Bp Marketing Problem After Oil Spill

British Petroleum’s Marketing Problem Florida International University Summer 2011 Alex Del Veccio Yudith Torres BP Marketing Problem In April 20th, 2010 one of the worst environmental natural disasters that were brought on by a men happened. We are talking about the British petroleum Oil spill on the Golf Coast. The disaster not only affected the plants, animals and people living in the area but also the image of the company. British Petroleum has been successful on creating a powerful brand image, being authentic to the core values of its business and building the goodwill of their customers, now BP is trying to save what is left after the disaster. The disaster leads to many angry people, including environmentalists, shareholders and the general public to create campaigns to bring down the company reputation. BP has been accused of 11 workers dead and 17, injured. The extent of the spill is about the size of Rhode Island, running across the northern Gulf of Mexico between the mouth of the Mississippi River and Florida. The spill runs wide, threatening the coastlines, and deep, traveling beneath about 5,000 feet of water and 13,000 feet under the seabed. The Deepwater Horizon well is leaking 5,000 barrels per day, shutting down fishing across the affected areas, damaging fragile habitats and putting animals in peril. BP was also accused of trying to silence the scientists that were studying the effects of the oil spill, not allowing publishing researches done for the company; this clause was expressed in their contacts. The entire situation has position BP with a bad corporate image in the entire world leading to customer to refuse buying its products. This crisis has result in a negative publicity, threatening the image of the company and having effects on people perception of the company and its products. BP has responded to the event, trying to diminish the severity of the contamination, in a desperate effort not to lose its social legitimacy and seen to being irresponsible and dishonest with the public. These are a few of many pictures that were put out there by the media, making the problem even worse for British Petroleum, those images were directly associated with the corporation, death, contamination, social irresponsibility, unhappy people. BP has a huge problem, they need to make people to stop associating those images with its corporation and products, and recover its good name again. Consumer Behavior Issues as a result of BP the oil spill Consumer attitudes toward BP products were badly affected by the oil spill; there was not favorable opinion about the corporation resulting on the decline of consumer intentions to buy BP products. BP oil spill has impacted purchasing behavior, the spill rattled the company, causing the stock to lose about half its value and prompting Tony Hayward CEO to resign and be replaced by Bob Dudley, But the company was able to get the oil gusher stopped and has been paying to repair the damage to the local economy. The company is paying to cleanup an estimated of $20 billion, as a result the company temporarily suspending its dividend, in another blow to investors. The dividends were reinstated in February 2011. Despite the fact that many surveys has showed that people has no intention to boycott or switch from BP brand ( (Harrison) the consumer perception of the company was reflected on consumer willingness to invest on BP stocks, maybe because many of them were normative influenced altering their behavior to meet public opinion expectations. Consumer awareness has shifted dramatically when there is a catastrophe related to a big corporation such as British Petroleum, consumers has jointed forces and organized protests to show their disgruntlement with the corporation and pressing them to take full responsibility for the disaster. The oil spill has had effected no only on consumer attitudes towards BP products, but to other industries too. Approximately 71% of consumers were still concerned about the safety of consuming seafood, and 23% reported they have reduced their seafood consumption as a result of the oil spill ( (Bianco) Consumer analysis Of British Petroleum after oil spill According to a Brand Index Survey, (Index, 2010) British Petroleum public image went below Goldman Sachs (and investment bank many feel contributed to the financial crisis' in 2008). This Survey that came out in June 2010 show these findings. Only Toyota who went through a massive recall shows worse. Many more surveys show that consumers were not please with British petroleum (eye, 2010) Following are s few notes from the article on the corporate eye's website (eye, 2010): * From an Economist and YouGov survey: When it comes to trusting BP to â€Å"do the right thing in stopping the oil spill and cleaning it up,† 9% of respondents said they trust BP â€Å"a great deal† and 13% trust BP â€Å"quite a bit† while 20% have â€Å"only some† trust that BP will do the right thing, and another 20% said they have â€Å"very little† trust that BP will do the right thing. The majority of respondents, 28%, trust BP â€Å"not at all. †Ã‚   The remaining respondents stated that they were not sure how they felt. * From the same Economist and YouGov survey: 65% of respondents believe that BP and other companies involved in the oil spill are â€Å"pointing the blame on others and avoiding responsibility† while just 35% believe BP and other companies involved are â€Å"doing whatever it takes to stop the spill and clean up the oil. † * From a USA Today/Gallup poll: 34% of the respondents rated BP’s response to the spill as â€Å"poor† and 39% rated it as â€Å"very poor†. Only 6% rated BP’s response as â€Å"very good† and 18% rated it â€Å"good. † * From a Pew Research Center and National Journal Congressional Connection poll: 44% rated BP’s response to the oil spill as â€Å"poor† and 26% rated it â€Å"only fair† while 16% rated BP’s response â€Å"good† and 3% rated it â€Å"excellent. † * From a CNN and Opinion Research Corp. poll: 76% of respondents disapprove of BP’s response to the oil spill and 24% percent approve. These surveys and many like them combined with massive protests and boycotts reshaped the Value of British petroleum as reaction to their stocks showed. In late June in 2010 British petroleum's stock fell to under 28 dollars per share. This was a major drop from there yearly high of over 61 dollars per share in February in 2010. While the consumer trend for the oil industry is still in high demand, British petroleum still loss revenue loss due to poor public perception and also lost revenue from the oil spill and cleanup efforts. According to this story BP has it work cut out for them financially (JACOBSON, 2011)– Almost $50 billion in lost market value. Its rivals' stock is up almost 15 percent, while BP's has been down roughly 25 percent. Shares that were worth $60 a piece on April 20, 2010, are worth $46 today (JACOBSON, 2011). * Sales of $24 billion of the company's assets to be set aside to help pay for claims and other costs. Gheit said roughly 10 percent of BP's production and reserves were sold last year. Another $6 billion worth are expected to be sold this year (JACOBSON, 2011). * $3. 