Brand strategies for an economic downturn

September 2008, Issue 497

Julie Bazinet, Steve Saxty and Belle Frank

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 maximise 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.
Based on information from Young & Rubicam's model, BrandAsset® Valuator (BAV), we are able to understand what happened to brands during this period in order to help our clients protect themselves from today's economically depressed environment. Our data suggest previous periods of downturn were marked by a strong focus on value, accompanied by a decline in brand trust, credibility and loyalty. Brands that were able to stay on top of their game mastered delivery of those qualities.
By the beginning of 2008, easy credit had accelerated the real estate market, and encouraged consumers and lenders to speculate on ever-increasing levels of home equity. For many, the gamble did not pay off. The resulting credit crunch and consumer interest in value applies pressure on brands. In order to compete in today's market, BAV indicates that a brand must reframe value through leadership, vision and performance if it is to stand out amid limitless competitive brand options. It must also maintain its trust and credibility while doing so. The bar has been raised!
Y&R's BAV (see Appendix) allows us to assess the role of brands as part of our culture; we can get a picture of the values of a society by considering what drives its most successful brands at various points in time (1).
DECLINE IN CONSIDERATION AND LOYALTY
In the late 1990s, consumer confidence was on an upswing, fuelled 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% (see Figure 1).

Figure 1: Brand loyalty

During this time, brand usage surpassed brand preference (see Figure 2), an indication in our data that buyers were becoming less emotionally attached to brands. We found that many consumers went from being loyal to a single brand to being open to a variety of brands. This behaviour can be explained by the vast increase in the number of available brands and the amount of information about them available on the internet, coupled with the economic reality that more consumers were now being forced to rationalise their purchasing decisions.

Figure 2: Brand usage

DECLINE IN CONFIDENCE AND TRUST
From 2001 to 2005, brand imagery characteristics such as 'trustworthy', 'reliable', 'high quality' and 'good value', as attributed to brands by consumers responding to the BAV survey, declined continuously, to eventually stabilise at a mere 65%, on average, of their pre-recession levels (see Figure 3). It is not that these attributes declined because they became less important. Quite the contrary, it is more likely that, in consumers' minds, brands simply failed to deliver them. Technology brands in particular took a big hit on these attributes during the last recession, which is not surprising given the dotcom bust. This suggests that today's marketers have to focus on building credibility and trust in order to endure the current economic climate.

Figure 3: Brand imagery

CHANGES IN DRIVERS OF CONSIDERATION AND LOYALTY
According to BAV, 'good value' was a key driver of brand consideration and loyalty from 1999 to 2002, along with 'high quality' and 'socially responsible'. Given the realities of the time, it is not surprising that value, quality and responsibility became so important for consumers. However, what is even more interesting is how these drivers changed as the economy recovered. From 2005 to 2007, drivers of consideration like leadership and performance were more than twice as important as they were during the recessionary period, indicating that consumers had begun rewarding brands that helped them navigate the overwhelming amount of choice and information available today (see Figure 4).

