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Thursday, July 15, 2004

The Martha Stewart Crisis

Whether you consider Martha Stewart a criminal, hero or victim, her sentencing signals the end of a long, punishing crisis. This analysis will focus on what Stewart did right and wrong from a public relations perspective; and how the scandal was shaped by the media and corporate reform.

Weighing in on this topic are authors Eric Dezenhall and Al Ries.

Dezenhall is an oft-quoted expert in damage control and the author of "Nail 'Em: Confronting High-Profile Attacks on Celebrities and Businesses."

Ries is the best-selling author/co-author of 12 marketing books including our favorite “The Fall of Advertising and the Rise of PR.”

But before we dive in, two points to make:

Some simply stellar content on blogs and public relations have been posted here over the last four days. As this post does not focus on blogs, I am hoping it offers Global PR Blog Week a timely, refreshing change of pace. You be the judge and let everyone know in the comments section.

The basic history of Stewart’s crisis will not be covered here. If you need a refresher, check out this timeline. Or just follow today’s news.

Every Meal Starts with a Salad
The media feeding frenzy around Stewart’s fall from grace began after her now infamous appearance on CBS' The Early Show. During her then weekly cooking segment, she was asked about the ImClone issue.

Stewart tried to dodge the question and noted she wanted to focus on her salad. Media training executives around the globe quickly added the footage to their training tapes of how not to handle direct questions.

“This interview took place too soon after the ImClone story broke,” says Dezenhall. “She was too flip and hadn't endured the crucible long enough to show human depth. When you live by personality you can die by personality. There are acute limits to what you can do with someone with Martha's personality.

“The same doggedness that served her well on the way up, served her poorly on the way down. Avoiding the CBS salad interview would have been a good place to start. But you can't tell divas that diva behavior is wrong. After all, until now it was effective.”

Silence isn’t Golden, it’s Guilty
Stewart’s first public appearance during the scandal was the most damaging of all. We could note this snafu proves out the importance of media training, but lets consider the bigger issue of brand strategy. Crisis communications’ and media training's role in a brand strategy is to preserve and reinforce the brand—when used proactively. Far too often, they're used reactively with mixed results.

Stewart fell silent after the CBS spot turned bad into worse, canceling public appearances. She hired The Brunswick Group to handle damage control and help create a crisis strategy (Citigate Sard Verbinnen now handles this work).

She should have engaged a crisis team the day the scandal broke. Especially during a crisis, silence isn’t golden, it’s guilty. Until Martha Talks was unveiled, the media had no comment from Stewart and they were left to assume, and assign, guilt.

Web Page As Spokesperson
Martha Talks proved the effectiveness of the Web in crisis communications. And as we’ve discussed, a blog could also support crisis communications.

Martha Talks tells Stewart’s side of the story. It generates support and presents her as a normal person—not the uber-perfect home heroine her shows and the media make her out to be. The site is humble, subtle and presented in a way that communicates, while Stewart maintains her innocence, that she realizes the serious nature of her legal issues.

Timely trial updates, statements from Stewart’s legal team and a library of different op/eds written on her behalf populate the site. It’s become a news source, getting Stewart’s point across without her having to field interviews. Of course, she did conduct strategically-timed interviews with Larry King and Barbara Walters.

Traffic Shows Support
Stewart also translated traffic stats into a show of support. The site has received more than 34 million hits and more than 170,000 supportive emails since it was launched in June, 2003. This information is brought to your attention on first view.

Personally, I think she could have employed a blog or comparable comments/bulletin board section to build on the e-mail support base the site developed. The danger is that anti-Stewart fans can also post, but I think the pros of pushing her site further to tap into this audience outweigh the cons.

“Stewart's Internet campaign was quite good,” says Dezenhall. “It allowed her to mobilize and to communicate with supporters. In the end, it didn't turn the jury, but it was a good move to establish the Web site.

“I am a skeptic about too many TV interviews, especially with a personality like hers. When I have a legal defendant I've been conservative about press, but because Martha had a publicly-traded company there was reason to do it. In the end, the killers were bad facts against Martha, the hostile Marie Antoinette climate and Martha's persona.”

Brand Personification
Can the brand survive without Martha Stewart? Wharton School offers up an interesting article on this entitled: “When the CEO is the Brand, But Falls from Grace, What's Next?” (login now required – sorry!)

The article explores brand personification—when the brand is tied to an individual. The main point is to strike a balance when you rely on the CEO as your brand.

