BP: A Marketing Case Study

Justin Bean, Presidio Graduate School SUS6060-S1

Summary:

BP’s branding as a sustainable company and adoption of the tagline “beyond petroleum” is examined from a marketing perspective. The story of the BP Gulf Oil Spill and BP’s response is presented as a catalyst for public knowledge of inconsistencies with brand promise and behavior. The response and public reactions are examined before conclusions of the viability of BP delivering on its brand promise are analyzed.

Company Information:

Name: BP Type: Public limited company (LSE: BP, NYSE: BP) Industry: Oil and natural gas, alternative fuels Founded :1909 (as the Anglo-Persian Oil Company), 1954 (as the British Petroleum Company), 1998 (merger of British Petroleum and Amoco) Headquarters: London, United Kingdom Area served: Worldwide Key people: Carl-Henric Svanberg (Chairman), Bob Dudley (CEO), Byron Grote (CFO) Products: BP petroleum and derived products, BP service stations, Air BP Aviation Fuels, Castrol motor oil, ARCO gas stations, am/pm convenience stores, Aral service stations solar panels Revenue: US $246.1 billion (2009) Operating income: US $26.43 billion (2009) Net income: US $16.58 billion (2009) Total assets: US $236.0 billion (2009) Total equity: US $101.6 billion (2009) Employees: 80,300 (Dec 2009) Website: BP.com

Tags:

Oil spill, branding, BP, beyond petroleum, brand internalization, environmental disaster, crisis response, occupational safety, greenwashing, social media, public relations, energy, renewables, fossil fuels, marketing, brand image management, Deepwater Horizon, Gulf of Mexico, economic recovery, deepwater drilling, offshore drilling, oil rig, honesty in advertising.


Introduction

In July of 2003, BP (formerly British Petroleum) adopted the tagline “Beyond Petroleum”, in an effort to rebrand itself as a socially responsible, environmentally friendly company. This “fresh reassuring, and hopeful” strategic brand positioning was effective in making BP a consistently highly-ranked brand in the minds of consumers throughout the first decade of this century (Heaton, 2010). However, in light of the 2010 Gulf of Mexico oil spill BP’s environmental and corporate social responsibility record has been held under intense scrutiny, revealing a company that does not seem to hold its identity and actions in close alignment with its marketing campaign. This paper seeks to analyze the authenticity of BP’s “beyond petroleum” campaign and especially its branding response to the Gulf of Mexico oil spill, including its use of social media as a new tool for reaching disillusioned customers and stakeholders.

A Fresh Start for the New BP

BP’s “beyond petroleum” campaign began in July of 2000 as a strategy to position the BP brand as a leader in cleaner petroleum and renewable energy. Its acquisition of Solarex (as part of its Amoco purchase) in 1999 gave BP Solar the distinguished honor of being the largest producer of solar panels at the time, producing 30 megawatts of solar products per year (BP, 1999). Kotler (2009) reports that after this rebranding, employees of BP felt the company was going in the right direction and had a positive image of the new brand. The campaign was quite successful, according to the Center for Brand Analysis, bringing it’s ranking among other global “Superbrands” to number nine in 2009 and twenty-three in the beginning of 2010. Figure 1 also shows BP gaining brand power after the adoption of the tagline, peaking in 2008, then dropping slightly in 2009 in accordance with decreasing advertising expenditures (from $75 million in 2007, $53.5 million in 2008, to $32.8 million in 2009), as well as declining industry average brand equity trends ($13 billion in 2008 to $7.4 billion in 2009, or a 43% drop), (Branding Strategy Insider, 2010). However, according to the same research, BP’s brand equity decreased less dramatically (from $19.9 billion in 2008 to $14.3 billion in 2009, or a 28% drop), suggesting that its brand value may have acted as a buffer during this period.