Figure 4: Leadership and performance

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 carmakers 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.
More recently, the V8 brand was able to reframe its value by reminding buyers that a serving of V8 is nutritionally equivalent to three servings of vegetables; it also costs less, and has the additional benefit of zero spoilage. For buyers who are feeling the pressure to save on rising grocery bills, such a message has resonance.
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.
For retailers like Best Buy which sell large products that are difficult to transport home, such as large-screen televisions and washing machines, drop-shipping orders (shipping them directly from the manufacturer) can save money and hassle for both store and customer. The retailer's shipping and warehousing costs are reduced, and the buyers get quicker and cheaper delivery with less risk of damage to the product.
3. Empower Customers with Trade off Options
When faced with limited financial resources, consumers inevitably make trade-offs when they are looking to purchase products or services. Therefore, another strategy for increasing value is to provide consumers with trade-off options that they otherwise would not have.
Dell was a pioneer in employing this approach. Historically, PCs were sold as standard packages through retailers. During the recession of the early 1990s, the company was able to focus on its direct-to-consumer sales model, thereby eliminating the cost and competition of selling through the retail channel. The direct model not only allowed Dell to pass some of these savings to its customers, but it now became possible to customise each computer in a cost-effective way. Customers benefited not only from a lower price point, but also from a product that perfectly matched their requirements, providing Dell with much competitive leverage and a huge boost in sales volume.
4. Build Loyalty by Connecting with Customers' Core Beliefs and Personal Values, as well as their Need for Value
One of the most fundamental ways to connect to consumers is for a brand to differentiate itself from competitors and build loyalty by providing a benefit that would be emotionally compelling on its own and then boost it further by offering financial value.
Recessions can be brutally challenging for retailers. However, Target Corporation has experienced phenomenal growth since the recession of the early 2000s by promising and delivering 'cheap chic' to its customers. The affluence of the late 1990s had whetted consumers' appetites for increasingly upscale brands, but the economic reality of the job market meant that, for many consumers, such products were out of reach.
Still, consumers yearned for them, and Target was savvy enough to provide them at a price point almost anyone could afford – a smart marketing approach that made consumers feel smart. The resulting effect on Target's brand has been significant. Target's brand equity had always trailed Wal-Mart's in BAV, but this strategy has helped the brand become stronger each year. Finally, in 2007, Target overtook Wal-Mart to become the strongest retail brand in America, while Wal-Mart, whose positioning had focused almost exclusively on price, remains a strong but stagnant brand.
5. Consider what your Brand can do for Someone Else
There are of course times when a more thorough retargeting is needed to help brands weather the challenges of difficult economic times. For some brands, a customer base that is too small or one that becomes unable to afford the product might force a rethink about how to engage a wider audience.
In 2000, General Motors faced a declining domestic middle-class market for its Buick range, as US buyers sought either lower-priced vehicles from rivals Honda and Toyota or more upscale brands. The surprising decision to export a few thousand units to China to recoup fixed costs of production met with considerable Chinese enthusiasm, and sales took off because the brand was regarded as affordable, American and classy. As sales remained flat in the domestic market, GM began investing in products tailored to Chinese tastes, and sales continued to increase. In 2006, China became Buick's largest market, surpassing sales in the United States.
PROTECT YOUR BRAND ASSETS
The current economic downturn is driven by different factors from those of the last recession, and consumers have raised the bar in terms of what they expect from brands. Our data show that consumers increasingly want their brands to deliver leadership, vision and performances as well as value.
Luckily, this time around, advances in online communication, distribution and eco-friendly packaging, to name but a few, suggest that brands have infinitely more options to reframe their value propositions and connect with their customers than ever before.
The 'do nothing but cut prices' approach, as Taco Bell employed during the last recession, only weakens a brand, according to BAV data. And beware of this tactic, for its impact can be, and often sadly is, a long-lasting one.
Brands that have the agility to deliver optimal value to their customers, even if it requires substantial change in how they operate or communicate, may not only survive the recession better but even thrive in it.
APPENDIX 1: BRANDASSET® VALUATOR
BAV is a huge database on brands. Since 1993, Y&R has surveyed over 500,000 consumers across 44 markets about more than 35,000 brands. BAV gauges consumer perceptions on brand health and imagery, relating them to brand usage, consideration and loyalty. In each market, BAV measures brands relative to all other brands.
1. B Frank and M Sussman: Brand health measures your mother would love. Admap 492, March 2008.
Julie Bazinet is associate director, analytic brand planning, at Y&R.julie.bazinet@yr.com
Steve Saxty is SVP, group planning director, at Y&R.steve.saxty@yr.com
Belle Frank is EVP, director of strategy and research, at Y&R.belle.frank@yr.com

