How to make a brand toxic in just 6 easy weeks.

Building a successful brand is a painstaking exercise comprised of many elements, principally the quality of its services or products; the brand identity and how it’s marketed to appeal the right customers; a set of brand values that resonate with them as well as an excellent, or at least solid, brand experience - what it’s like to deal with the company. 

If any of these aren’t up to scratch it will eventually lead customers to look elsewhere. Clearly if the quality isn’t great customers will look for better, or if it’s overpriced. Marketing plays a key role for consumers and some will even pay a premium to be associated with a particular ‘badge’ such as a designer handbag. The brand values are ever more important for consumers who want to buy from companies that share a set of beliefs, such as sustainable sourcing. Then, even if all of these tick all the right boxes, if the experience isn’t good this will also drive customers away - how many times would you go back to a restaurant with great food but terrible service? Good businesses work hard to be the best that they can across all these areas to build value into their brands and to grow them.

What doesn’t happen that often is a brand owner taking a sledgehammer to their brand through their behaviour, damaging its reputation, sales and even the share price. 

Famously, back in the early 90s, Gerald Ratner was the owner of an eponymously named high street jewellers which he’d inherited from his father but built into a multimillion pound business. Every UK high street had a Ratners. Then, when speaking to the Institute of Directors on April 23 1991 at a dinner attended by over 6000 business people and journalists, he was asked how his company could be selling a sherry decanter for the fantastic price of £4.95? Gerald, presumably thinking he was being funny, answered “How can you sell this for such a low price? Because it’s total crap.” He went on to say that his company “sold a pair of earrings for under a pound, which is cheaper than a prawn sandwich from Marks and Spencer, but probably wouldn’t last as long.” Hilarious.

The company’s shares dropped £500 million in days. Gerald quickly lost his playboy lifestyle and the company had to ‘do a Phoenix’ - go bust and start again renaming themselves ‘Signet Group’. A case study in how to destroy a successful brand in less than 60 minutes.

Now Elon Musk is clearly an exceptionally intelligent human being, a genius in fact by most people’s measure. He sold his first business Zip2 to Compaq for $307 Million in 1999 making $22 Million for his 7% share aged just 28. Then he founded X.com which became PayPal and was acquired by eBay for $1.5 Billion in 2002. Musk, the largest shareholder with just over 11% of shares, received $175.8 Million. By the way, he later bought back the x.com domain name as he seems to have a bit of a liking for the letter X. 

Many people would’ve sailed off into the sunset on their brand new yacht, but Musk then used $100 Million of his fortune to found SpaceX in 2002 which, amongst other things, has built a constellation of 12,000 satellites which delivers the internet to over 100 countries. And, as if that wasn’t enough, he is perhaps most famously the owner of Tesla the world’s largest EV car manufacturer which reached a market capitalisation of $1 trillion in 2021 making him he richest man in the world. As stated, he’s a genius, which may also account for some of his eccentricities such as fathering 14 children with 4 partners.

Now our Elon isn’t backwards at coming forwards and he likes to make his opinion’s heard, which is presumably why he used a sizeable chunk of his fortune to make an offer of $43 Billion offer to buy Twitter. Given that Twitter is something of a black-hole when it comes to profits, it would seem this decision wasn’t driven by business acumen rather a desire to control the medium, and the narrative.

Whilst he tried to back-track on the deal, he ultimately bought the company in October 2022 whereupon he proceeded to lay-off a significant part of the workforce to cut costs, and then to use the platform for his own ends. For example, he released documents about Hunter Biden’s laptop controversy in the lead-up to the 2020 presidential election and he has been accused of trying to silence some of his critics by removing their accounts’ blue checkmarks and suspending their accounts without justification. He constantly makes inflammatory remarks even in areas where he has no stake or apparent knowledge, such as claming Kier Starmer was complicit in the grooming scandals and should go to prison. He doesn't limit his ire to politicians though, he gratuitously called the guy who rescued the Thai children trapped in a sunken cave a ‘paedo’. Twitter, now re-branded as X of course, has plummeted in value since Elon Musk’s takeover. 

The combination of Musk’s wealth and reach saw him join the top table in the recent US election where he has become Trump’s right hand man and now heads up ‘DOGE’ the Department of Government Efficiency. In this unelected role he as adopted a similar approach to that which he adopted when he walked into Twitter (bizarrely carrying a sink to apparently convey ‘let that sink in’ - again, genius).

The approach can be broadly defined as ‘fire everyone and ask questions later’.  The recklessness of this approach, such as firing 30% of employees working on reassembling warheads, one of the most sensitive jobs across the nuclear weapons enterprise with the highest levels of clearance, has quickly become apparent. The Trump administration had to quickly back-track leaving workers confused and experts cautioning that DOGE’s blind cost cutting will put communities at risk.