Figure 1. Source: Branding Strategy Insider (2010)


From an external and internal branding point of view, this campaign would seem to be a remarkable success; however, it doesn’t seem to correspond with BP’s record. BP has been criticized repeatedly for environmental violations, oil and propane gas price manipulation, safety violations, falsifying inspection reports, hazardous substance dumping, and its involvement in environmentally-damaging practices such as extracting oil from Canadian oil sands (Wikipedia, 2010). Ninety-seven percent of flagrant willful safety violations, (which the Occupational Safety and Health Administration defines as: “committed with plain indifference to or intentional disregard for employee safety and health.”) in the refinery industry were attributed to two of BP’s refineries (Texas City and Toledo, Figure 2. Source: Center for Public Integrity, (2010). Ohio), many of which had been cited before in various areas of the plant and went uncorrected, leading OSHA to the conclusion that “BP has a serious, systemic safety problem in their company.” This disregard led to an explosion at the Texas City plant in 2005 which killed 15 people and injured 170 others, as well as a chemical leak in 2010 (two weeks before the BP Gulf of Mexico oil spill) that released 530,000 pounds of carcinogenic, poisonous, or dangerous chemicals into the air of Texas City (CPI, 2010).

Despite its successful brand positioning and strategy, BP was not delivering on the promise of its brand internally. Even in the renewable energy sector it only dedicated 4% of its exploratory budget to some form of renewable energy, a substantial amount and a move in the right direction, but not enough to qualify the entire company as being beyond petroleum (Goodman 2010). In its Second Quarter Results for 2010, BP reports that recordable injury frequency, integrity management major accidents, as well as loss of primary containment incidents have all decreased since 2000, 2004, and 2008, respectively, and according to the same report, injury frequency has been decreasing over the stated period for the industry as a whole as well (BP, 2010). In spite of these efforts, BP’s overall operations still focused on producing oil, a major contributor to climate change and human health dangers globally, and did so in a way that put stakeholders (including shareholders) at considerable risk of harm or loss.

Trouble on the Horizon

On the night of April 20th, 2010, abnormal pressure inside a marine riser on the Deepwater Horizon drilling rig (owned by Transocean Ltd., operating on a BP-owned well) caused an explosion on the platform, killing 11 workers and injuring 17 others. The ensuing oil spill into the Gulf of Mexico , one of the US’s most economically productive and biologically diverse bodies of water, released as much as 185 million gallons of crude oil (for comparison the 1989 Exxon Valdez oil spill released 11 million gallons), the largest accidental marine oil spill in the history of the oil industry (NYT, 2010). BP’s safety record and procedures came under intense scrutiny, and public outrage built as more was revealed about its


disregard for worker and environmental safety. Boycotts of BP gas stations, protests in front of the London BP headquarters, and 24-hour news coverage of the spill (brandishing the name “BP Oil Spill”) helped to degrade trust and belief in the brand image, as well as leading to a 52% drop in stock value (the lowest since 1996), net quarterly loss of $16.97 billion, $2.9 billion in clean-up costs up to June 30th, 2010, and total costs of the spill for BP anticipated at $32.2 billion, roughly the same amount as the entire nominal GDP of Kenya (BP, 2010; IMF, 2009).

The Crisis Response

BP’s initial reaction to the spill was to downplay the damage, estimating that only 1,000 barrels per day of oil were spilling into the Gulf, and later saying “somewhere between 1,000 and 5,000” after a separate 5,000-barrel-per-day leak was discovered (Slate, 2010). This had the effect of damaging their credibility and trust early on, leaving the public skeptical of future statements. Then CEO Tony Hayward also made a series of unfortunate contradictions and gaffes (presented in table 1), making the company’s motives appear to be dubious, insincere, and out of touch. Hayward also initially shifted blame to Transocean Ltd., but said they would give full support to the clean-up effort. This was perceived as an avoidance of responsibility on BP’s part, further degrading the public trust in its communications (Slate, 2010). Hayward later resigned and was replaced by the executive in charge of the Gulf Coast Restoration Organization, Bob Dudley, in October of 2010. Efforts to downplay the severity of the spill, cover only the positive developments in the clean-up, or over-sympathize with the victims were seen as patronizing, met with public outrage, charges of greenwashing, and reiteration of past shortcomings (Greenpeace, 2010).

