Friday, November 25, 2016

CRKT and Brand Management

I am trying my hand at something a bit different here--more journalism-y.  If you don't like it, tell me in the comments section.  

If you follow knife subreddits closely you probably know this already, but for those of you that don't there has been something of a controversy surrounding two CRKT knives that were recently released. The first was a Blade HQ exclusive Lucas Burnley Squid. The second was a Knife Center exclusive Hootenany.

The problems were discovered probably a month apart and they were pretty similar. The Squid was labeled as having titanium scales when, in fact, they were steel. The item was marked as Ti, even the product number indicated Ti, but the scale was not titanium. The Hootenany was supposed to be a special edition with S30V blade steel, a steel rarely, if ever, found on CRKT knives. This was something that was on my radar when it was announced and then, for reasons I don't exactly remember, it fell into that pile of "next knife to buy" that we all have. When I circled back to see if it was still available, the Hootenany was gone and in its place was a true problem--the S30V steel was not, in fact, S30V.

CRKT tried to do some damage control.

They posted this on a thread over at BladeForums:

We are aware of the problem with the blade steel. We’ve taken immediate actions and the weight of the issue is not lost on us. An independent third party lab test has confirmed that the steel is not S30V. We were disappointed in the outcome of the test and we are currently revisiting not only our relationships, also our own processes. We have taken the following steps to ensure that history does not repeat itself: 

· Re-confirming our supplier certifications. 
· Developing an improved Quality Assurance process for all CRKT products. 

We care about quality here at Columbia River Knife & Tool and integrity is mission critical to how we have chosen to do business. We recognize that issues like these threaten that core attribute of who we are. We are working closely with Knife Center to “make it right”. Thank you for your patience. We continue to appreciate the support we receive from friends and fans, when circumstances arise. 

--Douglas Flagg VP Sales & Marketing CRKT

These two mistakes could not have come at worse time for CRKT. They just landed in Big Box stores, transitioning from the lower tier to the middle tier of production knives. They went from a strange collection of oddities (the "Edgie" anyone?) to some really great designs with big name guys like Ken Onion. And now this year, they released two knives, the M16 and the KISS in premium blade steels (Damasteel of all things). This after the Hi Jinx, their uber knife, won overall Blade of the Year in 2014. They had made the turn from low to middle and were clearly now aiming at the higher end of the production market. And then this happened. Really, really bad timing.

I have always had a good working relationship with CRKT. They have come on the podcast, provided review samples, and never complained when something scored low. In fact, they have always been grateful of the feedback. And I think they have been making some awesome and underrated knives (see: Liong Mah Eraser, see also: Eros SS). So while I am not a fan of any brand, it is has been fun watching CRKT pivot from one end of the market to another in an incredibly competitive environment.

But these two mistakes are concerning and the response has not been the best. In an effort to do due diligence, I reached out to CRKT and spoke to Doug Flagg by telephone. He has reviewed this article and approves of me releasing his statements. Here is a summary of what we discussed:

The two mistakes were totally unrelated but coincidentally, and unfortunately, happened at near the same time.

According to Flagg, the Squid mistake was caused by problems the OEM had with producing a consistent blackened finish on the titanium they were using. They contacted CRKT and informed them of the problem and changed the spec on the knife, switching from titanium to steel. CRKT approved the change, not noticing scale material was switched.

Having reviewed contracts professionally, I can tell you that this kind of thing happens all of the time. In fact, in construction contracts it is built in to the process--both sides negotiate a spec for the job and reduce it to writing and then as the job goes along the spec is changed. Once the job is mostly done and the specs are finalized, they produce a document called a punch list and then the builder must complete each item, including changed ones. It is a complex process of back and forth so I can see how this mistake would come about and go unnoticed. Even more problematic in this instance is that CRKT did release Squids with titanium scales, just not black version. So I bet a dollar to a donut they just used the old contract and old spec list and added "black coating" to it. Then when the problem came about they approved it and didn't realize it changed the spec.

