December 2008

Directives
Does your brand smell of desperation? Warren Baxter

If predictions play out, the next 24 months are going to be a roller coaster as our global economy manoeuvres itself through the sub-prime fuelled credit crunch. Many organizations are feeling stranded on a precipice and grasping for anything they feel will protect them through this downcycle; “feel” being the operative word.

With knee-jerk reactions aimed at cutting costs, reducing liabilities and conserving cash, fear, not optimism, is now driving many business decisions. Recognizing this emotional state of fear is critical because all the decisions we make, including business decisions, are based on emotion and then rationalized with logic. Consumers are no different when making purchase decisions. The fight by companies to win consumers’ hard-earned dollars is on the very same emotional battleground. If a brand is truly important to consumers by way of a high level of emotional connection, they will remain loyal. But squeezed by economic uncertainty, that level of emotional connection to a brand will be tested, even strained. To maintain and strengthen this connection, it is important for companies to revere their brand.

Often, the first thing marketers must shout in tough economic times is “Don’t cut the budget!” And in principle they are right. The annals of business history are filled with examples where maintaining or increasing their marketing spend has helped companies preserve sales numbers during an economic slowdown and improve their market position as the economy improves. The evidence demonstrates that maintaining or increasing marketing spend while competitors are decreasing theirs allows companies to increase their “share of voice” (SoV) within the market. This leads to an increase in market share and top-of-mind brand positioning. When the economy improves, the company experiences better than pre-downturn performance as a result of this stronger position. Coke, BMW and Kleenex are exemplary brands that have demonstrated that an economic downturn can be an opportunity for a business to better position itself in the market.

But is it enough? Is any marketing spend good marketing spend? In a word: No. Tantalizing ad campaigns that promote slashed prices and liquidation sales only influence ten per cent of the market. In most cases, simply increasing advertising is not the answer. As the late David Ogilvy: “The Father of Advertising,” said, “Any damn fool can put on a deal, but it takes genius, faith and perseverance to create a brand.”

An astute company will focus its efforts on maintaining or increasing its brand presence in an authentic manner that is consistent with its promise to the consumer. Acting with little consideration for this promise can cause long-term damage. For example, if a company’s brand promise is superior 24-hour online customer service, then no matter what special deal it promotes, if the company moves half its customer service operators into cold calling and can’t deliver on its promise of superior service, its brand equity will surely erode. Any short-term gain created by the promotion will be lost over the long term, regardless of the increased SoV. It is vital for organizations to understand that in softer economic times, purchasers, whether business or consumer, must be able to trust and believe in a brand. Any lack of authenticity or failure of the company to deliver on its brand promise, will diminish the brand and have direct financial implications. In a 2002 brand paper, Paul Richards argued, “Just as they can respect integrity, customers can also smell uncertainty and desperation.”
The lesson here: revere the brand.

To summarize, here are five simple strategies that can help keep your brand valued by consumers during a market downturn.

1. Stick to your long-term goals. Deviating from what your brand stands for by running “urgency” campaigns designed to create quick sales may help short-term cash flow, but loyal customers may view it as “cheapening” your company’s offer to the market. Avoid the “smell of desperation” and persevere with building a strong brand.
2. Maintain or increase your marketing budget. When the market goes quiet, successful brands typically increase their market presence with strong and considered marketing activities. Moreover, research suggests that these brands position themselves to bounce back better than other brands when the market cycles up.
3. Be authentic. Focus your company’s efforts on maintaining or increasing its brand presence in an authentic manner that is consistent with its promise to the consumer.  If your brand is about luxury and exclusivity, offering “low-end” products to attract more buyers will only decrease the consumer’s perceived value of your brand.
4. It’s not just about advertising. Branding covers all aspects of your business that involve customer touch points, from direct mail, to invoicing and client events. It’s important to consider how any changes in your company activities and structure may affect your customers.
5. Deliver on your brand promise. A recession is an overly emotional time when consumers need reassurance that they are making the right choice. If your marketing activities create mistrust by under-delivering on consumer expectations of your brand, consumers may quickly switch to a safer, perhaps less expensive, alternative.
6. During a recession, consumers and business are generally more particular about where they will spend their money. A company’s brand is its promise, an assurance of the best choice. A brand strategy that focuses on this promise and considers it throughout each customer touch-point will maintain customer loyalty and inevitably, elevate a company’s market position and market share when the economy cycles upward once again.

Warren Baxter is managing director of Karo Group, a strategic branding agency based in Vancouver, BC. Karo, recognized as a “Top Ten Best Workplace in Canada,” has partnered with some of this country’s largest organizations to shape their brands through advertising, interactive, environments and communications design. Warren can be reached at 604-255-6100 or wbaxter@karo.com.