Brand management: then and now

Quarter 1, January 2009

Tim Ambler

London Business School




Marketing has become far more professional in the 50 years since the Marketing Society was founded. This article takes a look at that development in order to speculate about where marketing will be in decades to come. These thoughts have been influenced immensely by discussions with some of the brightest young marketers of today.1
As the word 'marketing' means different things to different people, we will focus on brand management. How was it in the 1960s, how has it changed and how is brand management today? What can we expect, or perhaps hope for, in the future?
'Brand' is now a word in common currency. In this sense, marketing is a two-stage process: creating demand (brand equity) and then converting that demand into positive cash flow (selling). In both stages, marketers manage their brands to obtain satisfactory short-term profitability while at the same time building their brands for the long term. The conflict between these two objectives, with the accent usually on the first, provides much of the difficulty.
THEN
Procter & Gamble is usually credited with inventing brand managers, starting with Camay soap in the 1930s. By the late 1950s the advertising for 'fabulous pink Camay' had moved beyond cliché to being a joke. Its appearance in a cinema provoked roars of laughter and cartons being thrown at the screen. Media selection was not well connected with the target audience. Those were the days!
Cinema commercials can still provoke that reaction but not when the campaigns are products of professional brand management. The 1960s had very few of those. Marketing plans, where they existed at all, were written by the ad agencies – often UK branches of US agencies who were more advanced in such matters.
Typical of most consumer marketing companies in those days was my company, International Distillers and Vintners which created its first UK marketing department in the mid-1960s. An international marketing team for J&B Rare scotch whisky already existed: one man and his secretary. Croft Original sherry was inspired by the ad agency Mather & Crowther, using the already very successful (in the US) J&B Rare as a model. J&B was a scotch for people who thought whisky was smart but didn't much like the taste. It was based on J&B's previous international spirits success: Very Special Old Pale cognac. Croft Original was also pale in colour because sherry (then the main wine and spirit category) consumers thought fino, i.e. pale sherry, was smart but found it too dry in taste. So Croft looks like a fino but is sweet to the palate. Repeating the J&B formula may not have been deliberate but it worked. The new marketing team launched Croft by sending a case to every trade customer who ordered enough Smirnoff. Not a great launch plan but it secured distribution.
However, rather more professional brand management was becoming widespread in fmcg companies selling largely through supermarkets, which were rapidly gaining strength at the expense of traditional outlets, thanks to the abolition of retail price maintenance.
Kotler's Marketing Management was already the dominant textbook and the 4 Ps provided the structure for marketing plans. Nielsen was the main supplier of market research and was primarily used to ginger up the sales force. Every two months Nielsen would present distribution figures including facings and out of stocks, down to quite detailed sales areas. High- and low-performing sales managers were complimented and castigated respectively, whether they deserved it or not. Research was used intermittently for consumer usage and attitudes, primarily for advertising purposes. TV campaigns were researched in cinemas by testing brand preference before and after seeing a batch of commercials that included the brands being researched. Knobs on the arms of our seats were turned this way or that to indicate pleasure or interest in whatever was on the screen at the time.
It all seems fairly simplistic as one looks back but it did not seem so at the time. Only one TV channel carried advertising. Two main suppliers dominated posters and a few chains took care of cinema. Diversity lay in the press. The full service ad agencies provided figures on cost per thousand, reach and frequency. PR completed the marcoms portfolio. Specialist marketing consultants were rare as few had enough experience to sell.
Brand managers then had arguably more control over the 4 Ps, certainly marketing communications, promotions, price and, thanks to Nielsen, distribution. On the other hand, brand managers barely existed beyond fmcg and drinks companies.
Before moving on, we should note the birth of account planning in the 1960s, created in slightly different ways by Stanley Pollitt at BMP and Stephen King at JWT. This rigorous approach to using consumer market research for ad campaign development, good as it was and is, had very little attention in its early days.
FOUR BIG CHANGES SINCE THEN
The first big change followed the recognition that marketing was essentially a competitive game. Market share replaced sales as the key measure of success. The Market Science Institute in the US, founded back in 1961, claimed that market dominance was the driver of profits. Grow market share, it was thought, and profits would then increase too. We now know that is not the case; growing market share can decrease profits if it depends on excessive price cutting or promotions. We now know that increasing the perceived quality of the brand, or brand equity, drives both share and profitability. In other words, share and profits may correlate but only because both are driven by the same thing.
The second big change was the computer. The first stage was the shift, with the IBM 360 in the 1960s, from batch processing of operational data for distribution and accounting purposes to the production of marketing information. This arrived as piles of printouts. Brand managers did not care very much for all this paper but they stacked it high to impress senior managers. It was used symbolically to show that brand people had tabs on the market even when the pile was as virginal as when it left the print room.
