Case Study Wal-Mart

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by: Mark Rogers

An article in the New York Times (requires free registration or use Bugmenot for a one-time password) profiles how Wal-Mart have taken on their detractors with a pro-active PR campaign, run by a number of ex political campaigners.

The PR campaign emphasises the Wal-Mart positives (good value, local employment) and looks to off-set a campaign of detraction from pressure groups like Wal-Mart Watch, run in part by trade unions who oppose the company’s employment practices and who cannot get recognition from the company. (Note their website’s heavy use of email newsletters, syndicated news, its blog and comment pages.) The trigger is a new documentary entitled “Wal-Mart: The High Cost of Low Price” by Robert Greenwald. The documentary looks systematically at Wal-Mart negatives – the effect on smaller local businesses of a Wal-Mart opening up, their healthcare policies and employment policies.

Key quotes:

A confidential 2004 report prepared by McKinsey & Company for Wal-Mart, and made public by Wal-Mart Watch, found that 2 percent to 8 percent of Wal-Mart consumers surveyed have ceased shopping at the chain because of “negative press they have heard.”

Once a darling of Wall Street, Wal-Mart’s stock price has fallen 27 percent since 2000, when H. Lee Scott Jr. became chief executive, a drop that executives have said reflects, in part, investors’ anxieties about the company’s image. Sales growth at stores open for more than a year has slowed to an average of 3.5 percent a month this year, compared with 6.3 percent at Target.

To keep up with its critics, Wal-Mart “has to run a campaign,” said Robert McAdam, a former political strategist at the Tobacco Institute who now oversees Wal-Mart’s corporate communications. “It’s simply nonsense for us to let some of these attacks go without a response.”

The impact of the negative sentiment in slowing Wal-Mart’s growth is a classical demonstration of Frederick Reichheld’s net promoters theory. This theory maintains that as the proportion of your detractors grow, your growth is curtailed and that a decline in your net promoters index (the number of your promoters minus your detractors) is strongly predictive of a stock price decline.

It would be interesting to track the impact of Wal-Mart campaign, which is run by Edelman on Wal-Mart’s online net promoters index.

Thanks to Flemming Madsen of Onalytica who suggested we blogged this.

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