"Strike a balance, where the company benefits from an appealing public personality like Martha Stewart and Donald Trump or Ralph Lauren and Michael Dell, while it builds a strong identity that doesn't rely on the individual.

“Like Stewart, Trump places his name on everything he gets involved in. He is a visible, vocal brand voice. Lauren and Dell, however, have cleverly created a separate, institutional identity that doesn't make them so vulnerable if they have a personal problem.”

Martha Stewart Living Omnimedia (MSLO) is moving in that direction with products and projects that do not bear Martha's name. It will be interesting to see how much more they will need to change at MSLO to strike a balance.

“It's a long road, to differentiate your company from your personality,” says Dezenhall. “But it's do-able.”

Ries disagrees.

“The Martha Stewart brand can’t survive without her,” says Ries. “But we do think that brand personification is a good idea. For every failure there are many successes. Calvin Klein, Tommy Hilfiger and George Foreman to name three.”

MSLO and Martha Stewart have been very inconsistent on how much MSLO’s house of brands relies on Stewart. MSLO is quick to point out that Stewart is one employee of a large company. How could one person possibly account for the bulk of the brand?

Then after the guilty verdict, the lawyers had everyone saying that MSLO could not survive if Stewart were in prison. There was lots of waffling here. And not the Belgian kind, made from scratch for your next Sunday brunch (you KNEW there would be a domestic reference in here sooner or later).

What's in a Name?
“Eventually the goal will be to make Martha Stewart a Betty Crocker-type figure,” says Dezenhall. “This is someone who we know as a symbol, but do not know personally. I'm not even sure if Betty Crocker was a real person. [she’s not]

“In a less radioactive climate, the name Martha Stewart still has equity. I'd be throttling back on her personality but not necessarily doing away with her image. There is no singular strategy here, and much will depend on the business and cultural climate after Stewart's sentence is served.”

The New York Times brings us an interesting fact: "Since last June, when Stewart was indicted on charges of conspiracy and obstruction of justice, MSLO has applied for 12 trademarks—none of which include her name."

The article notes, "trademarks are a capital asset—property a company can own to enhance a brand, product or service. An exclusive name or image often increases a product's value."

Based on how the sentencing goes Friday morning, I'm predicting that MSLO might even start referring themselves as just that...MSLO, or their ticker symbol MSO. I call it pulling a KFC. Unfortunately, this is no longer an accurate statement as KFC tries to distract us from the sizzle and crackle of the deep fryer by evolving from Kentucky Fried Chicken to KFC and now to Kitchen Fresh Chicken? They should have stopped at KFC.

CEOs & Corporate Reform
Personally, I think Stewart is a victim of much needed corporate reform.

Keep in mind, she’s not being convicted of insider trading, rather lying during the insider trading investigation. Her worth has plummeted from billions to millions and she lost the helm of a diverse company she built all by herself. Hopefully U.S. District Judge Miriam Goldman Cedarbaum will hand down a sentence fitting the crime.

So why the need to incarcerate her? Well, I’ll argue it’s because most folks cannot match these executives:

Rigas, Ebbers, Kozlowski, Fastow, Nacchio

to their respective companies

Enron, Tyco, WorldCom, Qwest, Adelphia

The Justice Department has charged more than 700 people in the two years since the Corporate Fraud Task Force was formed. But Stewart is the celebrity CEO everyone recognizes. This sentence sends a message to corporate America.

Dezenhall notes, “Legally, Martha isn't a victim because she was convicted of breaking the law. Her career and her business certainly have been victimized. There is a witch hunt component to this on top of the legal violations. Her celebrity and her success played a role in the intensity of the scrutiny and the harshness of the punishment.

“We are living in a Marie Antoinette period right now. The savaging of success is considered universally good. Americans enjoy playing a role in building someone up, but once they rise out of our reach, they must be torn down. How it's done, in a court, in the media, is academic.”

The Big House or Stewart’s Farmhouse?
August 3rd is Stewart’s birthday. Will she spend it in the big house or at her farmhouse? We’ll find out, but legal experts estimate the prison sentence could be 16 months or more. Will a prison sentence spell the end of Stewart? Of course not.

“Stewart will be back,” says Dezenhall. “Americans enjoy the whole process of crucifixion and resurrection. A wounded Martha may be a lovable Martha. We do love to see the mighty suffer. A Martha comeback would be a story the media would love to do and that may dictate things.

“There are simply too many examples out there to tell us that scandal is not only temporary, but it could be the best thing that ever happened to someone.”