Honestly, this one is not such a problem. Its easy to see how it occurs. That doesn't make it okay, but it does make it understandable.

The Hootenany is an entirely different issue.

According to Flagg, the OEM told CRKT that the steel was S30V steel. CRKT received the knives with the S30V mark and sent them along to Knife Center. It wasn't until that Blade Forums post that they realized there was a problem. They then got a unit and sent the blade off to SB Specialty Metals (a company that does a lot of business in the knife industry both as a steel supplier and processor, offering large batch grinding services and other things), which confirmed through testing that the steel was not S30V. Without a full metallurgical analysis, CRKT can't say for certain, but the Hootenany's steel is likely in the 107X-108X family (hence the crazy rust seen in the post). Tracking down the problem has been difficult. The OEM is overseas, presumably in China. This presents all sorts of language and economic barriers, but so far as CRKT can tell, the OEM was duped by the steel supplier. CRKT is meeting with the OEM in person, face to face in the coming month and they are investing in handheld steel detectors that can distinguish one kind of steel from another with the push of a button.

In both instances CRKT offered to refund all of the purchases.  They also worked closely with all 75 people that purchased the knives as well as Knife Center itself.  

In the end, I am not sure that was enough. Knife knuts are a passionate group of enthusiasts. They do not woo easily and have long memories. And while CRKT did release public statements and buy back the knives in question and issue refunds, this isn't exactly the most impressive response we have ever seen to these sorts of problems.

In law school and business school there are two paradigmatic examples of using a problem to improve your brand--the Tylenol recall and the Lexus repairs.

In 1982 someone (never caught, BTW, one of my favorite unsolved mysteries now that the Watergate source was uncovered and the identity of the Unibomber has been confirmed, though the DB Cooper mystery is equally interesting) tampered with Tylenol and put poison in the pills. Seven people died. Johnson and Johnson not only helped stop the sale of Tylenol they did two things that really switched this horrible negative into a positive for the brand. First, they took out ads on TV specifically telling people NOT to use their products. Second, at the same time the ads were running, they recalled EVERYTHING. In all J&J recalled more than $100 million in products and spent millions more on advertising. Tylenol got it--if they wanted to keep making medicine they had to prove to the public that their health was the #1 issue. In taking such radical and expensive steps Tylenol saved their brand and earned public trust in the face of a true disaster. That was an impressive response to crisis.

Lexus did something very similar when their brand launched. At the time, the idea of a luxury Toyota seemed ridiculous. BMW, Cadillac, and Mercedes all laughed. And then the cars came out and they were damn good. A little less laughing. And then they started selling. Even less giggles. And then two customers, yes, just two, complained of faulty wiring that caused a breaklight to overheat. Lots and lots of laughing. Lexus recalled every car they made, all 8,000 at the time. BMW, Mercedes, and Cadillac all pause to scratch their heads. Lexus had employees, from dealers to receptionists, drive to where the owners had their cars and picked them up and drove them to dealerships to be fixed for free. In places where dealerships were far away Lexus rented garage space and paid local mechanics to fix the problems. And this move, costly as it was, saved the infant brand. Now no one, not BMW or Cadillac, laughs at the idea of a Japanese luxury car.

These two examples stand in stark contrast to what CRKT has done--they are obligated to provide refunds for mislabeled products. Almost every state in the US has consumer protection laws that cover this. So, yes, it is a good thing to do, but I don't think they deserve praise for merely doing what is required.

The question is twofold--1) what will this do to the CRKT brand; and 2) what could they do to make this their recall or repair moment, following in Tylenol or Lexus's footsteps?

I think the Squid thing is a very simple and common problem--Mr. Flagg owned up to the error and explained it. I don't think this error calls for anything more than a bit more attention to these special editions. Mr. Flagg has already said they have changed their special edition process. I doubt this error will happen ever again.

