Reputation Fallout of L.L. Bean’s Break with Tradition

MaineL.L. Bean: a “family business” under pressure  

After marrying into an 8th generation Maine family seven years ago, I soon came to understand how dear L.L. Bean was to them – and the Pine Tree State’s residents at large.

Multiple family members – including my wife – worked for the company, pilgrimages to the Freeport flagship store were the norm, and gift cards a holiday staple. L.L. Bean’s value proposition was clear: great products from a proud local business that were covered by a no-questions-asked lifetime or exchange guarantee.

Not surprisingly, the company’s announcement early this year of scaling back their return policy caught my eye. No longer would customers be able to receive a refund, merchandise credit, or exchange – irrespective of the date on which they were purchased. Instead, customers now had one year to return their purchase with a receipt – no questions asked.

After 12 months, it would be up to L.L. Bean to evaluate returns based on defects in manufacturing or craftsmanship. Return abuses and the increasing costs associated with them were cited as the main (pun intended) driver of this policy change.

warranty.PNGImage source: Hip2Save

What triggered changes L.L. Bean?

2017 was a tough year for L.L. Bean. The iconic American outdoor retailer suffered from the lingering fall-out of a children’s water bottle recall due to lead-contamination, flat sales, and got caught in political crossfire with company heiress Linda Bean’s vocal and financial support for the Trump campaign.

The latter has led to several strategic business decisions by company President and CEO Steve Smith, appointed in 2016, mostly centered around cost-cutting measures. In addition to a revised return policy, the minimum purchase for free shipping was increased to $50, workforce reductions implemented, and bonuses and pension plans were eliminated.

While Smith highlighted an overall positive reception of the shipping and return policy changes, the public’s feedback seemed decidedly more mixed. The company received support (from my father-in-law, among others) for cracking down on abuses of the original satisfaction guarantee, but also scathing criticism from customers for, in their opinion, braking a historical company promise of fully standing behind their products. This has  culminated in an ongoing lawsuit by an Illinois man claiming that the recent change is “deceptive and unfair” business practice.

In L.L. Bean’s online letter explaining the rationale behind the revised guarantee, Executive Chairman Shawn O. Gorman stated that “Our commitment to customer service has earned us your trust and respect, as has our guarantee, which ensures that we stand behind everything we sell.”

The question remains: above and beyond anecdotal evidence, has this trust and respect eroded – and, if so, has it impacted  the company’s reputation and stakeholder support?

Has L.L. Bean’s reputation declined?

To answer this question, we used data from the Reputation Institute’s annual US RepTrak® 100 study, measuring the reputation of hundreds of the largest and most visible companies in the United States – including that of L.L. Bean. The following findings contrast the company’s reputation and performance measured in early 2017 with that in February of 2018.

The results: reputation, performance, image, and support trend downward

In 2017, L.L. Bean was highly ranked at number 16 overall, with an excellent reputation score of 80.8.  A year later,  the company had dropped out of the top 100 with a score of 72.6. While this still qualifies as a strong reputation, the 8.3-pt. decline was among the steepest of any company ranked in the top 100 in 2017.

Figure 1: L.L. Bean 2018 Reputation Dimension Scores and Weights

fig1

While the reputation score shows the emotional connection that the general informed public has with the company. Figure 1 shows the YoY change in L.L. Bean’s perceived performance on the seven dimensions of reputation, along with their relative weight.

Starting with the most important single driver of reputation, we see that Products/Service and Performance had the lowest drop of -2.7-points overall and remained the highest score for L.L. Bean across all dimensions. This drop though was 35% higher than the average change for all measured companies in 2018. When looking at the underlying attributes of this dimension, “stands behind products” and “meets customer needs” saw a much steeper drop in scores of -3.3 and -4.4-pts., respectively – three times the average decline compared to all other companies on average.

Whereas customers did not previously have to think about the ins and outs of returns and exchanges, they now must consider deadlines, availability of receipts, and deal with uncertainty around whether the company will address or solve their product issue.

