Branding Strategy Insider

Defying The Genericizing of Brands

As marketing budgets shrink and tip in favor of value messaging and cost incentives rather than brand-building, the absence of the latter in favor of the former is acutely dangerous. This type of price-driven activity has historically been considered a generic, low-level marketing practice, and normal branding rules have not applied. While that may have worked well enough during flush times—when larger branding efforts acted as a halo and compensated for generic activity—today all communications must incorporate brand-building. Otherwise,brands risk coming across as interchangeable, schizophrenic, watered-down and reactionary.

Take, for instance, the interchangeable messages that are coming from various U.S. fast-food joints. There’s Subway’s $5 Footlong, Arby’s 5 for $5 and Little Caesars $5 Hot-N-Ready. The simple message: Get more for less. Little is said about the taste or quality of the food. And little is said of Citroën’s technological prowess in a U.K.campaign that simply lists the prices and economic advantages (fuel-consumption data) of the automaker’s C1, C3 and C4 models. This is a real departure from Citroën’s previous long-running campaign for the C4, which starred a funky futuristic transformer that illustrated the tagline “Alive with technology.”

Even more problematic is when price-led efforts are disconnected from concurrent branded efforts—evident in an effort for the Morrisons supermarket chain in the U.K. In a clear attempt to stifle the ominous threat from discounters, Morrisons has ramped up its price-led advertising. A series of cheap-looking ads fronted by Nick Hancock—a fairly low-profile, low- cost TV face—highlight some worryingly low prices: all the ingredients for a family barbecue for just £4. Confusingly, a simultaneous campaign uses higher-profile celebrities (Helen Baxendale,Tara Fitzgerald, Lulu) waxing lyrical about their passion for fresh, quality British produce.

Schizophrenic behavior of this nature dilutes core brand equity. While it may help in the short term, knee-jerk reactions to the immediate environment can prove detrimental to the long-term value of the brand, especially if they don’t link up to what a brand represents or the bigger brand idea.

Brand Reactions To Anxiety

Brands have adopted a variety of tactics in response to changing consumer attitudes and behaviors. In the first quarter of 2009, JWT monitored more than 100 brand responses to the recession in our 16th installment to the AnxietyIndex. We found that most approaches fit into six buckets: optimism, humor, nationalism, nostalgia, consumer empowerment and value/price. (Some of these approaches overlap.)

Optimism
During crisis, people learn to live with losses (jobs, homes, savings) and uncertainty, making them more sensitive to what really matters. As in every extreme change and loss situation, people start pondering the meaning of their lives. Brands are taking part in this process by trying to inspire consumers with optimism. Coca-Cola Spain’s "Open Happiness" campaign tackles the meaning of life via the concept “What would you tell someone who has just arrived in the world in times like these? ”While the times might seem dire, Coca-Cola reminds us that the future always offers hope.

There are also two compelling case studies from Argentina that focus on optimism; both campaigns were executed after the country suffered from a period of high unemployment, high inflation and general social instability in the early aughts. Beer brand Quilmes debuted a stirring television spot for the 2002 FIFA World Cup that featured the country’s soccer players cheering on the nation, urging their fellow citizens to pull through and get past the crisis while Aerolineas Argentina’s 2003 campaign focused on the concept of “Argentine-ness”as a powerful social connector.

Humor
Trying to make light of a dismal situation, brands are resorting to all sorts of recession humor, some successfully (Jet Blue poking fun at those who seem most responsible for the financial crisis), others with a thud (Manhattan Mini Storage using recession wordplay to persuade those who must downsize to store their belongings; one ad highlights the “Storagista,”defined as a “city gal who downsizes to a studio and stores to save money”).

Brand Building in the Face of Fear

What do guns, burglar alarms and condoms have in common? Their sales all boomed in 2009, with condom sales jumping 22 per cent over the same period in 2008. But why?

The answer can perhaps be found in Nigeria and Chile – two countries I visited on my world tour promoting Buyology. Surprisingly neither of the two countries was familiar with the “R” word. When asking government officials why that was the case, the explanation was simple – the media hadn’t paid that much attention to it, and as such no one had effectively read about the Recession, so the Recession simply had not yet arrived.

Is this whole thing just a well-orchestrated media story whipping up that dreaded component – fear?  When you are told repeatedly that the world is buckling under the weight of a financial crisis, the first line of defence is to save whatever money you have. That sets a whole new train in motion. Suddenly your local retailer around the corner loses revenue from your less-frequent visits. They are forced to lay off staff, who in turn are spending less, and in fact are no longer buying your products.  It becomes a cycle somewhat akin to a self-fulfilling prophecy.  We’re told it’s a crisis. We stop spending. They stop spending. Everyone from producer to retailer suffers.  And the economic meltdown keeps on melting.

