Given that I find a marketing lesson in, well, everything, the one we got delivered to us yesterday morning by JPMorgan Chase was a no-brainer.
Hastily, JPMorgan Chase increased its offer for the critically-injured Bear Stearns five-fold, from $2 to $10 per share. Now why, we ask, would the acquiring company voluntarily agree to a quintuple multiple on an already accepted bid?
Because the Bear Stearns shareholders, screaming like proverbial stuck pigs, felt maligned. Not to mention poorer than when they acquired the stock. So, in order to calm the waters, JPMorgan Chase is coming up with the cash.
The marketing lesson? Glad you asked.
Bear Stearns traded for around $30 the Friday before it sold for $2. The week before that, it traded north of $70. Around a year ago, it was around $180. With this as the context, why offer $2? Why not zero?
At least if you offer zero, you get to be the hero! “Look, guys – as the acquirer, we’re taking on responsibility for your dodgy sub-prime deals, to the tune of $30 Billion. You’re tapped, so we’ll take it from here, and protect you from going completely under.”
Instead, it was as if they hosted a dinner for 6 at Le Cirque and left a $5 tip. The $2 offer, seen as insulting, had the opposite effect of the message they had intended, that of financial saviour of the venerable brand.
Now they’re up to an offer of $10/share to allow everyone to save face, and to stave off potential lawsuits and whatever else. Yes, this is an egregious oversimplification of a complicated financial transaction, but there’s a very simple point at the bottom of the whole mess.
You see, in today’s wired world, EVERY action sends a message that is delivered almost instantaneously, and EVERY message becomes a touchpoint that your constituency uses to form and revise their opinion of your brand. In this case, protectors get seen as pikers, because one portion of their actions made them seem penurious. Perception once again equals reality.
A good lesson for me, anyway. How about you?