- Peloton's ad troubles are just the latest in a long list of campaigns that brands took heat for.
- Advertising can hurt perception of a brand because consumers consider advertising a window into a company's culture and values.
Though Peloton's marketing department may be feeling the heat this week thanks to a controversial holiday ad, it's far from the first brand to be criticized for its advertising.
In 2017, Pepsi's Kendall Jenner ad was panned after critics said it made light of the Black Lives Matter movement. Dove ran a Facebook ad for body wash two years ago that was called racist because a woman transforms from black to white after using the product. Dior's "Sauvage" perfume campaign — starring Johnny Depp in what appeared to be traditional Native American clothing — was accused of profiting off Native American cultural imagery. And Carl's Jr. ran a campaign stating that one of the brand's "truths" is that "We believe in putting hot models in our commercials, because ugly ones don't sell burgers."
The list goes on (and on, and on).
A botched ad campaign isn't exactly on the scale of a massive oil spill or, in the case of Volkswagen, an emissions scandal. But Daniel Binns, New York CEO of Omnicom Group-owned brand consultancy Interbrand, said it can still hurt.
In Volkswagen's case, the brand "is so strong, built up over many years, that it did take a small ding, [but] it very quickly returned," he said. "The brand itself was resilient" because of the equity it had built up with consumers over time.
Indeed, Volkswagen took the 40th spot in Interbrand's annual "Best Global Brands" report for 2019.
These days, people often view a company's advertising as a window into corporate culture. If something comes off as distasteful to consumers, they may judge the company harshly. And Binns said there's a level of cultural sensitivity that is noticeably higher than it was even three or four years ago.
In Peloton's case, Binns said the brand's powerful cult following has been more due to its product and the product experience than its own branding. He said whereas Nike has earned the credibility to talk about deep issues like racism, Peloton, with its thinner external brand, isn't quite on that level. Binns said that successful brands today have a strong sense of purpose.
YouGov, an international polling and market research company, said it took nine months for Pepsi's brand perception to recover with millennials after backlash from the Pepsi ad. It's a bit too early to see the full impact of the Peloton ad on its brand, but YouGov did a poll Monday on whether people would be insulted or pleased to receive a fitness-related gift for the holiday season. Thirty-eight percent said they'd be more pleased, while 7% said they'd be more insulted.
Jonathan Mildenhall, the former CMO of Airbnb and now CEO of consultancy TwentyFirstCenturyBrand, said Peloton is a great brand and has "the most valuable asset of any brand in the 21st century": A fanatical community.
"Just check out the Peloton Facebook page to understand what community-driven brand advocacy looks like," he said in an email. "Unfortunately, this ad commits a 21st century marketing crime in that it fails to reflect the authenticity of its community. Do I think it will damage sales in the short term? No. But, and this is important, advertising like this will destroy Peloton's reason for being in the eyes of its community and this in turn will comprise the value advocacy and word of mouth referrals in the mid and long term."
There's also a question of what happens next. If an ad receives a lot of criticism, it isn't uncommon for a company to pull the campaign and apologize. Pepsi, for example, pulled the ad quickly and apologized, saying it had clearly "missed the mark" after it received criticism. Eric Schiffer, chairman of Reputation Management Consultants, said if Peloton pulled the ad, it would have likely slipped from the public consciousness in 72 hours and would be less harmful for the brand.
"If they continue to run this, it could hurt revenue," he said. "It shows devastating incompetence. The correct response would have been, 'We didn't mean to in any way indicate that women need to buy this in order to have their boyfriends' approval.' What they've done, instead, is show a boneheaded lack of connection and empathy to their core female audience."
He added that consumers want to buy from brands they believe in and that stand for things they believe in. When an ad like this seems to contradict the values a brand has been built on, that can be damaging, he said.
"I suspect that Peloton will be pedaling backwards very soon," he said.
Disclosure: CNBC parent Comcast-NBCUniversal is an investor in Peloton.