How Are Brands Impacted In Economic Downturns?

Branding Strategy Insider helps marketing oriented leaders and professionals like you build strong brands. BSI readers know, we regularly answer questions from executives and marketers everywhere. Today we hear from Craig, an executive with a brand acquisition company in New York City who asks this about brands and economic downturns…

I’ve been a reader and fan of Branding Strategy Insider 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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