Chapter Summary

Reputation Rules – Mercedes and Moose

Submitted by
Niharika Singh
PGP/24/223

Reputation Rules explains how reputations are formed in the corporate world, as well as
how to build, preserve, and, if necessary, re-establish them. The main axis is the recognition
that reputations are by their very nature public, involving a diverse collection of
stakeholders, the most important of which are:
1.Customers
2.Business
3.Government
4.Media
Individual stakeholders interact with one another independently of other stakeholders,
making it critical for companies to monitor developments in the circles of other
stakeholders, because the corporate reputation now depends not only on the product it
sells to customers, but also on what other stakeholders feed the customer as product
information.
This tangential information has a big impact on the firm's reputation (KKR leaking the
management agreement in the RJR Nabisco LBO is one such example, where a firm
strategically plots the reputation damage for another firm)

The chapter begins with an overview of the Mercedes A-Class launch case. The down-
market plan was a risky move, but it was one that Benz wanted to adopt in order to gain
more market share and attract new customers. A report on the A-failure Class's in the so-
called MooseTest, on the other hand, had a significant impact on the brand, not just A-Class
but also Benz. The A-Class rolled over during Collin's test, causing a slight injury to the
passenger. The true damage was caused by Benz Management's reaction to the occurrence.
With its first "no comment," the corporation demonstrated minimal transparency and
exuded tremendous confidence in the car's quality, bordering on arrogance. Benz
squandered its important moment, and instead of swiftly restoring trust, it exacerbated the
crisis.

Reputational Terrain:
The main goal that any organization should be concerned with is dealing with the
reputational risk. Because strategy cannot overcome terrain, it must be used in conjunction
with it. A customer's perception of news is influenced by a third party, and the degree of
effect is determined by societal importance and audience interest. It, on the other hand, is
independent of the source.

Referring to exhibit 1, most businesses are in the lower left quadrant, where there is less
audience and societal interest. Discussions on niche-market issues, intensive academic
study, and similar topics are examples. When an event rapidly surges and has a well-known
relevance, however, this can move right with increased audience interest. In the upper left
quadrant, there are news sources such as trade periodicals and customer-specific
publications that provide in-depth coverage of themes. When a subject in this quadrant has
a surge in audience interest as a result of the appearance of a well-known persona, it
becomes a mass market commodity, requiring extensive coverage and the need to shape
the information in a way that is more appealing to the consumer.

After that, exhibit 2 shows the tactics needed to deal with news in each of these
environments. Simple reporting does not require embellishments because it is limited to
direct facts. Extensive reporting would transition to live updates to keep the audience's
interest peaked with up-to-the-minute information that could be evident and repetitious.
In-depth coverage necessitates analysis and interpretation, which is a crucial requirement of
the quadrant's customers. As audience attention grows and traction develops, it becomes
necessary to offer mass market data as stories in order to generate a hero, villain, storyline,
and conclusion that is easier for the average consumer to understand and infer from. To
manage reputations, it's critical to comprehend the fluctuating dynamics of various
reputational terrains.

These terrains shift throughout time as new events emerge, such as celebrity participation,
compelling imagery, and challenges from related businesses. The goal is to be viewed as a
hero rather than a villain in the story to increase public trust. As soon as the issue is brought
to the public's attention, firms begin to feel pressure from politicians and regulators who
want to advance their objectives while simultaneously protecting their own reputations.
Their position changes over time and is impacted by public opinion movements. Being
hostile to the defaulting corporation is a frequent tactic for preserving reputation.

Social Media:
Bloggers, Facebook, and other kinds of social media are thought to be eclipsing "traditional
media" in terms of attractiveness and influence. However, in the context of reputation
management, this transition is more subtle. The mass media serves as both an originator
and an amplifier of information. Because many professional media sources its news from
user-generated media, it is becoming increasingly essential as an originator. User-generated
news, on the other hand, is unlikely to have much impact without an amplifier. According to
a research by Cornell and Stanford academics, news organizations are still the primary
sources of information, and news output climbs and declines quicker than blog traffic.
However, bloggers tend to keep subjects alive for much longer than typical news cycles.

Mercedes embracing the Moose:

Mercedes' early response to the criticism of the A-class concentrated mostly on technical
minutiae, which customers perceived as arrogant, resulting in a loss of faith in the firm.
Mercedes realised that typical advertising approaches would not suffice, and that they
would need to reach a considerably larger audience in order to save the A-class from
disaster. It was necessary to change the unfavourable media coverage to a positive one. In
the Reputational Terrain, the Moose Test was located in the upper right quadrant (high
audience interest and high socialimportance). Mercedes had to tell a storey in order to solve
the problem. Families that were concerned about the safety of their young children were
the victims. Mercedes had to play the role of the hero who would save the victim by making
the vehicle safer. It was also necessary to make its acts clear to a broad audience.
They took the risky step of recalling all vehicles and installing ESP (Electronic Stability
Program) free of charge, despite the fact that it was not technically necessary, in order to
generate a positive impression on customers. Niki Lauda was brought in as a test driver for
the car after the firm launched a big ad campaign to sell their message to customers. To
erase the tarnish on the A-class Mercedes vehicles, the corporation also purchased prime
time ad space to display all of these photographs to their clients.
Schrempp was deeply involved in the recall and advertising effort, and he saw the issue as
both a threat and an opportunity. Special teams were formed to address the operational
and logistical issues posed by the ambitious move. The relaunch strategy was crucial,
focusing on establishing trust with clients rather than displaying technical data to illustrate it
was a small flaw. Despite the fact that the automobile passed a new Moose test, it was the
image of Niki Lauda as the test driver that re-energised the public's opinion of the
corporation, resulting in the A-class becoming Germany's most ordered model.

Exhibit 1

Exhibit 2