As sophisticated as we have come to believe we are, at this point in time, we need to  remind ourselves that we’re not that far from our evolutionary relatives – primates who live their lives taking care of most basic needs – food, sex, sleep and survival.

In an atmosphere of fear, we tend to revert back to our own basic needs, and this can explain why we’re stocking up on condoms, buying weapons and installing burglar alarms.

A recent neuroscience study shows that fear is a far bigger driver than we would ever care to admit.

Mistakes Shape Recession Marketing

With everything seemingly going wrong with the world economy, it’s not the best time for marketers to expect good news. Today is no exception my friends. I’m afraid that marketing is in a terrible mess. Hope lies in the fact that most marketing problems can be solved with a certain amount of commonsense.

The crux of the issue is that marketing is shadow-boxing, when companies should be ‘in search of the obvious’. Marketing people spend too much time tinkering with new ideas and really don’t focus on the one thing that they should be focusing upon — differentiation. In all this fooling around with new ideas, marketing executives are forgetting the basics of how to separate their brand from the competition. What marketing folks need to look for is that simple, obvious strategy and not get bogged down in the complexities.

Given the avalanche of new products hitting the market, creating differentiation is becoming increasingly difficult. The arrival of so many products also puts the emphasis back on the need to be different. You are getting into a market with an army of competitors out there. You have to face that fact and say, maybe there’s no room for me unless my offer is something different. The trouble with marketing people is that hope springs eternal. And for clear differentiation, the marketing program has to inevitably start with the competition. What you want to do is what your competition will let you do.

The biggest challenge facing the marketing fraternity today can be summed up in two words: Wall Street. Financial statements are pushing companies to grow and be everything for everybody. Companies, in their insatiable desire to grow, lose focus and move away from a simple idea. Beware of Wall Street. Plot your growth strategies carefully and do not take the brand where it does not make sense. You cannot be everything to everybody unless you are a Wal-Mart. That said, even Wal-Mart discovered, much to its discomfort, that it cannot be everywhere. For example, the chain could not successfully compete in the up-market retailing space against Target, the retail chain that sells “fancier stuff for less.”  Another example: Home Depot tried smaller neighborhood formats to retail hardware, but failed because local retailers had deeper insights into local market needs. From a retailing perspective do experiment with multiple retailing formats, perhaps under a separate brand.

The economic downturn spells bad news to most marketers, but a slump also presents an opportunity to build brands.

Brand Transformability In A Down Economy

In an economic downturn, there may be a tendency to give up on new ideas and thinking, and just hunker down, until the worst is over. But, what if this is really our chance to examine new possibilities? If freaking out doesn’t make your numbers improve (and - at this point - you can lead a consumer to your product, but you can’t make her buy), what might happen when you use that brainwave space to identify and integrate consumer trends you never actually noticed before? Perhaps amazing things.

Take Reena Jana’s quick hit Businessweek article and video with David Rockwell, architect/branding expert/set designer, as an example. He commented on hotel design, which has been on my mind a bit lately too. One of Rockwell’s thoughts: what about holding cooking classes in hotel kitchens? Such design thinking is worth a little hotelier attention these days, given the convergence of trends in staying home, cooking more, and being with family. What else, physical space or otherwise, is primed for such “transformability,” as Rockwell called it?

Cooking classes in a hotel kitchen could serve consumers and add value on so many levels - but without this “what now” sense of doom we feel, such ideas might never surface. Given extreme limitations, creative thinking is forced to be that much more bold, even as the solutions become more streamlined.

Here’s another example of transformability, in my mind: Consider how Subaru is handling the current “discount” season, with their “Share The Love” philanthropic campaign. Rather than promoting money-back at loan signing or one of the other typical year-end strategies for a car dealer, they kept within the tight parameters, learned more about their consumers and thought quite differently. What their research found was that a charitable donation would very much resonate with the types of people who’d be considering a Subaru buy right about now.

Recession Marketing Success Requires Boldness

Over the years hundreds of studies have been conducted to prove companies should maintain advertising during a recession. In the 1920’s advertising executive Roland S. Vaile tracked 200 companies through the recession of 1923. He reported in the April 1927 issue of the Harvard Business Review that the biggest sales increases throughout the period were rung up by companies that advertised the most. After World War II, Buchen Advertising, Inc. decided to plot the sales of a large number of advertisers through successive recessions. In 1947, it began measuring the annual advertising expenditures of each company. When they correlated the figures with sales and profit trends before, during and after the recessions of 1949, 1954, 1958 and 1961, they found that almost without exception sales and profits dropped off at companies that cut back on advertising.

