Make better branding your New Year’s resolution
Economic slowdown, recession, depression, call it what you will. A bad economy affects everyone. When times are tight, the bottom line is dictated by the sense of value consumers place in your brand, or more precisely, how much they are willing to pay for that value.
Both the value perceived by consumers and actual value are strongly influenced by brand. Brand can drive growth in an up market or protect the company’s value in a down market. One of the most important, but often overlooked, aspects of a recession is the insecurity consumers experience. As consumers feel the pinch, they begin to search for change.
Companies need to focus on actions that take advantage of the opportunities that change brings. Branding in a recession is all about investing in consumer retention and attraction.
During a recession, most companies cut back in every area of the business and start slashing prices to accommodate the shifting demand curve. While this may help in the short term, this strategy can actually damage both the company and its brands. There are tremendous lessons to be learned from previous recessions. Not everyone automatically loses out in an adverse economy. Historically, companies who invested in their brands during hard economic times retained their core audience, attracted new consumers and emerged stronger in the end.
In a poor economic climate, companies must recognise that consumer retention and attraction is the name of the game. You must invest in brand-building to win market share, not just margin. Those who fail to see their consumers as an appreciating asset may soon find their brands and business devalued or defunct.
During a bull economy, consumers have more disposable income, spend more freely and take bigger risks. However, a bear economy forces people to evaluate their purchasing decisions with a critical eye towards value. Consumers’ spending habits change dramatically – they take inventory of their costs and the related benefits. If the value is not readily apparent, they could move on to a “safer” option.
Recessions are brought on by many factors, but are fed by consumers’ economic fears. People spend less overall and become far more selective about where they spend the little money they have. This tends to expose and amplify brand weaknesses. As consumers are far less forgiving and far more price-conscious, they abandon brands that fail to provide clear, meaningful and relevant value.
Branding cannot be reserved as an exercise in times of growth. To be effective it requires constant maintenance, perhaps even more so in times of crisis. Take care of your brand and your brand will take care of you. Neglect it and you’ll immediately feel the ill effects. Brands are built over decades and generations. Think long term – make your competition chase you.
Brands are valuable in good times and in bad. During tough times like these, your brand may be considered by consumers who would otherwise not take notice or see relevance. Make the experience positive and you may build a bond for life.
Many case studies have shown that hard times are actually the best times to steal market share and build brand value. As weaker brands die off, the remaining brands sing louder, calling to consumers who are ripe for change. Steal your competitors’ consumers and the payoff is two to one.
The effect of brands actually alters consumers’ behavior. When consumers value a brand as being a trustworthy, quality offering, they are usually willing to pay more to avoid the risk of making a bad decision. However, they may be prone to try new brands as their wallets are squeezed ever tighter.
Recessions often weed out weaker brands making category leaders even stronger. At the same time, “value-based” brands can gain market share by presenting the consumer with a familiar name at a reasonable price. This brand switching provides an incredible window of opportunity for companies to steal market share from competitors. The number of consumers retained depends on the ability for the “temporary” brand to deliver on its promise of value.
When brands focus on value, rather than price, they reassure consumers with greater confidence. The moral support that is provided by brands during a recession helps to rebuild that enduring bond between brand and former consumer.
The necessity for a clear brand proposition is more important than ever as consumers recognise the need for new ways to work within their shrinking budgets. The companies who recognise and seize the opportunity to steal market share while others are in shutdown mode, will find the benefits far outweigh the costs.
Abandoning or neglecting your brand as markets tighten only makes matters worse. Historically, companies who properly support their brands with cost-effective measures can retain and even gain share in the face of lower-priced alternatives. These same companies will be best positioned to enjoy the fruits of their labor when the economy inevitably returns to growth.
Following the Stock Market crash of 1987, Nike tripled its marketing spend and emerged from the recession with profits nine times higher than going in. Taco Bell and Pizza Hut also took advantage of this recession, promoting themselves heavily, while the market leader McDonald’s, cut back. This investment paid off as both Taco Bell and Pizza Hut significantly narrowed McDonald’s category lead.
Recessions are tough on companies and consumers alike as both face the pressures of restricted cash flows and receding bottom lines. The bonds that brands build with consumers at such times are powerful. A recession must be viewed as an opportunity to reassess and strengthen the brand to drive the most value – spend smarter not harder.
The only answer to a recession is a proactive response. Investing in your brands will help to retain your audience and attract a new audience by stealing share from weaker brands. Only the best positioned players will survive and thrive.