Brand Building in a Recession

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 shareholder 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 recognize that consumer retention and attraction is the name of the game. You must invest in brand-building to win market share, not just mindshare or 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.
Stealing Share
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.
As consumers begin evaluating their purchases on a different set of priorities, heritage brands can use the emotional connections that already exist to regain past consumers that have moved on to “higher end” brands. A recession can unlock the relevance trapped within the brands of people’s youth.
The necessity for a clear brand proposition is more important than ever as consumers recognize the need for new ways to work within their shrinking budgets. The companies who recognize and seize the opportunity to steal market share while others are in shutdown mode, will find the benefits far outweigh the costs.
Invest in Your Brand
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 U.S. 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 by significantly narrowing 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.
Decisions should be focused on spending wisely, but too often companies do nothing at all. A company’s typical reaction to a slowing economy is to cut back and wait things out. Ironically, those companies end up damaging their most valuable assets—their brands.
Conventional wisdom suggests that in times of recession it is better to tighten the belt and cut marketing and branding expenditures. However, when companies cut their outreach, they also begin to cut the ties that bond consumers to those brands. For smart companies, opportunity beckons.
A downturn represents less money in consumers’ pockets and more careful consumption habits. A slimmer budget means companies must be more effective with their branding efforts. Determine what is excess or even damaging to your brand and shed it. Use your focus and resources to strengthen your position in the market and in consumers’ eyes.
As you see your competitors cutting back, recognize that now is the time to strike. If funds are too tight to make an all-out attack, cut less than your competitors. Remember, in a recession both your dollar and your message go farther.
Cut Costs Not Corners
While difficult economic conditions may be trying, it is important to stress that investing and spending are not one in the same. A company can make a significant investment with minimal spend. There are many ways to achieve great impact with minimal or even reduced costs:

• In a recession, more effective employees can make the difference between success and failure. Implementing an internal program that encourages employees to “live the brand” brings a company together by providing clarity. This simple effort can boost employee morale and ensure that their efforts stay focused and on-brand.
  
• Instead of spending on typical sales promotion, spend on engagement. Exploring and exploiting different sensory inputs can lead to innovative brand signals that are less costly to implement than traditional advertising. Look for the low hanging fruit. Ask the question: “Where and how can the brand effectively get the message out?” Bang for the buck is everything.
  
• Outsource branding, “insource” execution. The cost of execution eclipses the cost of creativity. A tight budget can choke branding and marketing efforts. In a recession, the costs of branding can seem high. However, by bringing high-cost items like execution in-house, companies can better leverage their limited budgets.
  
• Negotiate! Your dollar buys more in a bad economy. You may find that you are able to negotiate longer payment terms, volume discounts or other benefits. In times of recession, most partners and vendors are open to discussion. Leverage your position properly and you could find a tight budget buys big budget returns.
  
• Leverage relationships and explore co-branding initiatives. Companies are cutting costs at every turn. Co-branding can reduce marketing costs while extending the brands reach by allowing unrelated brands to split the costs of marketing while gaining the competitive advantage of cross-brand endorsement.
  
• Price slashing may sound simple and logical, but it is a sure way to give up ground to competitors who may be more aggressive during the downturn. Price isn’t merely a reflection of quality, it’s also an indicator of it. It’s easy to rationalize that: “it drives business,” and “consumers are struggling and need the help,” but steep discounts tend to attract price-driven shoppers who aren’t likely to be loyal to your brand.
  
• Cement a value-based position with consumers, not a position of low price. If you can find a way to reduce costs–while maintaining quality–and you can permanently pass that price reduction on to the consumer, your brand equity will grow now and after the economy eventually rights itself. Whether in good times or bad, if you can provide enhanced value to consumers, you’re doing the right thing.

While a recession may feel like the worst time to be a marketer, it may be the best time to build brands. The companies who maintain a strategic perspective and invest in their brands will rebound from a recession stronger from the experience. Weaker brands may not exist by the time the economy re-surges.
Consumers are forming opinions about your brand whether you’re proactively managing the experience or not. So, to be successful, be as optimistic as you can. Your brand and business are in a position either to contribute to the fear or help diffuse it. The connections made during these times of crisis are often stronger than those made in times of prosperity. Look for opportunity where others see hopelessness to find the low hanging fruit your brand needs to thrive.
Equity is only built through the consistent delivery of your brand promise over time. The reward is improved customer loyalty.

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Consumer confidence is waning across the global economy. In times like these, decades of hard-earned brand equity can be eroded over the course of months. Recessions force companies to be smarter about where they invest. Focusing solely on how your brand is different and how that difference creates value for the consumer, increases consumers’ confidence in your brand. Demonstrate that it is “worth more” and you’ll increase their willingness to pay more when every penny counts.
When the market goes south, management too often turns its approach away from brand-centric to price-centric thinking. Thus begins the vicious downward spiral where brand value erodes, in turn reducing revenues which further tightens belts and value continues to erode. 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.
When consumers trust your brand, they don’t contemplate their purchase decisions—they buy.



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