Their studies also revealed that after the recessions ended, those companies continued to lag behind the ones that had maintained their advertising budgets. In 1979 another study by ABP/Meldrum & Fewsmith, covering the recession of 1974-75 and post-recession years, showed similar findings. They found that “companies which did not cut advertising expenditures during the recession years (1974-1975), experienced higher sales and net income during those two years and the two years following than companies which cut ad budgets in either or both recession years.”

The findings of six more recession studies by the group present formidable evidence that cutting advertising in times of economic downturns can result in both immediate and long-term negative effects on sales and profit levels. Meldrum & Fewsmith’s former Senior VP, J. Welsey Rosberg reports “ I have yet to see any study that proves timidity is the route to success. Studies consistently have proven that companies that have the intelligence and guts to maintain or increase their overall marketing and advertising efforts in times of business downturns will get the edge on their timid competitors."

Case Builds for Recession Advertising

Firms that are able to increase advertising during recessions are likely to have stronger future earnings, according to a new study by researchers at Oregon State University and Western Oregon University.

Roger Graham, professor of accounting at OSU, and Kristina Frankenberger, professor of marketing at WOU, examined associations between company earnings and advertising expenditures during five recessions since 1971. Graham and Frankenberger are presenting their results at the European Marketing Conference in May.

According to Graham, general accounting principles treat advertising as an operating expense rather than an investment. While advertisers may regard advertising as an investment, and therefore an asset, Generally Accepted Accounting Principles, or GAAP, treats advertising as an expense, which suggests that advertising has no future (i.e., asset) value.

“Without evidence that advertising is an asset that provides a future financial benefit, the natural proclivity among firms is to reduce advertising during recessions,” Graham said.

The researchers studied data from five recessionary periods since 1971, sampling data from more than 3,000 firms listed on the public stock exchange that demonstrated a four-year advertising contribution to earnings.

Graham said they found that when adjusting for inflation, advertising expenditures contributed to increased earnings by firms for up to three years. The greatest impact occurs in the year immediately following the recession, and especially for firms offering consumer goods or industrial products, as opposed to firms offering services.

As a case in point, Audi reported in the February issue of Advertising Age that it will increase its 2009 advertising budget by 15 percent, specifically to take advantage of a soft advertising spending market.

Recession Advertisers Reap Rewards

In a study of U.S. recessions, McGraw-Hill Research analyzed 600 companies from 1980-1985. The results showed that business-to-business Firms that Maintained or Increased their advertising expenditures during the 1981-1982 recession averaged significantly higher sales growth, both during the recession and for the following three years, than those that eliminated or decreased advertising. By 1985, sales of companies that were aggressive recession advertisers had risen 256% over those that didn't keep up their advertising.

In addition, a series of six studies conducted by the research firm of Meldrum & Fewsmith showed conclusively that advertising aggressively during Recessions not only increases sales but increases profits. This fact has held true for all post-World War II recessions studied by The American Business Press starting in 1949.

Sponsored By: Brand Aid

Economic Downturns and ROI Scrutiny

Dave, a Strategy Director in Eindhoven, The Netherlands asks:

"As in previous downturns, any campaign or promotion proposal has to stand up to ROI scrutiny if it is to make it beyond the concept stage. Do you have any advice for the setting up and measurement of ROI in the current climate?"

Dave, we appreciate your question. As you probably know, it is very difficult, if not impossible, to measure ROI for most brand equity building activities, which tend to have a slow, integrated and cumulative impact over the long-term. Luckily, it is much easier to measure ROI for many shorter-term brand and product marketing activities, which tend to focus on triggering a sale or at least a sales lead. Here is what I would focus on:

•    Highly customer-targeted Internet marketing activities such as keyword searches and other measurable actions
•    Direct marketing of any type including online newsletter-related offers, email campaigns and direct mail – you can measure ROI for all direct marketing activities
•    Any highly targeted lead generation actions such as trade show offers (providing that you carefully track the progress of the leads throughout the sales process)
•    Publicity-related actions – while these are not always measurable, they are relatively inexpensive (usually incurring just a PR person’s time) with potentially big impact and the added benefit of being more believable than ads
•    Customer appreciation events and activities, especially if you can incorporate add-on sales and encourage customer referrals through them
•    Online guerilla marketing activities – like publicity, these are mostly time- not cost-intensive

Finally, I would caution you that companies that continue to invest in brand building activities during economic downturns emerge from those downturns with greater brand awareness and sales momentum than do competing brands that have cut back on their brand building activities during the downturns. What P&G did in 1929 is enough proof for most.

I wish you much success with your recession marketing efforts.

We share more on Recession Marketing here and here.

Have a question related to branding? Just Ask…

Sponsored By: Brand Aid

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.

Have a question related to branding? Just Ask…

Sponsored By: Brand Aid