3 July 2020

Brand strength key to surviving crisis

On February 23rd this year, Air NZ, one of the country’s most beloved brands, announced their new economy Sky Nest.

By Dallas Gurney

 

Billed as the latest invention from one of the world’s most innovative airlines, the Sky Nest was to give long-suffering economy passengers the chance to grab a mid-flight kip just like the flash business class folk at the front of the plane.  As is the script with most of Air NZ launches, the Sky Nest was met with praise and global media attention.

Oh, how long ago that must now feel for our national airline.

Little did they know that a crisis was brewing of such magnitude that, less than one month later, it would call on the Government to underwrite its very existence with a $900m loan.  Surely there is no greater case study of how fast crisis can ravage a business than this.

As expected from an airline skilled in dealing with crisis, Air NZ’s response to COVID-19 and the border closure was swift.  They handled a huge number of displaced travellers with few real grumbles.  They communicated clearly, telling customers not to worry about calling if they weren’t flying within the next 48 hours.  They also took immaterial but potentially niggly issues off the table, like Koru membership and Airpoints status retention, which were generously extended for all.  It was a good early decision; nobody gets more annoyed than a frequent flier with a sense of entitlement.

But as the crisis progressed the public started to grumble.

Call centre wait times were horrendous.

But, more significantly, we took issue with the credits.  Customers didn’t like the fact the airline had taken money and wouldn’t give it back.  With the immediate future of international travel uncertain, the credit for the winter holiday to Bali was going to turn into six trips to Wellington.  One can only go to Te Papa so many times.

Many wanted, and still want, the cash.

The reality is Air NZ can’t afford to give up the cash.  They don’t have the money.  They might go broke, or at the very least have to dip heavily into the government’s loan.  Airline executives have decided giving carte blanche refunds is not an option and the brand will have to absorb the backlash.

The impact of this decision on brand health, as tracked by market research firm Perceptive, has been brutal.  Over COVID-19, Perceptive charted public perception of Air NZ week-to-week and, each week, they crept more and more into the red.  It’s been a hero to zero situation.

Which has led to people asking, what the hell is happening at Air NZ?

What is happening… is exactly what should be happening.  A much-loved company is using some of its hard-earned brand capital to get it through a tough time.

In crisis, brands don’t usually build brand love, they spend it.  Air NZ has been one of our most loved brands for over a decade so they have a ton of it on hand.

The company will come out of this with people liking them a bit less than before, but an opportunity to rebuild that love again over time.  You don’t get that chance if you’ve gone bust.

The learning here is companies need to invest in brand so they have a bank of goodwill to spend when times are hard.  Over investment in performance marketing (bottom-of-the-funnel stuff like social and search) at the expense of a fully funded brand layer will not help you get out of such a bind.

What is also clear that the airline has entered a new phase in its management of this crisis.  The executive team has shrunk by a third.  CEO Greg Foran has unveiled an 800-day plan with the company clear it will be a much smaller business than we’re used to.

The frenzy of those first few months is over and the focus is now on the future.

The Harvard Business Review recently released a 140-page report titled How to Lead in a Time of Crisis.  In it, writers Ronald Heifetz, Alexander Grashow and Marty Linksy propose we are entering a sustained period of world crisis.  Whether it’s climate change, political instability or other global uncertainties, we are going to have to brace ourselves for a continual flow of serious and unfamiliar challenges.

I don’t know about you, but at this stage that hypothesis feels about right.

The article says we will not return to normal.  We will not even face a new normal, saying:

“Leadership will now require new skills tailored to an environment of urgency, high stakes, and uncertainty – even after the current economic crisis is over.”

The Journal suggests leaders will now have to:

  • Foster Adoption – helping people develop the ‘next practises’ that will enable the organisation to thrive in a new world even as they continue with the best practises necessary for current success.
  • Embrace disequilibrium – keeping people in a state that creates enough discomfort to induce change but not so much that they fight, flee or freeze.
  • Generate leadership – giving people at all levels of the organisation the opportunity to lead experiments that will help it adapt to changing times.

 

In short, for a business to thrive leaders will need to be able to pivot people quickly through an ever-changing period of sustained crisis.  We have to be OK with being uncomfortable.  If we can do that, innovation will flow and a competitive edge can be earnt.

One of the regular excuses we hear for a lack of crisis planning is

“there are too many things that could happen, we can’t plan for them all”.

That is true.  But crisis planning is not about practising the specific events that could go wrong and more about how to organise yourselves when they do.

The more comfortable you are operating against the backdrop of crisis, the more decisions you will get right regardless of the specifics of an individual event.

While it’s unlikely the Sky Nest is now a priority for Air NZ, there is no doubt the airline will turn its attention on how it can make the best of the situation it is in and set itself up for the future.  The fact home base is almost COVID-free presents nothing but potential opportunity.  Let’s hope, for all of our sake, that opportunity is realised.