Reputation is a Business Asset, as Long as its Good

Reputation is a Business Asset, as Long as its Good

Fashion designers Domenico Dolce and Stefano Gabbana drew applause for sending a pregnant model down the runway as part of their tribute to mothers for Fall/Winter 2015, but their endorsement of “traditional” families in a subsequent interview caused controversy and ...

June 20, 2017 - By TFL

Reputation is a Business Asset, as Long as its Good

Case Documentation

Reputation is a Business Asset, as Long as its Good

Fashion designers Domenico Dolce and Stefano Gabbana drew applause for sending a pregnant model down the runway as part of their tribute to mothers for Fall/Winter 2015, but their endorsement of “traditional” families in a subsequent interview caused controversy and calls to boycott their label – namely, coming from musician Elton John, who has two children conceived through in-vitro fertilization with his husband David Furnish.

Sources said after the fact that statements Dolce and Gabbana made to Panorama, an Italian magazine, in November 2015, put their F/W collection, entitled “Viva la mamma,” in an entirely new light. In the interview, translated by the Telegraph, the designer duo stated: “We oppose gay adoptions. The only family is the traditional one … No chemical offsprings and rented uterus: Life has a natural flow, there are things that should not be changed.”

Following the heavy criticism that was sent their way on Twitter and other social media platforms, Dolce and Gabbana tried to clarify their statements. “I was talking about my personal view, without judging other people’s choices and decisions,” Dolce reportedly said. “We talked about our way of seeing reality, but it was never our intention to judge other people’s choices,” Gabbana said. “We do believe in freedom and love.”

In an attempt to further remedy the conflict, the brand supplemented into collection of runway accessories – which consisted of bags that read “I love you Mama” and one that featured a woman holding the hands of two children – to also include bags depicting same-sex couples when the collection hit stores month later. 

Unfortunately for Dolce and Gabbana, their attempt to right their wrongs was not terribly well received. Sources called the move opportunistic put forth simply to tap into/profit from a new market, and a press ploy, as opposed to a move based on authenticity. 

The traditional family scandal is only one of the recent controversies to add to years of bad press associated with the house’s tax evasion trials and multiple guilty verdicts. More recently, Dolce & Gabbana found itself the subject of negative attention as a result of the its seeming backing of U.S. President Donald Trump after routinely dressing First Lady Melania Trump.

And still yet, consider the brand’s Instagram battle with singer Miley Cyrus, who spoke out against D&G’s “politics,” and do not forget the flak it has received in connection with its pricey (and problematic) “boycott” tees, which Atlanta musician and model (who walked in the S/S 2018 menswear show), Raury, protested on the brand’s own runway this week. 

On the heels of his boycott, Raury told GQ: “The ‘Boycott Dolce & Gabbana’ T-shirt they created completely makes a mockery of what ‘boycotting’ is. Boycotting is the people’s voice. A protest is the people’s voice. It has power. It changes things … Boycotting is real. Dolce’s entire campaign says it’s not real.” 

What is interesting about D&G’s unending penchant for controversy is that it represents a significant risk that businesses, especially fashion ones, regularly face. And the sheer amount of negative press that the Italian design house is facing is not to be overlooked, as it is potentially damaging not only to its image but to its bottom line, as well.

Negative press in fashion can be derived from a huge array of circumstances. Here, it is the result of controversial statements made by a house’s creative directors, as well as a slew of what some have viewed as distasteful products. In the past, we have seen backlash arise from the use of black face makeup on white models in magazine editorials, the use of Native American costumes, and the casting of “shockingly skinny” models.

While the role of negative press is often not automatically viewed by brand executives as a harm as detrimental as a supply chain problem or a violation of law – as the old saying goes, all press is good press, after all – it is, in fact, a serious business risk that must be taken into consideration on a consistent basis. Businesses with favorable reputations are perceived as providing more value, which often allows them to charge a premium – something that is absolutely essential in the luxury sector, where bags cost at least $1,000 and dresses even more.

Moreover, according to the Harvard Business Review, brands with favorable reputations are better able to hold on to customers, as reputable brands have customers that are more loyal and that buy broader ranges of products and services. This focus on consumers buying a range of goods is important given the widespread licensing that takes place in fashion. The licensing of fragrances, eyewear, etc. serves as a significant source of income for high-end brands and an important mechanism for them to reach a wider audience. This is also a practice that may be hindered by a negative brand image. Also, we know that catering to existing customers is less expensive than seeking out new ones.

Finally, because the market believes that companies with favorable reputations will deliver sustained earnings and future growth, these companies tend to have higher price-earnings multiples and market values and lower costs of capital.

With this in mind, it is in a brand’s best interest to manage reputational risk in order to avoid the actual fruition of such risks whenever possible. A company’s overall reputation is a function of its reputation among its various stakeholders (investors, customers, suppliers, employees, regulators, the communities in which the brand operates, etc.) in specific categories (think: product quality, corporate governance, employee relations, customer service, intellectual property, financial performance, handling of environmental and social issues).

A strong positive reputation among stakeholders across multiple categories will result in a strong positive reputation for the company overall, and vice versa, which is clearly linked to sales and revenue.

Harvard Business School professors, Robert G. Eccles, Scott C. Newquist, and Roland Schatz propose the following three questions as fundamental to the assessment and management of a brand’s reputation: 1) What is the brand’s reputation in each area (product quality, financial performance, and so on)? 2) Why?, and 3) How do these reputations compare with those of the brand’s peers/competitors?

While these inquiries may seem relatively straightforward on paper, thereby, suggesting that reputation management is a moderately simple task, do not be fooled. As we can see from Dolce and Gabbana’s recent PR fail (and John Galliano’s anti-Semitic rant before that when he was employed by Christian Dior; the time Hedi Slimane lashed out at critic Cathy Horyn on Twitter; and Nicolas Ghesquiere’s not-so-nice words about Balenciaga on the heels of his departure from the Paris-based design house, etc.), systems to manage reputation are more difficult to implement in reality, especially when creative types, such as designers and creative directors, are introduced into the mix.

However, this is certainly an effort that is worth noting and one that brands should keep on their radar, given the frequency with which such PR nightmares occur. Business reputation is key in fashion and it is something that is often problematic to fix after the fact.

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