Talk of crisis could be a death spiral for Thomas Cook

One of the greatest moments of the very great comedy series The League of Gentlemen takes place when a policeman visits the home of snub-nosed serial killers Edward and Tubs. The policeman asks politely if either of the pair have seen a missing backpacker. After a careful pause of about three seconds Tubs blurts out “we didn’t burn him” and the episode descends quickly into horrific madness.

And it’s rather a similar story for Thomas Cook. The 178-year old travel agency should be talking about holidays and sunshine this time of year but its current financial crisis means it has to respond to the ugly rumours that are now circulating around its longevity, or lack thereof. And every time the company attempts to reassure customers that it “has the support of our lending banks” or that people “can have complete confidence in booking their holiday with us” it has the exact opposite effect from the one that was intended.

Changing market conditions have led to significant losses and write-downs at Thomas Cook in the last year. The company has been shutting things down and selling assets with an apparently rapacious desire to offload. Most recently the company sought bids for its fleet of 105 jets.

It was this fire sale and the fact that much of Thomas Cook’s newest bank loan is secured against these planes that prompted auditor EY to issue a rare warning on Thursday. That warning prompted Citigroup analysts to then conclude that the company’s shares were essentially worthless a day later.

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That headline, reported first in the business press and then the popular titles, sparked a sudden surge in consumer concern. The company still sends 20 million people a year on holiday and many of these trips are the packaged kind that a family pays for well in advance – hence the panic that engulfed Thomas Cook over the weekend.

Committed customers awaiting their holiday took to social media to check that they would not lose their upcoming trip. But, once again, no matter how many times the company tries to sound calm and reassuring to customers on Twitter, it still feels suspiciously and increasingly like “we didn’t burn him”.

We’ve seen this kind of commodifying panic before, in which perceptions of decline become a self-fulfilling prophecy. The media starts covering a brand suggesting that it is over-priced, or in trouble, or no longer cool and consumers absorb the message and turn it into reality.

Maybe Thomas Cook was already in financial trouble, maybe not. But by the time the story reached the market last weekend the perception of trouble had become something far more concerning than the trouble itself.

This has to be the endgame for Thomas Cook – not because it is struggling to stay in business, but because it is perceived to be.

It was Franklin Delano Roosevelt who famously told the destitute crowds emerging from the Great Depression, who had gathered for his inaugural address, that the only thing Americans now had to fear was fear itself. And it’s somewhat similar for brands. The only thing brands really have to fear is the spectre of losing their branded status in the mind of the consumers.

When a brand is strong, magical things happen to the organisation that owns it. Consumers perceive the size and pre-existing stability of a brand as a signal that this is a company that has more to lose than them if something goes wrong, and they take that risk as a signal of safety.

That safety leads to trust and then to repurchase. It ensures better terms from suppliers. Attracts better employees. Creates familiarity and the potential for loyalty. On and on it goes.

Branding’s virtuous circle

In fact, if you step back and look at it from afar, the branding process is a brilliant, circular money-making wheel. You know the brand and know it is big. So, you buy more and pay more for the privilege. The brand then gets bigger. More people get to know it and know it is big and they want to buy from it too. And the branding wheel keeps turning.

But the wheel occasionally turns in the opposite direction, as it has started to do for Thomas Cook. The company’s CEO Peter Fankhauser has gone to great lengths this week to reassure everyone that his company has a clear plan and has plenty of money to pull through the current crisis. But he is either missing the fatal point or choosing to ignore it in public.

Even if Thomas Cook had been in a position to survive its current tough times, those times have become immeasurably tougher since Friday. Fankhauser had a financial crisis to handle last week; that crisis remains but now he has a massive brand crisis to manage too.

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After a significant century and a half of brand power, Thomas Cook is haemorrhaging trust. And like air or Elvis or the ability to get an erection, you only notice something like that once it has gone.

While the company may well get Derek and Tracy to Magaluf next Friday and back home a week later, there aren’t going to be as many bookings in the future. Of all the perceptions a travel agency can get lumbered with, the one brand association that will kill you faster than a billion-dollar deficit is “not likely to be in business when my plane takes off”.

It’s very sad, but this has to be the endgame for Thomas Cook – not because it is struggling to stay in business, but because it is perceived to be struggling to stay in business. Perception really is more important than reality in this case. In fact, perception is about to become reality.

I think as marketers we underestimate the importance of trust in our approach to brand management. And I don’t mean the over-intellectualised, anthropomorphic version of trust that everyone cocks on about at marketing conferences. I’m talking about a deeper, more primeval version of the word that simply means it won’t do me any harm if I choose this brand over other options.

We have had brands for thousands of years. They pre-date food standards and the effective rule of law by centuries. If you found yourself in the ancient world in need of lunch or a catapult or a carriage, you had really only one recourse – the name of the company behind the product – to reassure you that this mystery object was not going to kill or maim or take your money and not materialise.

Many years ago I travelled with the ‘Barmy Army’ to Sri Lanka to watch the English cricket team get another mighty thumping in a test series. During our travels to Kandy for one of the matches we discovered there had been an influx of counterfeit alcohol into the local bars and booze was, quite literally, killing and blinding local drinkers.

This created something of an existential crisis for my travelling party and myself, because the idea of test match cricket without a massive flaming piss-up each evening was something none of us could countenance.

It’s easy to forget that for the first five thousand years of branding it was trust in a company not to collapse or make a product that would kill me that probably represented 99% of brand equity.

At stumps on the first day of the test we retired to a nearby recreational location and nervously circled the bar. In the end the only beer any of us had heard of was Lion so we took our chances for the rest of the evening with Lion lager and lived to tell the tale.

I still remember the very odd consumer decision-making process, in which we debated which booze was least likely to kill us, and the distinct feeling that my ancient ancestors had been doing exactly the same thing generations before me.

In a modern branding world, in which we focus almost exclusively on emotional benefits and brand purpose, it’s easy to forget that for the first five thousand years of branding it was trust in a company not to collapse or make a product that would kill me that probably represented 99% of brand equity. Without that trust, all other higher-order branding benefits are immediately negated.

And that is very bad news for Thomas Cook. They are in a no-win, no-survive situation. Say nothing about the crisis and brand equity will disappear – and, with it, most of the company’s future sales volumes. Address the concerns head on and reassure your customer base that the company will survive, and that reassurance fans the flames of a commodification crisis that ensures your sales disappear just as badly.

Whatever the great and very good associations that Thomas Cook has built up over its long and amazing history, when the floor of trust begins to fall away everything above it comes crashing down too. Whether this company could have survived its financial crisis is now immaterial. Its branding woes will do for it long before anything else.