Carnival's Continuing Disaster

By Tom Gibbs - January 31, 2012 | Tickers: CCL, JBLU, JNJ, PEP | 0 Comments

• Email
• Print

Nearly three weeks have passed since the Friday the 13th wreck of Carnival's (NYSE: CCL) Costa Concordia cruise vessel, and many are still confused about management's handing of the disaster.  Italian emergency officials have finally ended their search for missing passengers, fearing that nearly 32 people have died in the shipwreck, and two lawsuits arising from the blunder were filed last week. 

Unless company management can take swift and effective mitigating action, it is likely that there will be huge financial and legal implications over the very long term.  Can CCL’s handling of the Costa Concordia incident be considered one of the largest PR disasters in recent business history?

An examination of several examples in corporate history shows that there are right and wrong actions to take when dealing with such disasters.  Such situations, even if they include the loss of multiple lives, can be successfully handled by quickly implemented and effectively managed PR strategies. 

• Johnson & Johnson (NYSE: JNJ)
• What Happened? In the early 1980s, seven people died after consuming extra-strength Tylenol capsules that were laced with potassium cyanide. 
• How Was it Handled? In putting the customer first, JNJ quickly pulled 31 million bottles of Tylenol (nearly $100 million worth) from store shelves nationwide.  The corporation stopped all production and marketing of the product, and partnered with the FBI and FDA to help search for the culprit.  Although the culprit was never found and charged, the corporation’s swift handling of the incident and its release of tamper-proof bottles acted to improve its long-term brand image.
• JetBlue (NASDAQ: JBLU)
• What Happened? An early 2007 ice storm hit the United States’ East Coast, leading to over 1,000 canceled flights in five days.  JetBlue customers were reported to have been stranded on the tarmac for seven hours.
• How Was it Handled? Instead of pointing the finger at a specific group of employees or blaming the weather, CEO David Neeleman blamed internal processes and operating strategy errors.  In writing a public letter of apology to the victims of the incident, JetBlue introduced its Customer Bill of Rights program and presented a detailed list of what the company would do to help the affected (including monetary compensation).  Neeleman made public appearances on various news shows to help resolve the situation without pleading a case of innocence, but to highlight the corporation’s obvious faults during the situation and what has been changed to prevent similar occurrences from happening in the future.  JetBlue still remains one of the most popular airlines and has high customer satisfaction levels.
• Pepsico (NYSE: PEP)
• What Happened?  In the early 1990s a syringe was allegedly found in a can of Pepsi, and nearly 50 similar can-tampering claims were reported in the following week.
• How Was it Handled?  Although it ended up being an elaborate hoax and Pepsi management was certain of their innocence as the investigation progressed, the company acted quick, released statements directly to the worried public, and offered 100% transparency throughout the entire process.  Instead of making vague statements (“Our products are safe, you can trust them.”), company management released videos of the entire canning production process, and North American director Craig Weatherup personally made appearances on several news stations with the hard-hitting evidence.  Eventually the rumors faded away, and sales rebounded fully and swiftly from their 2% fall throughout the investigation period. 

Based on the effective handling of these potentially image-crippling situations, what would have been the best course of action for CCL?

Give the Public a Name/Face With Which to Associate

Throughout a time of uncertainty (especially for the shipwreck’s victims), the public feels much more comfortable with a company’s actions if it can associate with a trusted name and face.  Without a meaningful public appearance or statement released from Carnival CEO Micky Arison, who is overseeing the ordeal nearly 5,000 miles away in Miami, Fla., the corporation is not giving the public much faith in its ability to handle the disaster.  The swift and effective action of Pepsi and JetBlue CEOs throughout their crises, including appearances made on various broadcast news outlets, was a huge contributor to the quashing of negative public opinion about their respective companies. 

Even a neutral third party hired to make press releases (an outside PR firm, for instance) would be better than a seemingly blatant removal of oneself from the situation. 

Put the Customer First

No better lesson can be learned from the JNJ, JBLU, and PEP examples above than the effectiveness of a PR strategy that puts the customer first.  Carnival’s 30% price drop under normal circumstances may be an intriguing offer to some, but to the vast majority, if not all of the affected passengers, it is undoubtedly viewed as a meaningless action that lacks sincerity.

The corporation’s “solution” appears on the surface to be more of a loss-recouping initiative instead a face-saving and potentially long-term brand-building strategy.  JNJ and JBLU actually came out of their respective disasters as better corporations – JNJ’s safety bottle and JBLU’s customer bill of rights have acted to improve their products and services.  Safety, even more so now, is a key issue to cruise passengers.  Instead of ensuring customers that their next cruise will be less expensive, a more brand-improving action would be to strengthen all safety measures and increase the stringency of captain and crew screening processes. 

Control the Stream of Information

Over the three weeks since the shipwreck took place, the worldwide media outlets have taken full control of the stream of information reaching the general public.  In traditional media style, the information has been spun to show the factual embarrassing nature of the incident, which is obviously not the message Carnival wants to convey.  The media is not doing anything inherently wrong, as the viewing public wants and deserves to hear the truth, and Carnival has not taken the initiative to control the flow of information themselves.

Again, the three examples above exemplify an effective handling of information flow.  By swiftly releasing opening statements and consistently releasing subsequent updates through a representative with a recognized name and face, each corporation was able to tell the public what they wanted to when they wanted to say it. 

The emphasis on consistent information cannot be understated, as for every day a company’s management continues to operate in silence the more opportunities the rating-seeking media has to control the information flow.  Especially in the era of modern communication, characterized by social media outlets that can reach millions of individuals at all hours of the day, it is very surprising that Carnival has not taken more meaningful steps to control the situation. 

The front page of the company’s website makes no reference to the disaster (it actually presents inexpensive cruise offers), and the company’s Twitter has made no meaningful attempts to ease the public since the day following the wreck.  In fact, the blog post less than a week after the incident states that the company is, out of respect for those affected, taking a break from releasing any new posts.

Every step Carnival management has taken over the past three weeks has been in stark opposition to what has been shown to work with past case examples.  The company’s inability to control the situation will undoubtedly lead to much more extreme implications than a mere 15% stock price drop – the long-term diminishing of brand-image and loss of customer confidence will continue to affect the corporation for some time to come. 

• Email
• Print
• Feedback