How are Brands Impacted in Economic Downturns?

Craig, an executive with a brand acquisition company in New York City writes...

"I've been a reader and fan of your blog for some time now.  I've occasionally commented on some of your entries and I've found your discussions very interesting. My question is timely - Do you think that brands are more or less - important - during down economic climates in general ?  Do you think brands are more or less - valuable - during down economic climates in general?  Is there anything about this climate in particular that effects those answers in general?  Have you ever seen any deep datasets about customer behavior in relation to brands for changes in economic climates? I'd love to get reactions from other BSI readers as well."

Craig, thanks for the compliment and for a very interesting question. I have not poured through deep databases regarding brands, customer behavior and changing economic climates. Your best bet for that type of data and analysis is to peruse the Nielsen website. For instance, I know that they recently published a report entitled Advertising Builds Confidence for Financial Brands in Crisis. Having said that, here is what I have come to believe about brands and economic downturns:

* the asset value of most brands will decrease as the stock market declines
* those brands that continue to invest in brand building during the downturns will have more momentum coming out of the downturns than those who don't
*luxury brands (such as Neiman Marcus or Nordstrom's) typically are harder hit than other brands during economic downturns, but that depends on which consumer segments are buying those brands and to what extent the economic downturns are affecting them personally
* small indulgence brands (such as premium ice cream brands, Starbucks coffee, etc.) tend to do better than higher ticket luxury brands during economic downturns
* downscale and discount brands (such as Wal-Mart) tend to fare better than many brands during economic downturns
* brands with which people are very familiar and comfortable do better than newer, unproven brands during economic downturns

Given the breadth and depth of this economic downturn, including the breadth and depth of the socio-economic segments affected, it is quite likely that most brands are suffering to one degree or another. Interestingly, our business is doing as well as it ever has. For that, I am quite grateful.

We share more on Recession Marketing here and here.

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Comments

[petra]

Although to me it seems logical that "small indulgence brands (such as premium ice cream brands, Starbucks coffee, etc.) tend to do better than higher ticket luxury brands during economic downturns", I have to notice that Starbucks financial results and market position (its profit dropping, closing of several hundred stores, etc. ) do not really support that thesis. Seeing Starbucks underperforming during the last few months, I have to wonder: if strong brands are the ones that will most likely survive the crisis, where did the Starbucks go wrong?

[amit budhiraja]

Hi, I had actually written about how different brands are impacted in a recessionary environment on my blog - http://marketingbrew.blogspot.com/2009/02/is-recession-blessing-in-disguise-for.html .

Though my context was mostly with the Indian consumer in mind, I am sure it applies similarly to consumer and corporate behavior across the globe. I think this environment presents a huge opportunity to the smaller regional brands to get a foothold in the consumer mind space.

[Derrick Daye]

Amit and Petra, thanks for your thoughts.

Petra. I think Brad's thoughts hold up if we are talking about coffee. When we're talking about Starbucks their issues have been mainly internal. They lost their way from what made them great. After a painful realization they brought the founder back to re-capture the vision, direction. Evolution and change are not the same thing.

One category I'll add to Brad's thoughts on success in tough economic times is video games. Yes, video games. Our salvation? We'll see.

Derrick