BP is still facing pressure from many corners, especially in the United States, to rename its American service stations or provide those who sell BP brand items with tools to counter the loss of customer loyalty.
The debate over a possible name change, which started at the beginning of this year, has not made much progress, with BP remaining stoic in the face of all the pressure from declining U.S. sales, boycotts, and protests from station owners.
At issue is the fact that most gas stations are independently owned, franchises, or under contract to buy the BP products.
According to brandchannel.com, “Most of the 11,000 stations selling BP fuel across the U.S. are independently owned, and they have seen reductions in sales of up to 40 percent in the wake of the disaster.”
What’s little known is that companies such as BP bind the service station owners to long-term contracts that are ironclad. The station owners are stuck and unable to seek recourse by branching out to different name brands.
Truth be told, these gas station owners were clearly not responsible for the environmental disaster, or BP’s subsequent public relations nightmare. But they are bearing the brunt of the backlash over the oil spill disaster.
“Some things definitely need to go. ... So here’s an idea that just might work. Bring back the Amoco name. You purchased the brand some years ago, and ultimately shuttered it. It may be ready for a new look and a comeback,” said Jamey Boiter, a brand strategist at BOLTgroup, in a FastCompany report.
But for station owners, changing brands isn’t easy. After spending tens of thousands of dollars each to have BP become a well-established brand name, a name change and new advertisement campaign would eat even more into the earnings of their small businesses.
Suggestions that attack the problem from a different angle and would keep the BP brand name intact include BP reducing the gasoline cost to station owners, who in turn would grant discounts to loyal customers. Other suggestions include reduction of credit card fees and the provision of funds for advertising.
Although BP has responded to BP station owners’ concerns “by offering distributors cash, reductions in credit-card fees and help with more national advertising,” according to the brandchannel, it is not enough to make up for the loss.
Earnings Remain Strong
BP’s gross sales revenues during the first half of 2010, versus the same period in 2009, was 55 percent higher, indicating that the BP disaster didn’t stop customers entirely from visiting BP stations, although greater backlash against the company didn’t come until later in the summer.
The company did report a $17.2 billion loss, not because of sales, but because of the $32.2 billion it has cost so far for the Gulf of Mexico spill response. Otherwise, the profit would have been around $15 billion, which is roughly one-and-a-half times more than the profit earned during the first quarter 2010 (which was $6.1 billion and almost four times more than its second quarter 2009 profits).
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What’s in a Name?
In 1998, the British Petroleum (previous name for BP) and Amoco Corp. merger was heralded at the time as the world’s most profitable and largest industry merger ever.
The merger “was expected to deliver synergies from cost-savings that would add at least $2 billion pre-tax a year by end-2000,” according to a 1998 statement from BP.
The company was to be renamed BP Amoco Plc. In May 2001, the name was changed to BP Plc, dropping the name Amoco after approval by the company’s stockholders.
In 2000, BP began to revamp its worldwide service stations to become more environmentally friendly. A large number of U.S. Amoco-style gas stations were either closed or converted to BP environmentally aware stations, and only very few U.S. stations retained the Amoco name.
Brand Crisis
“A brand crisis can take many forms, which can linger differing lengths of time depending on the survivability of the brand. Every corporate brand crisis is unique,” said Jim Gregory, CEO of CoreBrand, a brand strategy firm.
Each disaster affects a brand name differently and much appears to depend on management’s immediate reaction and media coverage. But it appears that no prediction can be made as to what will happen to brands if faced with adversity.
With BP, the company’s “bumbling management of its Gulf crisis, its seemingly endless decision-making process, not to mention post-crisis effects that will last decades, make this crisis unprecedented,” Gregory said.
Gregory studied a number of different-sized corporations and disasters that affected their brand name. Some companies’ brands survived intact, others weakened, some became acquisition targets, and there were those that were ruined.
When the CEO and CFO of Tyco International Ltd. were accused of fraud, the company received bad press and did not recover for years.
Oil firm Texaco took five years to recover from the 1995 discrimination accusations. But in the end, this company merged with Chevron.
Dynegy Inc. was investigated by the SEC for fraud concerning a multiyear natural gas project. The company was found to have circumvented tax laws and to have been involved in an illegal trade action. The company came clean, paid a fine, was forthcoming about its misdeeds, and was favorably perceived by the general public for its reaction. Its products became better known, and it improved its financial condition.
“Can BP’s brand ever be fully restored? Not in my opinion. The most likely outcome is that once BP gains control over the well, the company will become an acquisition target—preferably by a competitor with a better safety record,” predicts Gregory in his article.