Aside from Products/Services metrics, it is notable that L.L. Bean’s reputation decline was mainly driven by significant drops in perceived performance on corporate social responsibility, which accounts for 42% of any given company’s reputation in the United States. Lower Governance scores (fairness, openness, and ethical behavior) seems to indicate a lack of transparency around the return policy change. Only 19% of respondents feel that the company provides enough information about what it does and a mere 22% say it communicates often.

The recent changes in workplace benefits and staffing have clearly cast L.L. Bean in a more negative light from an employee perspective, with the steepest ratings decline in the Workplace dimension. It is therefore not surprising that the general informed public tends to judge the company more harshly on what the company does for them and the community at large, as indicated by lower Citizenship performance.

In sum, our results seem to indicate that the recently implemented business strategies have had a broad negative impact on L.L. Bean’s reputation  i.e. the emotional connection that the general informed public has towards the company. We have also seen L.L. Bean’s performance rated more negatively  not only on product and customer service performance, but across all key operations of the business.

In addition to a 22% pt. decline of being seen as a genuine company, Figure 2 shows a significant decline across all supportive behaviors – particularly in purchase intent – no doubt a critical metric for the company.

Figure 2: L.L. Bean Percent Strong Support – 2018 vs. 2017

fig2

The fact that the second biggest drop is in Trust To Do The Right Thing mirrors the growing perception that L.L. Bean is increasingly perceived to be falling short in its role as a good corporate citizen and employer. Instead, the public discourse seems to center around sales and profit metrics – one of the least important drivers of reputation – or in the words of its CEO  “a path to a more prosperous future”  with “new opportunities for growth and improved performance for many years to come.” Finally – given the company’s plans for continued expansion of new brick-and-mortar stores – the recent decline in willingness to welcome it locally or to consider it as a potential employer gives pause.

Don’t get caught outside – how to recapture hearts, minds, and improve your reputation

Clearly, L.L. Bean has taken a reputation hit – but Mainers are a resilient, and resourceful people. The good news is that the company still has a solid reputation capital, and a healthy amount of goodwill among its loyal customers. What can companies, such as L.L. Bean, take away from some of the research insights presented here?

Show leadership by over-communicating via multiple channels and be transparent about policy implementations. Change is hard – especially when it comes to policies that have been at the very core of the company’s identity and promise. The “how” is at least as important as the “what.” Our research indicates that those companies who make their CEO a central and public figure in communicating strategic business changes tend to be the most successful from a reputation impact perspective.

Tell existing and current customers how changes will benefit – or at least not hurt them. While assigning blame to those having abused the return policy is a fair strategy – it is not sufficient. A better solution for L.L. Bean may have been to keep a simpler, slightly more restrictive 100% customer satisfaction guarantee: “After one year, we will repair any product at any time without proof of purchase.”

Re-frame workplace changes. Restructuring may be unavoidable to secure a company’s (financial) future – including changes in benefits and staffing. How are these measures going to help existing or future employees? How is the company making transitions as painless as possible? Make sure that the narrative centers around what new or existing advantages the business provides as an employer – and that financial sustainability has broader positive impacts above and beyond the company’s profit goals.

Showcase corporate social responsibility. CSR – especially Governance and Citizenship – are key drivers of reputation and business performance. Illustrating and creating more awareness around programs and initiatives – both via owned and earned media – is a crucial part of reputation and risk management. In the case of L.L. Bean, this would include their grant programs focusing on kids’ outdoor education – to the amount of $2 million dollars in 2018.

No doubt, L.L. Bean will continue to hold a very special place in the hearts of many families – including mine – both in Maine and beyond. As the (outdoor) retail industry continues to evolve, both from a competitive and retail-type perspective, a smart approach to reputation management will go a long way in ensuring that Bean Boots will remain a staple for many generations to come.

svenagainSven Klingemann, Ph.D.                                                          

Global Research Manager
sklingemann@reputationinstitute.com

 

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