8 billion paid out in claims so far. That's part of a $20 billion fund set aside under pressure from the government last year (JACOBSON, 2011). * Liabilities could swell by tens of billions more. If BP is found to be criminally negligent (several investigations and reports have yet to be completed), the price tag could exceed $50 billion. (Contending their equipment and work played a major role in the cause of the accident, BP is suing Halliburton and TransOcean for billions of dollars as well. (JACOBSON, 2011)) However not all is lost for BP. As you look at the Global 500 (500, 2011) ranking of the top one hundred companies in the world. You will notice that six of the tops 10 are oil companies, including BP at number four. This not only shows that oil is a very profitable industry and in high demand despite calls for alternative energy sources over the past decades. Unless such an alternative energy source can come about and service the billions of people who demand energy: the outlook in the oil industry will continue to be high. Which also means the oil industry will continue to be profitable. When we also add into the factor that developing countries have increased demand for oil and global demand for this resource is predicted to go from 41. million gallons per day to 86. 6 million gallons by the year 2025 (prices, 2010). I do not see consumer trends in oil consumption a problem for BP. This consumption pattern will be an advantage for BP. The bottom line is that BP's industry and products looks like they will be in high demand for the foreseeable future. However even though Bp's product is widely used they are not immune from poor public perception. Since the oil spill Bp has been forced to sell o ff some assets (White, 2011) to pay for loss revenue, and pending lawsuits from the oil spill. BP's problems continue outside of its finances. In early 2000 British petroleum launched a new campaign called â€Å"Beyond Petroleum†. This campaign was targeted top the environmental conscious consumer. Bp wanted to become established as an environmentally friends energy company. While it's hard to see if that campaign was successful regardless, any positive perception or equity acquired from that campaign was lost do the oil spill. Reinventing themselves as an eco friendly company looks to be a difficult task at this time. Moving forward With the environment a major issue in today's world it may be a good idea for BP to invest in research for safer more eco friendly offshore drilling technology. Another way for BP to win over the public interest is to come up with a cleaner alternative source of energy. Would it be ironic that a oil company invents an alternative energy that is safer and cleaner for the environment. The emotional element of BP’s brand invokes bad feelings. With concerns about Global Warming and endangered species many feel BP broke its Brand Promise started by their campaign â€Å"Beyond Petroleum†. For now British Petroleum's strategy should be to allocate resources for research for the above mentioned. And also allocate resources to improving public perception. One example is their commercials with local business owners that were affected by the Gulf oil spill. They are telling the consumers that they are standing by their mistakes. I would also advise BP to communicate to the public what changes they are making from organizational structure to safety precautions. BP may also look into working with eco friendly organizations and organizations like the World Wild Life foundation. Such organizations have voiced strong criticism BP after the oil spill. Working with these organizations would go far in telling the public they have turned over a new leaf. Marketing Recommendations for British Petroleum (prices, 2010) British Petroleum needs to have specific plan for each one of the possible scenarios they might encounter, the company took three months to stop the oil leak, and they are still working on the cleaning process. This shows that BP was not prepared to face such a huge natural disaster; they did not have a contingency plan appropriated. Its is very important than the fist reaction that company takes to resolve the problem is the most suitable one, because that is when the media and public attention are more focus on the problem, and a prompt resolution will lead a faster recovery of the company image. BP should focus on mortification, taking full responsibility for the situation and its consequences. This strategy address public critique in advance and give the company a more significant public relations ground. After admitting and apologizing for the catastrophe, BP must take an action to avoid that is going to happen again. Creating more and secure ways to drill oil, the company needs to improve procedures, safety and competence to regain the lost trust from the public. BP need to regain their good mane, at the moment the company is located in the awareness set in the customer mind that it does mean that its products will be consider if people has a negative image in it. British Petroleum need to build positive feeling towards its corporation, one option is to develop green advertising, the company have invested million on it, but today they should put more emphasis on it. Create better image (social factor) by better approach to compensate those who have been affected. There were many people affected by the catastrophe, people from different communities, they need to focus on the different groups of people they are trying to reach in order transmit the message more efficiently; failing to do will worse the problem. In order for people to place BP into their consideration set they need to believe that the company is reliable and responsible, in addition people must have good feeling towards the brand. They must invest a lot of money in advertising, informing people what is plan to recover and it is being developed. Those ad must run as many time as its needed, to inform people that â€Å"we are taking responsibility† to backfire those ad claiming the contrary â€Å"Show you care†, that is the primary position British Petroleum must assume. The reality is that the Oil Spill in deep horizon water in Mexican Gulf, in April 2010 has made a huge human, ecological and financial lost, and it has ruined the company’s reputation. There is not way the company can go back in time and avoid what happened, but they can look forward and make the best out the situation. If BP can convince the public that they truly believe that its image will be reinstated, people will start bearing positive feeling towards BP. Bibliography 500, G. (2011). And the world's biggest companies are†¦ Retrieved 2011, from Cnn Money 2011: http://money. cnn. com/magazines/fortune/global500/2011/ Bianco, V. D. (n. d. ). 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