“The DOGE people are coming in with absolutely no knowledge of what these departments are responsible for,” said Daryl Kimball, executive director of the Arms Control Association, referencing Elon Musk’s Department of Government Efficiency team. “They don’t seem to realize that it’s actually the department of nuclear weapons more than it is the Department of Energy.”

Many a pub used to have a sign behind the bar that read ‘No religion. No politics.’ because they’re divisive subjects and there’s a risk of a heated debate getting out of hand and, fuelled by the odd pint of lager, escalating into a fight. Now Musk, being a genius, will clearly have his own agenda for supporting Trump such as influencing policy on EVs, SpaceX and X but he also must’ve have known the risks of getting involved in politics because, by aligning yourself with one side you’re inevitably going to alienate the other. The billionaire’s support for Donald Trump has provoked a furious backlash from those who used to be his electric cars’ biggest fans and Tesla’s share price has almost halved. A Morgan Stanley survey this month found that 85% of Americans think that Musk’s political statements are having a negative effect on the company. 

“Ever since Musk, 53, took a prominent role in Donald Trump’s presidential campaign last year the fortunes of his electric vehicle company have become inextricably tied to politics. That pattern has grown as the South African businessman has established himself as arguably the second most influential figure in the new administration after Trump. People who wanted to drive an EV at least in part for environmental reasons, those people tend to skew politically to the left, and they may have been willing to tolerate Musk at the head, although they disagree with him, when Tesla was really their only serious choice,” said Daniel Crane, a University of Michigan law professor and author of Direct Hit: How Tesla Went Straight to Consumers and Smashed the Car Dealers’ Monopoly. “Now that they have lots of other choices, it’s pretty obvious that Tesla is dramatically losing market share.”

The impact in Europe has been even greater where a recent survey  of over 100,000 Germans found that  a staggering 94% of respondents have no plans to buy a Tesla. For a company once celebrated as a trailblazer in electric vehicles, these figures are a serious blow in one of Europe’s key markets. As a company, Tesla is inherently tied to its owner, a bit like when Steve Jobs ran Apple, which has historically contributed to its success:

“Analysts have argued that Tesla stock has been overvalued because of the fervent following that Musk commands. Tesla was always more than a car company... the brand represents to Musk’s supporters a techno-utopian future powered by green energy, relentless innovation and artificial intelligence.” Louise Callaghan, Sunday Times.
 
But the link between Musk and Tesla cuts both ways and his increasingly bizarre behaviour - he even threw a Nazi salute at a MAGA rally to fully underline his radicalism - has seen anger towards the businessman grow including on the right. Even Steve Bannon, the MAGA extremist, has called Musk a “truly evil person” and accused him of trying to implement “techno-feudalism on a global scale”. His alignment with the right, as well as alienating the left, also seems counter-intuitive as Musk is much more popular with pickup truck drivers and gas car drivers than he is with electric car drivers. Pickup truck drivers are generally very anti-EV, they’re typically very proud of their gas-guzzlers and are usually climate change deniers as is Trump himself who has historically lambasted EVs until Musk started to back and fund him.

This led to recent bizarre scenes at The White House with Trump trying to bail his new friend out of the hole of his own making by running an impromptu sales event on the lawns and even buying one, or at least pretending to! The brand’s association with Trump poses a particular threat, according to Mike Murphy, a Republican political consultant and founder of EVpolitics.com, who said:

“The question for Tesla is: is Musk lessening the hostility that Republican consumers have for EVs [electric vehicles] as Bidenmobiles and electric liberal-mobiles? The answer is that he is, but that it’s a slow road. On the other hand, he’s devastating Tesla’s brand among Democrats and independents who are much more likely to be buying a Tesla in the next year.” 

As well as halving the share price and seeing sales crash both in the US and especially in Europe, the backlash has also seen arrests at anti-Musk protests and even the vandalism of Tesla showrooms. Apparently in Silicon Valley, where Tesla’s are ubiquitous, many now bear bumper stickers saying “I bought this before we knew Elon was crazy” and social media is awash with liberals trying to sell their Teslas. In London a group calling itself ‘Everybody Hates Elon’ is thought to be behind a mystery poster campaign with ads appearing on bus stops and on the Tube with slogans like “Tesla: The Swasticar”, “Buying a Tasla? you may be in for a Nazi surprise...”  “Autopilot for your car. Autocrat for your country.” and “The fast and the Fuhrer.”

The legendary adman Sir John Hegarty, who has a great knack of expressing his thoughts in a really clear and concise way, proposed that:

“Brand and reputation mean essentially the same thing.”

The toxicity that now surrounds the Tesla brand, caused solely by the actions of the owner, demonstrate this to be true. And, because Elon Musk is synonymous with the brand, his crashing reputation has dragged it, and its sales and share price, down with him.