By the mid-1980s, brand management had spread across the business community, apart from business to business and financial services. Computer terminals provided information in a more friendly fashion. But terminals meant that marketers were less likely to leave their offices.
By the mid-1990s, terminals had been replaced by PCs, then laptops, then notebooks and then the BlackBerry. At the same time, more research agencies and in-house IT departments were each offering more information on a wider variety of topics. Available information expanded exponentially.
More recently, the digital age has given us the web, emails, Excel spreadsheets for forecasting and the dreaded PowerPoint, all on memory sticks the size of condom packets. Data protection has become more important than conception. At least brand managers no longer have to carry around piles of paper, guard books (the repositories for ad campaigns) and boxes of slides.
The third big change has been complexity. Whereas the brand manager of the 1960s had to deal with about six or eight suppliers (not that ad agencies wish to be seen as suppliers), today's brand manager has to manage both creative and media agencies, other marcoms and promotions specialists, as well as a myriad of consultants and research companies. A large company may have 30 marketing services' suppliers and, of course, media have proliferated. Trade marketing and customer relationships have developed their own teams and management, often as part of sales or operations rather than marketing in the departmental sense.
No doubt there have been other big changes too, but I will mention just one more, namely accountability. Attention has shifted from sales to the bottom line. Marketers are now expected to justify their expenditures in terms of the payback. That has brought a demand for estimating customer lifetime values and customer equity. Some firms now believe they can manage customers to maximise profit. This is a complete negation of marketing: we should empathise with customers to maximise their satisfaction and only profit as a consequence of that. You could say Tesco is managed by its customers but the reality is that it is a partnership for mutual benefit.
BRAND MANAGEMENT TODAY
Marketing today is certainly more diverse – multi-sectoral, with many more opportunities, and possibly more competitive. I am often told that 'price is more important now' but that is unlikely to be true. Price always was important. Now that people have more choices, higher wealth in real terms and less time for price comparison, price is probably less important, despite price comparison websites. Talking with top young marketers today, none of them mentioned price as an issue until prompted. Penny pinching by retailers remains an issue.
The strengths of brand management today, at least in the opinion of the brand managers themselves, very much revolve around being able not just to cope with the complexity of modern marketing, but to turn that to their advantage. They are very conscious of how they can add value. As one of the respondents, Suzi Williams, observed, 'brands are no longer inert things to be controlled. They are like adolescents and we can only facilitate their development' and 'emotion leads to action where logic leads only to conclusions'.
To handle so much complexity, the numbers employed in the marketing departments of large companies have multiplied, thereby contradicting the regular headlines about cutbacks. Outsourcing is both a solution and a problem. It may be genuinely cheaper to put the work out and the agency may have better and more relevant expertise, but it is yet another agency to manage, who have different goals and may not have to implement their recommendations.
Another consequence is the universal view that brand managers do not get out enough to meet customers and share the consumer experience. No quantity of market research reports will substitute for feeling the market as it is. Some companies ensured brand managers had field force experience first and spent at least one day a week in the field. Some still do. In practice, 15% field time is quite good but the consensus was that it should, and will, grow in the future. That depends, though, on cracking the 'meetings culture' of some large firms.
There is no doubt that marketers today see themselves as tougher and more commercial. The accountability trend mentioned above is part of that, but so is marketing's coordinating role. One of the respondents for this article, Ben Crawley, said 'brand management is a great grounding in so many business issues and for networking too'. That is encouraging. Marketing has long been seen as the colouring-in department where artistic young people do their creative thing before moving to bigger marketing budgets in other companies. Judging by my respondents, that is less true. Yes, marketing is a plum job so a better marketing job will beat another role and yet more marketers now see themselves as budding general managers. They also recognise more need to increase the time and money devoted to marketing internally.
On the negative side, modern brand management has seen over-extension that has 'taken brands too far', as Liesa Johnston put it. The shortest distance between two profit forecasts is a line extension. It is a quick fix that demands no brand investment and brings instant distribution. But it can, as Baileys Irish Cream has shown, damage parent brand equity and reduce profits after the initial surge.
If true, the call for integration is encouraging because marketers should engage with their colleagues and be seen as key to achieving the firm's goals, not just marketing goals. Marketing is not just a luxury for when finances permit. MBAs today, without prior marketing experience, find it almost impossible to get marketing jobs, but that will change if brand management is going to become as commercial as my respondents claim. Marketers need general business skills and generalists need marketing skills.
There are so many facets of modern brand management that a full account would be too long and this selection is inevitably subjective. But we need to conclude with what seems to be the dominant paradigm today. As noted above, accountability is good to the extent that it keeps marketing feet on the commercial floor but bad if it:

• undermines the immeasurable long term in favour of the quantifiable short-term. In past years, short-term goals were set low enough to expect some spare cash flow once they were achieved; that could then be hidden in the following year's expenditure to protect the longer term, e.g. the ad budget; getting that past your accountants and auditors is just as feasible today; it is naïve to report a higher bottom line than it needs to be
  


• locks marketing into the perception that it is a cost to be cut like any other
  


• involves too much time forecasting, planning, and reporting – leave all that to the accountants
  


• is built on false performance measurement models like ROI or purely short-term financial figures with no recognition of the marketing asset, namely brand equity; regrettably, that is the general picture today
  


• requires simply too many metrics or KPIs – just as brand managers have to cope with complexity by increasing focus, so marketers need to agree with senior colleagues what are the metrics that matter and not be distracted by those that do not; the tool that addresses that is the 'dashboard'; none of my respondents mentioned such a thing but I am confident it is on its way.

BRAND MANAGEMENT IN THE DECADES TO COME
Clearly the web will play a growing part but it is fanciful to suggest that it will enable brand managers to have meaningful one-to-one consumer dialogue. Consumers will communicate more with each other. Smart brand managers will monitor those exchanges and learn from them but they will rarely intervene. As the poet said 'the great advantage of keeping your mouth shut is that you cannot put your foot in it'.
On the other hand, brand managers will find ways for consumers to reach them when they really have to. Today's blank wall of call centres, ex-directory HQs and FAQs is immensely frustrating for consumers with genuine issues to resolve. Brand managers cannot be swamped by such matters but systems must be found for direct communication when necessary. Expert systems should be able to deal with most contacts but highlight those that need the brand manager's personal attention.
This may be optimistic but I believe a common business language shared by marketers and non-marketers alike will emerge. The idea that figures with pound signs in front of them matter and the rest do not, is so silly that it cannot prevail for long. At the same time, brand managers should respect continuity and stop chasing the fashionable metric or business process of the month.
Peppers and Rogers' Return on Customer and Reichheld's Net Promoter Score are two recent examples. To put it politely, both are flawed. Yet marketers leap to adopt them. Maybe the Marketing Society or the Marketing Science Institute in the US will set up panels of experts to review these things, rather as NICE does for drugs, before brand managers begin to use them. No CEO would then accept unapproved metrics.
This shared language will be part of non-marketer executives becoming far more savvy about what marketing can and should do for their businesses. They will recognise that marketing is the sourcing and harvesting of cash flow. Accountants will be measuring brand equity as part of their own routines using research shared with brand managers. HR people will be agreeing internal marketing plans with their marketing colleagues to ensure employees live their brands and marketing gets the value from their consumer experiences.
As noted above, expert systems and 'in-sourcing', eg metrics and forecasting to finance, will relieve brand managers of having to slog through the data overload and complexity. They will allow focus on essentials, thereby allowing marketers to get out more, although that may be more hope than expectation.
Neuroscience is not a practical brand management tool today but it surely will be within the next 50 years. No major new marcoms campaign or promotion or repackaging will be accepted before the neuroscientists have had their say. Modern-day pre-testing will be a thing of the past. The neuroscientists will get it wrong but not as often as pre-testers do.
It was good to see that one of the respondents for this article studied neuro-psychology at university. While marketers will always, and should, come from a variety of disciplines, this one is likely to grow in importance.
A visible symbol of both these trends will be widespread use of dashboards with which to drive the business. These are already becoming commonplace in large US companies, and are such an obvious requirement as to be a near certainty.
Imagine driving a car without a settled arrangement of instrumentation. And the dashboard will itself enhance the integration of marketing metrics with corporate goals.
Notes
1. Nathan Ansell, Benjamin Crawley, Jennifer Gershon, Liesa Johnston, Richard Lawrence, Lindsay Nuttall and Suzi Williams.