Showing posts with label Recession strategy. Show all posts
Showing posts with label Recession strategy. Show all posts

21.3.09

Recession-Fighting Incentives

To spend or not to spend, that is the question that a lot of people find themselves asking more and more these days. And while people’s purchase decisions often change when they’re on a budget, the decisions are not always as simple as just comparing price tags. There are two sides to the customer value equation: what you pay and what you get. And though slashing prices can be a quick way to close the sale, most people are still willing to pay for the brands that add value by adding the extras that make it worth it—the assurance that they are spending wisely. These recession-fighting incentives can be a great way to earn the attention, business and, hopefully, loyalty of audiences trying to make the tough decisions between the things they can’t afford and the things they can’t afford to pass up.

With consumers demanding more for their money, more companies are cutting prices to offer the “best deal,” which can come at the expense of the bottom line and brand perception. And now, more than ever, it’s important to stand out. Maybe marketers would be better off fighting the recession with incentives that add value and provide distinct business advantages instead. Creating tangible and rational value allows consumers to spend more wisely especially in this climate of frugality.
Hyundai: Assurance
Instead of simply discounting its already economical line of vehicles, Hyundai is addressing consumer fears with an innovative return policy: Hyundai Assurance. Those who finance or lease a new Hyundai can return the car for no additional charge if they lose their job within a year of purchase.



The incentive has helped Hyundai distance itself from America’s Big Three automakers and increase sales 14%, nearly doubling its Instead of simply discounting its already economical line of vehicles, Hyundai is addressing consumer fearswith an innovative return policy: Hyundai Assurance. Those who finance or lease a new Hyundai can return the car for no additional charge if they lose their job within a year of purchase. The incentive has helped Hyundai distance itself from America’s Big Three automakers and increase sales 14%, nearly doubling its market share as industry-wide, new-vehicle sales fell 37% last month.



Harley-Davidson: Ride Free

Ride Free Guarantee is ideal for riders looking to join the “hog family” and experience the freedom Harley-Davidson promises, but who are also worried about the current financial situation. New owners purchasing a Sportster will have the opportunity to trade it in for the full MSRP at any point within a year’s time. “Ride Free” introduces the idea of trading up within the brand from day one, giving riders the opportunity to test drive their new bike for a year before moving on to higher-end models.






Sears: Layaway
In an effort to entice consumer spending over the holiday season, Sears brought layaway back to its stores — nearly two decades after doing away with it. The program, with roots dating back to the Great Depression, was reintroduced as a direct response to customer demand in the face of the current economic Davidson promises, but who are also worried about the current financial situation. New owners purchasing a Sportster will have the opportunity to trade it in for the full MSRP at any point within a year’s time. “Ride Free” introduces the idea of trading up within the brand from day one, giving riders the opportunity to test drive their new bike for a year before moving on to higher-end



Oh Look, Ford Has an Assurance Program Now

Ford announced today an "It's OK if you lose your job or can't afford the car we just sold you because we'll just pay for it for you like Hyundai" program today, presumably so you'll go buy one of their cars. To incentivize you further: 0% interest on certain Ford, Lincoln, Mercury vehicles. If the "
Ford Advantage Plan" feels like a lotion-less HJ, read on; the auto-maker somehow has $700 a month for you, times 12 months, if you lose your job.
If you ask Hyundai, it's all one big goof because according to this one guy who works there, no one has used the program yet. As in zero people, people. That's probably why Hyundai tacked the Plus thing (they pay your loan for three months, then you can sell the car back).

