Report Summary
The melamine incident saturated communication channels for much of September 2008 during which time people learnt about the scandal through an average of four to five different communication channels, word-of-mouth being key among them. The melamine incident therefore provides a valuable case study for how each of the channels contributes to the unfolding and spreading of a message with implications for all marketers, not only in terms of crisis management, but also for tactical marketing and multi-media campaign planning.
Not all media have been equally valued by milk consumers however. The most trusted channels are TV news and radio news. In contrast, internet news sites and blogs / chats are trusted by barely half of consumers. While the information at stake during a health scare is especially sensitive, the findings raise thorny questions for marketers who must balance the speed, flexibility and niche access capabilities of the internet against its limitations in terms of overall reach and, seemingly, trust.
But the relationship between controllable media, user generated media and word-of-mouth is complex and low trust is not necessarily a barrier to effectiveness. Although many people regard the internet as being untrustworthy, it features heavily as an “input medium” for word-of-mouth communications, which is especially interesting considering the low penetration of online access in China.
The interplay between brands that have become known as tainted at different times and to different degrees is a complex one. Any customer leakage from a massive brand such as Yi Li can mean windfall business gains for small competitors. Many of Mengniu's loyalists were disenchanted by the tainting of the brand, expressing interest in switching. If San Yuan had had the capacity to capture them and if the brand itself had remained untainted, it could have made huge in-market gains. This observation will not be lost on any marketer and underscores some of the persistent problems in China's milk industry that perhaps will now been shaken out: product quality control, pricing, local anti-competitiveness, etc.
It also provides an illustration for contingency planning in any industry: how to handle a crisis in one's own company, what challenges a competitor scandal may raise, and the need for a rapid communications plan that is ready to deploy when a crisis hits.
San Lu has been weakened to its foundations by the melamine incident; Fonterra anticipating a multi million dollar write-down of their investment. But beyond ground zero, we can observe serious and to some extent permanent impacts, not all of them expected. It's no surprise that most milk buyers claim the scandal has given them a more negative opinion of China's milk products, but many also said the scandal had given them negative feeling about imported products. However, despite being angry at the situation, most consumers are pragmatic, a minority of Mengniu's and Yi Li's loyal customers claim to be intent on avoiding the brands.
As of the date of fieldwork, New Zealand's image had not been seriously harmed by the scandal because so few people were aware of the country's connection, via Fonterra. The net impact, to date, is that a small percentage of people feel worse about New Zealand because of the melamine scandal. This does not necessarily mean New Zealand is in the clear: most consumers do not know that a New Zealand company is Sanlu's partner. When informed of this fact via the interview process, many people experience a negative shift in feelings toward the country. Any future disclosure about the connection between San Lu and New Zealand could, if not well-managed, further tarnish the image of the country.
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