Will Apple's Standoff with the FBI Hurt the Brand? 22 Mar 2016

Will Apple’s Standoff with the FBI Hurt the Brand?

The fight over digital privacy recently moved at a high speed into the public domain — the FBI vs. Apple. The Federal Bureau of Investigation asked Apple to unlock an iPhone used in the December 2015 San Bernardino, California shooting. Apple is refusing to comply, but the end of the story remains to be seen. Among the outstanding questions to be answered is whether this legal battle will hurt or help the Apple brand for the iPhone and other popular devices such as the iPad.

To meet customer expectations for more security, in 2014 Apple started to use more encryption on the iPhone. When Apple recently refused to respond favorably to the FBI’s request to unlock a specific iPhone, an attorney for the U.S. Department of Justice suggested that Apple’s refusal to comply with a court order “appears to be based on its concern for its business model and public brand marketing strategy.”

However, a company’s brand is an important asset for any business to protect. This can be a particularly delicate issue when data security is involved. For example, Amazon recently announced their intention to remove default encryption from their Fire operating system. When critics and consumers quickly assailed this “backward decision” involving digital privacy, Amazon reversed their initial decision — continuing to offer full disk encryption. While Amazon’s 2015 decision to reduce data encryption actually preceded the FBI vs Apple debate, it does offer another public example of how brand issues can impact business decisions.

In the case involving Apple’s iPhone, the FBI has not hesitated to suggest that the interests of national security are a higher priority than business interests. Many tech executives such as Google’s Sundar Pichai disagree and are supporting Apple’s legal stand. Recalling earlier data privacy abuses in the name of national security, whistleblower Edward Snowden is also a current vocal supporter of Apple standing up to the FBI’s demands for unlocking private data.

At this point, Apple’s brand remains unchanged either positively or negatively by the public legal challenges to iPhone data encryption. In the spirit of Apple CEO Tim Cook calling for a public debate, Research Optimus reflects on some of the most pertinent business brand and customer protection issues in the following discussion.

Apple’s Dilemma: Customer Privacy or National Security?

In some ways, the Apple vs FBI legal battle is a replay of earlier attempts by government agencies to force private businesses to hand over personal data in the name of protecting national security. The primary difference (and it’s a big one) — this debate is happening in public courtrooms and the media instead of secretive courtroom proceedings that were almost always “Top Secret” until Edward Snowden revealed what was really going on regarding “private” data.

On the issue of public brand and trust, Apple is currently choosing to protect customer privacy because that is precisely what customers are trusting Apple to do. As noted by Apple CEO Tim Cook, “The same engineers who built strong encryption into the iPhone to protect our users would, ironically, be ordered to weaken those protections and make our users less safe.” Apple officials understand that any actions making the iPhone less secure establish a legal (and marketing) precedent that could understandably weaken the Apple brand.

In the United States, issues of civil rights and personal privacy have traditionally outranked all other legal challenges. It has only been in the past 15 years since the events of September 11, 2001, that national security concerns have emerged in the legal background to compete with personal rights. Since terrorist acts have become more commonplace throughout the world in recent months and years, the legal debate is likely to be an extended one.

The 2016 Presidential election in the United States certainly adds to the visibility and drama surrounding this case. Some political candidates have suggested that the tech industry is “soft on crime” and not supporting the government’s war on terror. To some extent, Apple is currently serving as a proxy for the entire tech industry when images of Apple being non-patriotic are leveled by law enforcement officials.

But a company’s brand — for Apple or others — depends more specifically on what customers and prospective clients think about a business and how its products and services perform on a daily basis. In Apple’s case, this seems to depend heavily on customers wanting Apple to protect customer data, privacy, and civil rights.

Should Apple Act Be Based on Public Opinion Polls?

Public opinion polls by Pew Research currently provide only a slight edge to unlocking the iPhone — 50 percent favor unlocking while 38 percent say, “Don’t do it.” Given the traditional margin of error in such statistical studies and 12 percent who are undecided, this is effectively a toss-up.

Meanwhile, the FBI has publicly admitted that they can’t hack the iPhone — this is beneficial publicity to Apple because it amounts to federal law enforcement officials advertising how secure the current version of an iPhone really is.

While some branding and marketing experts such as Michel Pham from Columbia Business School have suggested Apple’s legal stance is a risky proposition that will alienate some customers, Apple is nevertheless receiving a massive amount of free publicity. In a world where some consumers might be dissatisfied with Apple’s position, a high dose of daily publicity can be a “priceless” benefit for Apple — particularly for consumers outside of the United States where national security issues are less critical.

The Impact on Apple’s Brand: Stable So Far

Based on current brand surveys, Apple’s reputation has not changed. According to YouGov, a brand quality measurement firm, Apple’s image among U.S. adults remains the same — and perhaps surprisingly, there is also no difference when political party affiliation is taken into account. In another measure of branding stability, Apple’s BrandIndex remains stable.

However, an extended political fight would have unpredictable results on the Apple brand. As noted by Steve Callander of Stanford’s Graduate School of Business, “If Apple gets drawn into that broader political fight, that’s not going to be good for them.” Donald Trump urged supporters to avoid Apple iPhones and announced his intent to use a Samsung smartphone until Apple complies with the court order. Any similar boycotts of Apple products can produce unwanted attention for Apple — of course, the opposite desired impact can also occur with more free publicity for Apple.

What is the final resolution of this fight? Perhaps Apple ultimately wants to show customers that they’re willing to fight for their rights — even if the court ultimately forces Apple to comply.

Conclusion: The Apple Brand Is a Long-Term Asset That Should Be Monitored

Most companies will not have an extended confrontation with the leading federal law enforcement organization — such as Apple is having with the FBI. However, businesses should take a lesson from this highly visible situation and keep a watchful eye on their brand reputation. Just as Apple should monitor their brand image, companies of all sizes should do the same.

In Apple’s case, the brand could benefit when all is said and done — or it might take a hit. It is vital for all businesses to regularly monitor brand reputation and then make appropriate adjustments to marketing and PR strategies. This typically requires an astute balance of primary research and branding studies. Independent research firms such as Research Optimus provide a prudent, cost-effective and unbiased way to do this.

– Research Optimus

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