Brand strategies for an economic downturn

In financial markets as in marketing, perception is often reality. Today, while all economists may not agree that we are officially in a recession, consumers are increasingly pessimistic about the state of the economy and are behaving as though we are in one. As the cost of oil and food continues to climb, and property values continue to plunge, consumers are looking for ways to save and also maximize value when they do spend. For marketers, dropping prices is always an option, but this often does nothing more than undermine margins and brand equity. So, how do we go about 'recession proofing' our brands for the realities of today?

If successful brands are those that generate consideration and loyalty, in good times and bad, all brands would be wise to invest in these qualities during recessions, when consumers are much more selective about what they purchase. The dotcom bust, 9/11, corporate scandals and the war in Iraq all contributed to the recession of 2001–2002 and shook consumer confidence in government, business and other institutions, including brands.

DECLINE IN CONSIDERATION AND LOYALTY

In the late 1990s, consumer confidence was on an upswing, fueled by the dotcom frenzy. Interestingly, we saw in BAV that emotional loyalty, defined as a preference for a certain brand over all others, moved upwards in line with consumer confidence indices. The spike in emotional loyalty during the late 1990s/early 2000s can be attributed to the aspirational quality of many higher-end branded products that were suddenly within reach of a wider range of consumers. But, in 2002, exacerbated by the terrorist attacks of the previous year, emotional loyalty crashed, along with the financial markets. From 2000 to 2002, emotional loyalty and preference as measured in BAV declined by 27% and 20% respectively, whereas the typical change year-on-year is approximately 5%.

SPECIFIC CHALLENGES FOR TODAY

Data from the last recessionary period highlight the importance of value as a basic requirement for consumer brand sustenance. However, as the Detroit car makers can testify, addressing this consumer need simply by dropping prices is no guarantee of long-term prosperity.

Therefore, a wider reframing of value must become at least one part of the equation. Low price alone has not proven to be enough to build a strong brand. We know that now more than ever, it is important for brands to demonstrate leadership, vision and high performance if they are to meet consumer expectations. To attain optimal loyalty and consideration, brands must guide and inspire consumers in their quest to offer more value. The following are five approaches that different brands have employed that have helped them achieve these goals.

1. Highlight the Value Proposition that Enables your Brand to Stand Out

Marketers can change the way consumers think about their brand by reframing their value proposition. During the last recession, luxury brands like BMW and Mercedes achieved growth, at a time when one might assume they would face declining sales. By highlighting their total cost of ownership and offering fixed maintenance costs, they managed to achieve volume growth, as buyers became attuned to value rather than sticker price.

2. Remove Cost while Adding Additional Benefit Appeals

Often, there are opportunities for a brand to remove or reconfigure aspects of its product, but to do it in a way that does not reduce value – or that even increases it. For example, Poland Spring water recently changed its packaging, saving on both cost and materials, while simultaneously creating a leadership proposition that is environmentally appealing.

Source: Admap Magazine

To be continued.