The Hootenany steel issue is a horse of a different color. This is a problem that strikes at the heart of their business. If they lie about their steel, they are lying about the very essence of what they sell. Its like selling a Ferrari with a Yugo engine.

Here are some things I would recommend doing. 


First, CRKT needs to be very public with their upgrades to their testing process. Second, they need to vet their OEMs better. If they contract with an OEM that contracts with a shady steel supplier, they are complicit in the problem. They shouldn't be working with OEMs that are either unethical enough or gullible enough to be tricked like this. Third, they need to do something special for those folks that bought the Hootenany with the bum steel.

I asked Mr. Flagg if this series of mistakes has persuaded them to bring manufacturing back to the US, but he confirmed what I suspected--they couldn't do that economically. That said, there are a lot of companies in the same boat as CRKT. If one of the US OEMs, like Millet or TRM, could scale up and serve CRKT, Kershaw, AG Russell, SOG and other folks that use overseas OEMs maybe there is enough business to use economies of scale and make things for cheap here in the US again. It wouldn't happen anytime soon, but I think there is money to be made doing this for anyone listening.

Well, there is my take on the CRKT issues. I hope it has been informative. I think CRKT is still worth a look, but these two incidents (really the Hootenany one more than the Squid one) has cost them some of their hard fought reputation. Their willingness to discuss this issue and their willingness to let me post basically exactly what I wanted shows that they are taking this situation very seriously.  Everyone makes mistakes, how we address them determines who or what we are.  And Doug's final message is something I believe--CRKT will not make this mistake ever again. 


Thanks to Jordan Wagner for bringing these issues to my attention. I am working on another piece based on info he sent it. It should be a good one. Keep an eye out for it.

17 comments:

  1. I have been and continue to be interested in articles like this. Correct me if I am wrong, but it seems like for this: "I take great pains to make sure I do a good job, lay out all of my biases and reasons, and ignore hype. I also hope that you find this information useful, interesting, and funny." to be fulfilled, this sort of article helps to provide that service beyond the scope of a review of a particular piece of gear. This sort of article is a review of the knife industry forest instead of a particular gear tree.

    ReplyDelete
  2. Hey Tony, I'm the OP from the BladeForums thread. If I can help in any way, I would be glad to.

    I find it heartening, but curious, that CRKT responded to you but did not provide more information in the Blade Forums thread. Knifecenter essentially had to act as the middleman for them and relay their response about the situation. The tepidness of their response ended up upsetting people even further about this situation, since it sounded pretty non-committal.

    What worries me most about this situation is that it will probably be propped up ad nauseum as an example of why Chinese manufacturers shouldn't be trusted.

    ReplyDelete
    Replies
    1. Blade Forums and forums in general are hard to use as a platform for getting out information.

      Delete
    2. True, but they made no mention of it on any of their social media platforms either. The vast majority of CRKT fans are blissfully unaware of both of these issues they've had.

      Delete
  3. I always enjoy reading articles of this stripe. I have to wonder, though: what else could CRKT do to make things right? They're already doing a full refund. Swag (hats, shirts, etc) probably wouldn't have a positive impact. As much as I agree that they're looking at a kairotic moment, I can't envision a way for them to feasibly capitalize on it.

    ReplyDelete
    Replies
    1. I would like to see them do something special for the buyers that got a knife different from the one they purchased.

      Delete
    2. Maybe there is a difference of scale between the folks at crkt and the people running Johnson and Johnson and Lexus? As you've mentioned several times, companies like crkt are actually quite small and generate the disposable capital to match. It might be much more difficult for them to make those types of grand gestures. I, for one agree with Grayson that this was handled fairly appropriately, barring some minor communications issues.

      Delete
  4. Great article. Personally, I still wouldn't be turned off of buying a crkt product (unless this continues to happen). Even with that said, I still think it creates a problem for their brand. In my mind (and probably most consumers), I still think of crkt as a low-end knife brand. If they are trying to change their brand perception, they haven't been successful and this sort of thing won't help.

