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Don’t break your brand promise … ever.

I don’t pretend to know a thing about the recent GameStop trading debacle. From what I gather, and please know that there are better sources on this than me, all the big investment banks, brokerages and hedge funds were selling GameStop short. That’s an unsurprising tactic because it’s a mostly obsolescent brand. A consortium of day traders who hate short sellers, hedge funds (or both) organized on Reddit to buy up GameStop stock. That sent the price skyrocketing and caused massive losses for all the short sellers and the day traders got to enjoy their stick-it-to-the-man moment. Let’s ignore the morality of all this. The system is unfair, to be sure, favoring institutional traders at the expense of the little guy. But the losses from this gambit won’t be felt by the big fund managers. It will be felt by all the fixed-income retirees whose pension funds are managed by the hedge funds, etc. So, to me, this feels like asymmetric warfare, like killing a fly with a shotgun. But, again, let’s ignore that and, like I said, I don’t really understand, completely, what I’m talking about anyway. But I do know a branding disaster when I see one, and there’s a doozy here.

Not GameStop itself, mind you. I’m ambivalent about its brand. No, the branding disaster is happening at Robinhood. Robinhood is an app for making commission-free trades. Anyone can use it and, apparently, most day traders do. When they were driving up the price of GameStop, they were doing it mostly using Robinhood. When things got too volatile and the big institutions were hemorrhaging money, Robinhood did the unthinkable. It shut down trading on its app.

Wait a minute. Robinhood is supposed to help the little guys win. It’s implicit in their very name. That’s their whole reason for existing. That’s the purpose to which their millions of customers employ them. That’s their brand promise and they broke it.

A business has to know its brand promise (strategy). It has to make its brand promise to its customers (marketing). And, most important of all, it has to deliver on that promise (operations). When the market witnesses all three of these things happening, it bestows on the business the highest honor it can give – brand loyalty. It’s a symbiotic relationship, almost like a marriage, and it actually defines the brand.

Robinhood has been earning that brand loyalty since its launch in 2015, to the point where it was a leading app for individual trading. By suspending trading, Robinhood broke its own brand promise. That’s like cheating on your spouse. Pretty unforgivable. Day traders are hopping mad and Robinhood is sleeping on the sofa. It’s never a good idea to piss off millions of your best customers.

Why did they do it? I read somewhere that one of their financial backers was actually a short-selling hedge fund that was bleeding money due to the Game Stop rally. They had leverage over Robinhood to force them to remove the mechanism that was causing them so much pain. And they used it. But, again, please get your financial reporting from a more reliable source.

My larger point is Robinhood, whatever the story, committed a serious own goal here. You may even call it brandicide. Time will tell if it was a successful attempt or whether the patient will pull through. Lululemon once tried to save money by shifting to a less expensive supplier of fabric. Their brand promise was to make a consumer’s rear end look its best during yoga, when one is particularly vulnerable to feeling unattractive. Unfortunately, the cheap fabric stretched thin and had the exact, opposite effect. Lululemon broke its brand promise by making its customers’ hindquarters look … searching for the right word here … exposed. Years later, Lululemon is a strong brand again. But it was a long, slow recovery. Some brands never make it back. Remember Lance Armstrong, anybody?

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