Spillover

October 1, 2010

People are angry about BP’s role in the Deepwater Horizon disaster and the subsequent massive oil spill. Gavan Fitzsimons, R. David Thomas Professor of marketing and psychology at the Fuqua School of Business, who studies how individuals respond to marketing and brands and how they behave as consumers, examines why people have vented their anger at the company, and what, if anything BP can do to address the problem.

Targeted anger: Greenpeace activist posts protest sign near London BP station. Katie Collins/Associated Press

Does boycotting BP gas stations make sense?

The consumer perception is that BP is in the retail gasoline business. The reality is that they have only a tiny footprint in that business and that the vast majority of the stations that say BP on them are independently owned franchises. But the average person driving up to a gas station sees a BP sign and thinks BP owns this station and BP is selling them their gasoline. The average consumer doesn’t realize that all the brands of gas that are sold in their area come from the same refinery.

That notion of a boycott as a way to respond gives us a sense of some control. But it’s an illusory sense of control because we’re not actually getting back at BP itself, but at the owner of the local BP station. The reality is that when we feel like the world is spinning out of control, we’re going to do things to try and reassert control.

If a boycott won’t work, what is the most effective way for consumers to show their displeasure with a company like BP?

Negative word of mouth, because it’s out of the brand’s control. Passing comments from people who are important to you in your life are going to have a neg-ative impact on your evaluation of that brand. And that happens, obviously, not just in the oil business but in any business.

In addition to traditional face-to-face interaction, all of a sudden we have new technology that makes communicating to everyone we know—not just our immediate social circle or family at home or close family friends—but everybody in our e-mail contacts list or everyone who reads our Twitter feed or looks at our Facebook page. That entire community can be influenced by our attitudes toward a certain brand.

It’s a way for us as a consumer society to keep these massive powers in check and make sure that they’re doing their job. If they fail at that, we should use this sort of network to remind them what their responsibility is.

But if consumers aren’t directly involved in BP’s business model, how can their outrage hurt the company?

If consumers are upset at the BP brand, there will be talk of boycotts and there will be a lot of negative press about the brand. Does that affect BP’s day-to-day cash flows? No. BP is putting oil into a refinery and selling it to Shell, Exxon, and everybody else who’s selling the gas.

Now, their profitability could be affected by having the government mandate that they pay those who are negatively affected and that could end up being quite substantial if you look at the money that they’ve had to set aside. That will be detrimental in the short to medium run.

Where I think BP is most worried is not on cash flow but on share price. If everybody in the world has a negative opinion of BP, people start selling off the company’s shares—not just consumers, but institutional investors. We’re seeing it already. The share price is way down, and that’s because of all this negative feeling about the brand.

What does it take for people to be turned off by a brand?

I think of it as an expectations game. You have certain expectations for how companies will behave. When those expectations are violated, regardless of how high or low those expectations were—and they could have been really low—if they go a little below them, that’s enough. So it’s just a matter of that violation of expectations.

What do you think consumers expected of BP before the oil spill?

I would say the expectations were very minimal: maybe a clean restroom, that they won’t price gouge.

And now consumers believe that BP has done something really bad.

It certainly seems like BP has failed on multiple levels over and over, or you could argue that they failed at the beginning for not properly planning.

Do you think BP is unfairly taking too much criticism for the spill?

This probably could have happened to any of the oil companies. The issue is whether there’s culpability there particularly to BP for not having done things in the most safe manner. I’m not a technical expert in that domain, and it’s hard for me to say whether they deserve to be singled out for their bad drilling practices. But I think the broader question is a fair one.

The whole industry is probably taking more risk than any of us would like them to, in terms of balancing the likelihood of getting oil versus the likelihood of a spill, so who should we be most angry with? BP? Or the oil industry in general? Or, more broadly, us?

And so while some folks have tried to take a personal role in reducing their own energy consumption or their family’s energy consumption, many others haven’t. In a way, it’s really us as a society that is to blame for this disaster. That’s not something that makes people feel good—or in control of the situation.

Will BP be able to change consumers’ attitudes toward their company?

You see that BP is trying to respond. They’re running full-page newspaper ads telling the consumer—who’s not really their customer—that they’re doing their best and, hey, it’s all going to be okay. They’re trying to calm the market, basically, by running those ads. That’s all those ads are attempting to accomplish.

There are people who find BP’s behavior to be really reprehensible, and there are others who think “oh, it was only kind of mildly bad.” The types of public-relations efforts that BP is engaging in are going to influence those people who are only mildly upset.

When you get over to the people who are extremely upset, these PR activities won’t influence them, and actually will make them even more upset and will cause them to find the company’s behavior even more offensive.

This interview was condensed and edited by Aaron Kirschenfeld.