20.3.09

Can Am Spyder "Need"


Brand: Spyder
Agency: Cramer-Krasselt
Review Date: March 18, 2009Yes,
ًWe're in a period of austerity. But people still want to indulge themselves in small or big ways, and they'll be receptive to ads that (in the right way) give them permission to do so.
This ad for Can Am's Spyder, via Cramer-Krasselt of Milwaukee, takes due note of the bad economy and people's current disinclination to buy things they don't need -- for instance, $16,000 three-wheeled recreational roadsters. So, the brand doesn't come off as oblivious, as could easily happen these days with an ad that introduces such a conspicuously inessential product. But it's also true (as the ad suggests) that people have in their heads a hierarchy of the unnecessary items they want - some of which people may be prodded into regarding as items they almost need. The ad's mixture of brashness and realism wouldn't work for every product, but it seems in sync with the self-image of the people most likely to buy these things. I suspect those consumers will enjoy the implication that they remain undaunted while other consumers are running scared.
Whether this will motivate them to go out and actually spend thousands of dollars on a souped-up tricycle remains to be seen, but the ad will at least get them daydreaming about the possibility of doing so. --Mark Dolliver

16.3.09

Time for a Brand Stimulus Package

By Kevin Randall
March 16, 2009 issue

Follow the 7Ps of Branding

Every day we are bombarded with numbing news about the economy: bank busts, bailouts and buyouts, rising jobless claims, more home foreclosures, declining consumer confidence, the unfolding “stimulus package” and a national budget in crisis.

In the marketing world, we endure a similar drumbeat regarding the fallout: dismal corporate earnings, company layoffs, marketing budget cuts, advertising going dark, clients and agencies and people coming and going, and a brand budget crisis. There is a sense of turbulence, malaise and a lack of confidence.
Our industry is witnessing a diminishing commitment to long-term brand building. The mission of the moment is driven by the CFO, not the CMO, and calls for cost-cutting and short-term revenue-generating activities represent the only immediate focus.
Lead generation is “in.” Demand stimulus and call to action are the rage—perhaps partly because the term stimulus now enjoys so much currency. Brand strategy and market research are “out” of fashion.
Will the decline of brands and branding follow?
No.
A weighty and consistent body of historical data shows that marketers will do harm in the short- and long-run to their businesses and brands by knee-jerk budget slashing and running scared.
Hundreds of studies of marketing over ten recessions in the 20th century have concluded that not only did sales and profits decline for brands that cut brand-oriented advertising during the recession, but also that performance continued to lag upon the recovery (“Why it is important to invest in communications during an economic downturn,” IVCA.org, 2009).
Today’s brand leaders would be wise to consider and follow these 7Ps of Branding as a guide for the recession and beyond:
1. Profit

“We have a philosophy and a strategy. When times are tough, you build share." - AG Lafley, CEO, Procter & Gamble
Marketers now have a golden opportunity to profit and establish real competitive advantage by exploiting the current situation. They can increase brand value and market share now relatively more easily and cheaply than during good times. With competitive noise levels reduced it is easier for a brand to stand out in the marketplace. Media costs are more attractive. Interbrand CEO Jez Frampton argues for “protecting and growing a brand…a company’s most valuable asset—and a far less volatile asset than others during a time of economic uncertainty,” (“Interbrand Announces the 2008 Best Global Brands,” Interbrand.com, 2008).
2. Persistence

Corporate brand directors need to stay the course by going against the grain and not following the marketing herd. Even if budgets are trimmed in some areas, there should be a core of strategic and tactical activities that endure (the former initiatives tend to be less budget consuming even in good times). Such brand perseverance will provide reassurance during uncertainty to both the existing customer base, an especially critical target now, and to internal stakeholders. Rosabeth Moss Kanter cites current downturn success stories of IBM and Procter & Gamble as “role models” and examples of “persistence despite obstacles,” (“The Value of Role Models in the Downturn,” HarvardBusiness.org, 2009).
3. Planning

Despite the strong economic headwinds, brand builders should remain committed to pursuing long-term visions and executing plans while selectively and pragmatically improvising marketing tactics. IBM (the second most valuable brand in the world according to Interbrand/BusinessWeek, and a B2B brand) during the recessionary early 1990s and Southwest Airlines after 9/11 are examples of brands that never wavered from their long-range strategic compasses and profited enormously by doing so. These brands did not and do not meander based on quarterly results. The strongest, top-performing brands are built to weather the various storms that come along.
4. Performance