Table 1. Source: Daily Finance (2010).

Tony Hayward and BP Notable Gaffs “We're sorry for the massive disruption it's caused to their lives. ...There's no one who wants this thing over more than I do. I'd like my life back." - May 31st, to reporters during the aftermath of the deadly explosion. "What the hell did we do to deserve this?" - After 760 safety violations in 3 years and lobbying for less restrictive safety regulations. “…whether it was food poisoning or some other reason for them being ill, you know, there's a -- food poisoning is surely a big issue when you've got a concentration of this number of people in temporary camps, temporary accommodations. ...You know, armies march on their stomachs." - Speaking about the hospitalization of seven clean-up workers who experienced nausea, headaches, nose bleeds, dizziness and chest pains, doctors surmised that they might have had negative reactions to the toxic dispersant BP used to break up the oil spill. " The Gulf of Mexico is a very big ocean. The amount of volume of oil and dispersant we are putting into it is tiny in relation to the total water volume… I think the environmental impact of this disaster is likely to have been very, very modest " - May 28th, after scientists determined the devastation to be “catastrophic”. "I hear comments sometimes that large oil companies are greedy companies or don't care, but that is not the case with BP. We care about the small people." - June 16th, Chairman Carl-Henric Svanberg, expressing his concern for the Gulf residents.


Later BP pledged $500 million over a 10-year period to the Gulf Research Institute to research and assess the environmental impact the spill had on the Gulf, provided grants totaling $170 million to the states of Florida, Mississippi, Louisiana, and Alabama in an attempt to alleviate the impact of the spill on the states’ economies, established a charitable fund of $100 million for unemployed oil rig workers, donated $15 million for behavioral health outreach and support programs in Louisiana, set up a new Safety and Operational Risk Unit which would have the authority to intervene on any technical activity, and vowed to pay all “legitimate” claims for damages resulting from the oil spill (BP, 2010). These actions were a step in the right direction to restore its already decimated brand value, but BP needed a way to reconcile the need to spread word of their efforts with the need to avoid the appearance of greenwashing.

During the Exxon Valdez oil spill which, until 2010, was the largest spill in American waters, Exxon similarly tried to downplay the damage, pledged to pay for all of the clean-up costs, and compensate stakeholders for the damage. However, over time it failed to deliver on this promise, was embroiled in litigation for some time after the spill, and appealed several decisions in order to pay lower damages and distance itself legally from the negligent conduct of the Valdez’s allegedly intoxicated captain (who was acquitted of the charge at trial). BP and Exxon both shifted blame to other parties, vowed to pay more than they privately admitted to intending to pay, failed to acknowledge the uncertainty in the situation, and focused on technological solutions early on, as opposed to addressing the human crises (Washington Post, 2008; NYT, 2010). Despite the passing of over two decades, the name Exxon is still synonymous with the Valdez oil spill, a fate which BP’s brand would do best to avoid. But BP is in a different world of media than Exxon found itself in, with all the opportunities and difficulties that go along with it.

Social Media Campaign

It took seven days after the oil spill for BP to send out a tweet about its position or efforts to control the spill, seemingly another mistake on their part in the early days of the crisis. The common perception was that BP didn’t value its stakeholders enough to communicate with them. It also didn’t help BP appear to be technologically advanced or in touch with modern social media communication styles. However, after its first tweet on April 27th, BP became very proactive with its social media presence, tweeting a dozen or more times per day, tweeting crisis hotline numbers for wildlife and volunteers, as well as articles and updates on the state of the Gulf. This effort, along with its long delay before using Twitter, drew fire from a BP twitter parody (BPGlobalPR) that tweeted humorous and sarcastic updates, which had over 188,000 followers, compared to BP’s 18,000. BP demanded that Twitter enforce its parody rules Figure 3. Source: Twitter.com


