In October of 1980, The Conference Board (the business and economics organization focused on corporate governance, HR, business ethics, global corporate citizenship, and corporate performance) held a conference titled “Marketing Under Economic Adversity.” The title is apt for today as we are experiencing the highest inflation inn 41 years, at 9.1% in June 2022. We are also experiencing product shortages, population declines, declining consumer sentiment and are expecting recession. Google is limiting hiring. Microsoft is cutting staff. Peloton is moving to outsource manufacturing.
Brand-businesses must manage through the current volatility implementing strategies designed for sustainable profitable growth during current and predicted hard times. Action now is essential.
Some marketers believe that hard times are the time for a hard sell, defined as shouting maximized performance or minimized price or both. This is not the way to sell. This is limiting and misleading. In hard times, it is not about selling it is about buying. Unless marketers can generate buyers, there will not be any selling.
No matter how troubled the times, people do not just buy on price and performance alone. People buy on value. It is an everyday truth: the best value wins. Value is a virtue. But brands do not just wake up one day and have perceived brand value. Brand leaders must develop and implement strategies for generating brand value.
Perceived brand value is already necessary for brand consideration and purchase. The goal of every marketer in our turbulent economy is amazing value, staggering value, extraordinary quality at a great price. For marketers to generate buying, the goal must be irresistible trustworthy brand value.
The basic definition of customer value is: value is what you expect to receive, and what you do receive for what you expect to pay and do pay. We all have a mental value equation when we make a purchase. A consumer’s value equation is not math: it is a mindset. It is a mental process of evaluating an offering relative to its costs. However, over the decades, the consumer’s value equation has evolved from product or service for the price.
People assess a brand’s worth based on the total brand experience they receive (functional benefits, emotional and social rewards) relative to the total costs (money, time, and effort). But there is a very important new component to the equation. It is a value multiplier, and that multiplier is trust. Trust is the consumer’s belief that the brand will deliver the experience relative to the costs.
The new mental model of value is total brand experience relative to total experience costs all multiplied by trust. This is today’s new Trustworthy Brand Value equation. And this must be marketers’ focus. Success in troubled times requires creating and implementing a trustworthy brand value strategy right now. This is how to create buying so there is selling. The threat and consequences of our current pandemic and financial distress may change people’s behavior and habits. But, changed behaviors and new habits will not decrease the importance of value. Value does not vanish due to volatility. Trustworthy Brand Value is vital for a brand’s enduring profitable growth.
Trust is the consumer’s evaluation of a future experience with the brand: How confident am I that this brand will deliver this experience for these costs?
If trust in the brand is high, then as a multiplier, the perceived brand value is increased. If trust in the brand is low, then the perceived brand value is decreased. If there is no trust in the brand, if trust in the brand is zero, then it does not matter what the promised brand experience is relative to the costs anything multiplied by zero is zero.
Years of data support the point that credibility or expertise will not matter if there is no trust. Brand trust significantly affects consumer commitment. This influences price tolerance. Brand trust is a critical piece of the decision process. If you want a strong, enduring, loyal relationship with a customer, you must have brand trust. Trust is essential to the calculative process of brand acceptance.
Here are seven marketing actions for navigating in troubled times:
1. Do not confuse price and value. Many marketers continue to use these terms interchangeably. Price is what marketers charge. Trustworthy Brand Value is what customers perceive an offer to be worth. A sign of troubled marketing is defining value as merely low price. Do not reference a particular brand as a “value brand.” Each brand must be a value brand. Each brand is valued for different reasons. Price is important. However, a brand’s worth depends on a lot more than price. Value can happen at any price point. Value is in the eye of the customer: every customer is value conscious.
2. Maintain relative price. Do not increase price in the hopes of making up for lost sales. Avoid this losing strategy that sacrifices long-term value creation. Do not focus on deals: deals destroy brand loyalty. Deals increase price elasticity. Right now, many consumer brands such as Gatorade and Doritos have raised price significantly. At some point, consumers may no longer see the value in paying over $4 for a bag of Doritos. On the other hand, mobile phone service carriers are providing deals that basically give the customer a new phone for free. According to The Wall Street Journal’s analysis of pricing, the trade-ins for old or damaged phones offer up to a $1000 discount. Same with TV’s. NPD Group indicates that 71% of TVs sold from January through April 2022 were sold at discount.
3. Make sure that your brand’s perceived value is seen as a fair value for the promised experience. Marketers do not determine fair value. Customers do. Marketers set price. Consumers decide fair value: is this brand a fair value relative to competitive alternatives that I am considering? As The Wall Street Journal points out, many consumers are buying whole chickens at $1.56 per pound rather than spend $4.26 per pound for boneless, skinless chicken breasts. These consumers find the price of pre-cut, pre-skinned chicken breasts a poor value relative to cutting the chicken themselves.
4. Focus on maintaining and maximizing Trustworthy Brand Value not merely messaging. Do not allow marketing to focus solely on how to best communicate with customers, when to communicate with customers and across which devices. Brand management is much more than brand messaging. Creating and strengthening Trustworthy Brand Value is the goal of the business, not just finding the perfect messaging and media.
5. Create and implement a Plan to Win. A Plan to Win aligns the entire enterprise around creating and strengthening Trustworthy Brand Value. A Plan to Win puts the brand’s purpose, its promise, its five must-do actions (people, product, place, price, promotion) and its brand performance metrics on a single page. A Plan to Win is a brand-business roadmap for aligning all business units around the same goals, actions, and measures. Create cross-functional teams. Trustworthy Brand Value is not just for marketers. Finance, legal, sales, HR, IT and all other functions have a role to play.
6. Maintain or increase product/service quality. Cutting quality to reduce costs is wrong. Data show there is better return on investment performance after bad times if a brand maintains quality. Value added is an advantage. A strong value-added business is the best defense in troubled times. A recent article stated that hotels are increasing room rates while not increasing the service experience. This is not the way market during adversity.
7. Defend the profitable business that you already have. It is risky to focus on new products at the expense of beloved, existing brands. Focus on the business you do have before focusing on the business you do not have. Love the customers who already love your brand.
The time to guard against a recession is before the recession starts. Troubled times are trouble: but trouble for some does not mean the trouble for everyone. Do not just accept trouble; create trouble for others. Build and nurture your brands because your brands are your consumer protection. Your brands are a trust assurance policy for the consumer. “Troubled times” is not the threat; troubled marketing thinking is the threat.
Contributed to Branding Strategy Insider by: Larry Light, Author of The Paradox Planet: Creating Brand Experiences For The Age Of I
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