positive association with the Christian Brothers brand.
    —But in an open taste test where the bottles were left on the table, tasters universally preferred the competitor. Christian Brothers re-debuted their product with a classier bottle design, and sales shot back up again.

    Do you see what’s going on here? Even though the brandys were exactly the same in all three tests, factors besides the taste affected the tasters’ perceptions of what the taste were. Tasters who were looking at the bottle actually believed that the brandy tasted better.

    Branding actually directly affects your experience of the product, even if the customer doesn’t realize it.

  4. Phenomenal writing.

    I love the comparison between Johnson & Johnson and Apple, because it suits our times so well. You display a great deal of insight when it comes down to noting where a company may head and as you said it yourself, Apple’s direction right now doesn’t seem good.

    1. Thank you! I appreciate you taking the time to comment. The really interesting thing is that this isn’t the first time that Apple has done this. If you look back at their earlier products, you’ll find some similar examples:

      “Apple co-founder Steve Wozniak stated that the primary reason for the Apple III’s failure was that the system was designed by Apple’s marketing department, unlike Apple’s previous engineering-driven projects.”

      Interesting, since this seems to be the same philosophy that has served them so well in recent years…

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