Why the Amazon-Hachette Battle Didn't Cost the Retailer its Top Brand Ranking

The online retailer weathered a minor scandal and stayed atop the YouGov BrandIndex.

Jul 21, 2014 at 10:58AM

Amazon (NASDAQ:AMZN) may be the Bill Clinton of brands. The company has built up so much good will, scandals and negative publicity can't seem to dent the public's love for the online retailer. 

Despite Amazon's strong-arm tactics with book publisher Hachette and a controversial price increase for its Prime service, the e-tailer retained the top ranking among U.S. brands in the YouGov BrandIndex report

The BrandIndex measures brand perception by interviewing thousands of consumers every day, yielding more than 2.5 million interviews a year. The index tracks companies based on a number of categories including customer satisfaction, reputation, and general impression. It also examines whether customers would recommend the brand and includes the opinions of current and former customers. YouGov operates on a subscription basis, but publicly releases a top-10 brands list twice a year.

Amazon retained the top ranking that it earned during the previous period, handily beating Subway, Google's (NASDAQ:GOOG) (NASDAQ: GOOGL) YouTube, Ford, and Netflix


Apple (NASDAQ:AAPL) and Google both returned to the list after falling off in 2013, which YouGov BrandIndex CEO Ted Marzilli called "a vote from the mainstream" for those two brands. "While it may be trendy sometimes to criticize both companies, the fact is that everybody hangs on everything they do," he told AdWeek.

How did Amazon stay on top?
It seems surprising that Amazon took the top spot during a period when the company was often in the news for less-than-positive reasons. But Marzilli explained that the Hachette dispute -- which has made some popular books and anticipated new releases unavailable on Amazon.com -- did not hurt the company's ranking.

The affected group in this case -- book buyers looking for Hachette titles -- is small and unlikely to drag down overall perception, Marzilli said. Amazon also had some positive news during the ranking period, expanding its offerings for Prime subscribers by adding shows from HBO and launching a free music-streaming service. Those positives clearly overshadowed the fact that the company raised the price of Prime for the first time in nine years, increasing it from $79 a year to $99.

Amazon is so useful, convenient, and well-priced that most of its customers never noticed the Hachette dispute and sloughed off a 25% price increase for Prime. It's also possible that the Hachette battle created some positive public opinion, as Amazon is essentially fighting for lower prices for its customers.

Target is not so lucky
Not all bad news is treated equally by customers. One company, Target (NYSE:TGT), fell 14 spots from the end-of-year rankings, dropping from No. 7 to No. 21 in the wake of the data-breach scandal in which credit card information for 110 million customers was compromised. 

Target says it doesn't yet have an estimate of the full cost of the breach. Avivah Litan, a security analyst at technology firm Gartner, puts the cost at $400 million-$450 million, USA Today reported.

The good news for Target is that brands that have generally done well on the index can recover quickly from scandals if they take what the public perceives as positive actions to correct the problem. Carnival Cruise Lines (NYSE:CCL) was the top "Buzz Improver" on the chart, gaining 19.2 rating points in the six-month period. For some perspective, No. 10 Google came in at 22.4 rating points.

Following its series of well-publicized crises that included a disabled ship being adrift in the Gulf of Mexico, it took the cruise company about a year -- 334 days, according to YouGov BrandIndex's calculations -- to recover to its previous perception levels. That's half the time it took BP and Toyota to recover after their respective scandals.  

The cruise line, after its woes, worked hard to regain the public trust, spending $300 million on improvements on the fleet's safety system, and incorporating a review of each ship. The company also formed a safety and reliability review board composed of outside experts, including two retired U.S. Navy Rear Admirals, a former member of the National Transportation Safety Board, and a former senior vice president with Delta Air Lines

The moves paid off -- not only did the company bring "its consumer perception back in line with the rest of industry ... but their sales potential with consumers has rebounded above the rest of the cruise sector," Marzilli wrote on BrandIndex.com.

Target has replaced its CEO and made moves to protect its data. The company should rebound quickly, as before the scandal it had been a consistent top-10 brand on the index.

Does this mean Amazon can do whatever its wants?
Having a strong brand perception gives a company a lot of leeway -- much like Clinton remained popular despite being impeached over the Monica Lewinsky sex scandal. Amazon has built up a tremendous amount of goodwill with its customer base largely by treating them very well.

For the company to take a big fall on the BrandIndex survey, it would need to do something that shakes the public's trust -- like allow hackers to steal 110 million credit card numbers. Amazon has seemed pretty deft at avoiding such problems. It even managed to communicate so well with its customers that it went from not charging sales tax to charging it without creating much in the way of negative feedback.

If a company is seen as fighting on behalf of its customers, those people will accept it when the brand loses a fight with the government. Amazon made it very clear it did not want to collect sales tax, fighting aggressively and publicly against doing so. But when it lost and agreed to add the charges, people paid them little complaint. 

Amazon has essentially run a clinic for how to build public trust, and that has paid off in tangible terms.

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Daniel Kline is long Apple. He is baffled by Subway's inclusion on this list. The Motley Fool recommends Amazon.com, Apple, Ford, Google (C shares), and Netflix. The Motley Fool owns shares of Amazon.com, Apple, Ford, Google (C shares), and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Jun 12, 2015 at 5:01PM

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