Recently I went through my monthly marketer magazine and found this interesting article written by David Haigh. The points he mentioned here are simply suits to the current world and I also thought to share this with you.
Warren Buffett, “ the Sage of Omaha” once remarked that “you only know who’s swimming naked when the tides goes out”. Well, the tide has now gone out to reveal that many apparently reputable brands have been swimming naked for year. The banks, insurance companies and ratings agencies were the first to bare all. Cynical disregard for customers and staff have led to disaster, and many of these brands have paid the ultimate price.
Now brands in the “real” economy are also blushing. Over geared, over hyped and over priced brands such as Starbucks, Coke,BMW are all suffering as recession – hit consumers reappraise the benefits of conspicuous consumption. Their value has plummeted because they have fallen out of touch with consumers’ wants and needs.
In contrast, brands such as Wallmart, McDonald,Avon,Ford and HSBC are doing well.
Its no coincidence that they’re all middle of the road brands that have had to reinvent or reposition themselves in tough markets. All have re-evaluated customer relationships, products and services and the price-value equation.
In the last big recession many brands were badly hit as consumers switched to cheaper alternatives. In 1993, Marlboro realized it had stretched consumer loyalty too far and dropped its prices overnight by 25 percent.
While this caused short-term panic on wall street, a huge fall in Philip Morris’s share price and suggestions that this was “the end of branding as we know it”, it simply rebalanced the price-value equation and consumers flooded back. A salutary lesson for out of touch brands.
In recession, price elasticity curves shift. Functional attributes, including price, rapidly come to the fore. Image attribute decline in relative performance. Conduct attributes remain critical but not any price. Getting the balance rights is vital in a recession.
But in the struggle to adapt, only brands with strong values maintain their brand value. Consider Innocent- an expensive brand, but one that delivers on function, image and conduct. I expect it will adapt sensitively to allow for thinner purses, while maintaining its value system, and so hold up well in the recession.
There are a few simple rules to surviving the downturn. The first and most important is that cash is king. As one “witty” accountant once remarked “turnover is vanity; profit is sanity; cash flow is reality”. Without cash flow, brands will simply not survive.
This forces many finance officers to consider cutting marketing budgets. These are often poorly justified and so it may be the right thing to do. But when marketing communications are well defined there is strong evidence that maintaining marketing budgets in recession leads to greater value.
In 1998, consultancy PIMS showed that of 1,000 consumer brands surveyed, those that cut marketing spend during the 1991-93 recession made higher profits during recession but lost market after it. Maintainers ended up with higher brand value after recession.
Brands must maintain their values and investments if they want to emerge unscathed from the recession. Just be sure you have to cash to keep your brand live.
So marketer need to consider the following key points
1 – Make sure you keep in touch with consumers’ wants and needs
2 – Re-evaluate products, services and the price-value equation.
3 – Maintain band value and brand investment
4 – Ensure you have the cash to keep your brand afloat.
Thanks – themarketer.Dec-Jan 2009 p.p 15
Ragulan Tharmakulasingam 