and have the tweeter state that it was, in fact, joking (NYT, 2010). It also updates its Facebook profile daily with details of oil recovered for that day and total oil recovered thus far. The Facebook page allows fans to comment about anything they want, not censoring criticism or insults, making it appear more transparent and effectively facilitating a public venting session. In addition BP’s YouTube channel has messages about the clean-up efforts, executives and workers speaking about the spill, while their Flickr photostream shows photos of the cleanup, community outreach, oil-soaked wildlife, and controversial altered images alongside the originals, next to a statement to demonstrate the extent to which the photos were altered. BP also paid for search results on Google to bring up BP’s spill response site link on top, above environmental group listings, assuring it maintain visibility during the crisis.

While the initial social media response was generally deemed slow and wanting for detail, BP’s later aggressive focus on social media, while receiving a mixed bag of responses, has been perceived as a good effort to restore its brand, giving BP a more human face than when using traditional PR tactics or downplaying the crisis (Slate, 2010). While a steady barrage of reports and positive news from the company itself could be perceived as propaganda, in times of crisis there is no such thing as communicating too much. BP overall has done a relatively good job via social media of appearing to be transparent, providing detailed information about the clean-up efforts and updating the public on its efforts, passing along reports of the Gulf’s recovery, and making available contact information for members of the social media network to help in the efforts to save wildlife and recruit volunteers. Much of the criticism of the social media methods being implemented by BP revolves around not using two-way communication, not involving itself and its stakeholders in a conversation, but rather simply broadcasting messages and providing updates (Mitch, 2010). Because BP is new at such intensive use of social media, it may not have yet figured out how to actually engage the public without creating liability issues or creating more of the dreaded gaffs that helped to accelerate the downfall of the BP brand at the outset of the crisis.

Beyond the Horizon

BP’s branding was initially a success story, becoming one of the most powerful global brands; gaining a positive reputation, and the respect of its customers based on a sustainable social and environmental message. However, it became apparent after the BP Gulf Oil Spill that the company’s operations and management culture did not align its identity with this sustainable strategy. The fundamental question BP should have asked itself before aggressively branding the company as moving “beyond petroleum”, as well as during the following decade is “can we and are we delivering on this promise?” Great, lasting brands are earned; built by consistently delivering on brand promises and internalizing the brand philosophy (Kotler, p. 262, 2009). BP had a chance to leverage the goodwill within its company when employees praised it for going in the direction of “beyond petroleum”, however, given its safety and environmental record, and relatively small renewable energy profile, it failed to set an agenda to reverse these trends, or internalize the spirit of the tagline into its operations and management.


An essential criticism of the beyond petroleum campaign is that BP is, at heart, an oil company. Oil consumption, while demanded in enormous quantities by consumers, is a leading cause of many environmental and human health issues globally. Even if BP had adhered to or exceeded safety and environmental regulations, would it ever have been able to deliver on promises of moving “beyond petroleum”? The truth is that petroleum made up 93% of BP’s investments in 2008, and although investing in the other 7% in renewables Figure 4. Source: Greenpeace (2010). (2.79% wind, 1.39% solar, and 2.79% biofuels) is a good effort for an oil company, it far from delivers on the claim of being beyond or moving beyond petroleum as a primary source of income or focus of investments (Greenpeace, 2010). This very fundamental contradiction may have been forgiven and a resevoir of of goodwill created if BP had a flawless safety record, personable executives who didn’t unintentionally insult stakeholders, and more progressive environmental standards. But the nature of doing business in immense volumes with a polluting, poisonus substance that the public has seen cause numerous environmental disasters is one of immense risk to external and internal stakeholders. This risk cannot be mitigated by a better logo design, bright, catchy commercials, or a dynamic social media campaign. The brand may be able to recover in time and may even regain the trust of customers, but this trust will be misplaced and fragile until BP can actually align its operations, management, and internal philosophy with the brand promise and goals. In short, a company that implements the brand promise of “beyond petroleum” must be able to do and show that it’s doing just that: moving beyond petroleum.


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BP: A Marketing Case Study

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