Paula Deen and Reputation in the Market

After admitting to using the “n-word” in the past and organizing a party featuring black people dressed as slaves, Paula Deen has been getting dropped by her sponsors like a hot, possibly racist, cathead biscuit. While the Paula Deen scandal speaks volumes about the current racial climate in America, another important lesson should be lifted from it: A bad reputation is poison in the marketplace.

Walmart, which has ironically been embroiled in various racial lawsuits and complaints, was the first major retailer to drop Deen. Following its lead, retail juggernauts Sears, Walgreens, Kmart, Target, Food Network, and others have already made the decision to stop doing business with the 66-year-old chef and TV personality.

However, many people don’t see what the big deal is. There’s a Facebook group called “Support Paula Deen” which has attracted nearly 600,000 members. Even professional race-baiter Jesse Jackson has tweeted that he is willing to forgive Deen. But as innocuous as many people perceive Deen’s racial transgressions, it has proven to be enough to effectively topple her soul food empire.

And while many people may sympathize with Deen, it should be understood that businesses have every right and reason to disassociate themselves with whomever or whatever they find to be harmful to their image — just as the consumer has the right to refuse to support any business they dislike. Many people neglect to appreciate just how valuable reputations are to businesses.

A reputation is where the company tires meets the consumer road in a market: what it does, how it does it, and how well it does it — and how the public perceives each of these things. This ranges from word of mouth to Internet reviews to community ties to how the media depicts the company. For a business, there is no shortcut to a good reputation: it is a fragile chia pet that must be grown and maintained naturally.

The last thing a company wants to do is to alienate itself from customers. Therefore, through this ‘natural selection’ of public opinion, businesses will seek to minimize any associations and actions the public finds offensive. And that includes guilt by association.

Whether Mike Duke, CEO of Walmart, personally believes that Paula Deen is a raging racist is beside the point. Because many individuals become uncomfortable at the first sniff of racism, Walmart calculated that keeping Deen’s products on the shelves will cost the company more than it will benefit it. Period. Whether this will be its plan in the long run is yet to be seen; it’s very possible that Walmart will later gauge public opinion to be sympathetic to Deen’s situation and bring her back. That’s the beauty of the market — it is ever adapting and ever accommodating.

For instance, when ‘sweatshops’ became a controversial mainstream issue, GAP and several other clothing brands drastically changed its manufacturing methods, either by closing their shops altogether or offering higher wages and healthcare.

When the pseudo-documentary Super Size Me came out, every fast food chain immediately began offering healthier menus and prominently displaying nutritional facts. McDonalds even got rid of its ‘supersize’ option altogether, as if this phrase alone had become some sort of scarlet letter of obesity.

However, for those who realized the economic necessity of ‘sweatshops’ in developing areas and enjoy the occasional 3,000 calorie burger, you can still find both products at different businesses — probably right down the street.

So, despite being primarily concerned with maximizing their profit, a corporation — like a fictional archetypal character in a Nicholas Sparks novel — truly cares about what you think about them.

Content published on the Young Americans for Liberty blog is only representative of the opinions and research of the individual authors. It does not necessarily reflect the views, goals, or membership of YAL.

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