Brands (and their communications) will be judged and rewarded now by delivering on “value” over merely price. Some marketers have and will cut prices. Brand leaders do need to (re)define the value of their offering while not compromising the quality and experience customers expect or need (despite across-the-board corporate cutbacks). Harvard Business School professor John Quelch also recommends investing in opportunistic, focused market research since there is a real need to define “performance” and “value” and gauge what is relevant to customers in the shifting environment (“Marketing Your Way Through a Recession,” HarvardBusiness.org, 2008).
5. Positioning

Brand owners must uphold and defend their core positioning and resist the temptation to sacrifice quality, reduce innovation efforts or cut prices. A study of more than 1,000 companies showed that firms that cut manufacturing and administrative functions in a recession did tend to reap the benefits while those that decreased spending on new product development, quality and marketing suffered (“What strategic investments should you make during a recession to gain competitive advantage in the recovery?,” Strategy & Leadership, Profit Impact of Market Strategy [PIMS], Keith Roberts, 2003). Leading brands will stay there by offering and communicating their enduring relevance and point of difference. Recessions and discounts come and go, but trusted brands and their appeals tend to transcend and outlast these events.
6. People

There needs to be an appreciation of the link between top talent and top-performing brands. Hiring, motivating and keeping the best people (who exemplify the brand) while competitors are pruning overhead is a key source of proprietary advantage. Management guru Jim Collins chronicles the cases of Boeing, Hewlett-Packard and Procter & Gamble, who bucked the trend during tough times by investing in talent (when their rivals were shedding critical human capital) only to thrive and outperform the competition (“Crisis into opportunity,” CNN Money.com, Jim Collins, 2009)
7. Principles

Brand leaders should work with CEOs to make sure their brands and organizations are integrated and that employees internalize and externalize a set of values that don’t change. Both Quelch and Collins emphasize the importance of adopting core brand principles and personality traits, sticking with them and executing on them in the future. According to Kanter, IBM’s and Procter & Gamble’s strong financial results today are partly owed to their focus on corporate brand values, ethics and social mission. Valued customers and employees will be more loyal if they are reassured on principles—by the brand and by its chief executive and sponsor. This is especially critical in the B2B world, with its large transactions and numbers of stakeholders involved in the customer experience.
Long live strong brands whose adherence to the 7Ps of Branding will ensure the best return on investment!
Brands by the numbers
• Southwest Airlines was the best performing stock from 1972 to 2002. (“Crisis into Opportunity,” CNN Money.com, Jim Collins, 2009) • McGraw-Hill analyzed 600 companies from 1980 to 1985. The results showed that B2B firms that maintained or increased their advertising during the 1981-1982 recession averaged significantly higher sales growth—both during the recession and for three years following—than those that eliminated or decreased advertising. By 1985, sales for companies that were aggressive recession advertisers had risen 256 percent over companies that did not maintain their advertising (“US Recession”, McGraw-Hill, 1988).
• A study of 1,000 firms during recessions between 1982 and 1999 identified key differences regarding the strategies of the best and worst performers, with the measure of performance being changes in the company’s market-to-book ratios. Notably, the best performers had increased their marketing and advertising spending not just relative to their competitors, but also compared to their own spending in better times. (“Learning to love recessions,” Richard F. Dobbs, Tomas Karakolev, and Francis Malige, McKinsey & Co., 2002).
• A 2005 survey of 154 senior marketing executives underscored the findings of the McKinsey study (“Turning Adversity into Advantage: Does Proactive Marketing during a Recession Pay off,?” Raji Srinivasan, Gary L. Lilien and Arvind Rangaswamy), International Journal of Research in Marketing [IJRM], 2005.
• IBM reported a 12 percent increase in earnings for 4th quarter 2008 beating analyst expectations. (Google.com, 2009)

Kevin Randall is Director of Brand Strategy & Research at Movéo Integrated Branding, a brand consulting and marketing communications firm based in Oakbrook Terrace, IL. Kevin can be reached at krandall@moveo.com and 630.570.4813.

12.3.09

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

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