    I'll continue to watch and root for them though. If I remember correctly from the podcast, they are an extremely small company. And so I still think what they have been able to do is impressive, and there were bound to be some stumbling blocks on the path to mid-tier knife manufacturer. I certainly wouldn't put these mistakes in the gerber lock-fail recall category.

    ReplyDelete
  5. Good article. I think one of the problems at the heart of the matter is that CRKT is not a manufacturer. They have no experience in actually making knives. They are beholden to the OEMs they use and making sure they live up to contracts. When overseas samples come in to Spyderco/KAI/Benchmade, they have actual knife makers and equipment needed to test and verify anything they need to which greatly reduces the chance of these things happening.

    Now before someone uses the auto industry to counter my comment (car companies don't make all their parts and sometimes have zero experience in the manufacture of certain types parts)... the auto industry pays companies MILLIONS of dollars to disassemble cars, catalogue and verify individual parts and even estimate the cost of production to make sure they aren't overpaying for the part. That's the length they go to ensure this type of stuff doesn't happen.

    I doubt anyone in the knife industry is gonna or needs to invest in anything that extreme.

    ReplyDelete
  6. Really enjoyed this article and would love to see more of these types of pieces. I think CRKT needs to do something visible and be very up front about how they will be checking all the steel coming in from their OEMs before sent out to knife retailers.

    This was obviously just a mistake and not intended by them, but their response has been pretty lackluster and doesn't inspire a lot of confidence that this hasn't happened before and gone unnoticed for whatever reason.

    I'll continue to check out CRKT stuff, but the idea that the steel has a tiny chance that its not be what they claim, will be in the back of my mind when considering it. I don't know if that thought is 100% justified, but its there regardless. Which is a huge shame, because they are making more and more interesting stuff these past couple of years.

    ReplyDelete
  7. Someone needs to get those steel analysts to look at that 'CPM154' that Quartermaster uses.

    ReplyDelete
  8. I had a M16 from CRKT that was pure total junk, have stayed away from them ever since. Spyderco, Kershaw and Bencmade have made up my regular middle tier purchases. Chris Reeve Knives, Strider & Hinder have been my pick for top production(midtech). CRKT, SOG and Gerber at the bottom for me.

    ReplyDelete
  9. While they clearly aren't guilty of deliberate deception, I think CRKT may be guilty of naivety in their dealings with their Chinese manufacturer. You just have to have rock solid quality control in place. In the past I've had Chinese suppliers change the plastic used in mouldings, modify tooling and outsource to unapproved third parties without telling me. In a country where it's financially worthwhile to manufacture fake eggs(!) suppliers will take any advantage they can, and it's often their best customers who suffer most.

    ReplyDelete
  10. Tony,
    That was a relevant and informative post. Thanks for taking time to explain an issue that has probably gotten all fouled up on the interwebz.

    ReplyDelete
  11. Do you know if the OEM was in Taiwan or the mainland?

    ReplyDelete
  12. Great article and an interesting read. I don't follow CRKT too closely, but purchased one maybe 15+ years ago and an aluminum handled M16 more recently and have been impressed by the leaps made in build quality. No, they are not ZT, but they are definitely not Gerber. With their pivot upmarket, it's understandable to place high demands on them, but I don't know if a comparison to J&J or Toyota is fair. Those are giant corporations with multibillion dollar market caps! Companies like those have the cash and resources to do that type of extreme damage control. I don't know if it is realistic or reasonable to expect that CRKT do the equivalent. However I do agree that the response appears weak, and perhaps a place to start might be more openness on their end, raising awareness of the problem before others do it for them. More than doing something special for those who have purchased these knives (which goes without saying), demonstrating that they are extensively and independently testing samples of all of the "special edition" steel knives they've put out this year would also help reassure consumers.

    ReplyDelete