Managing brands in recession: a CEO responsibility

Managing brands in recession
Market Leader Winter 2009

Unfortunately, the value of brands, both in the consumer's mind as well as on the balance sheet, is not always reflected in the time and attention given by many companies' top management. In a recent EIU study, 'Guarding the Brand', the senior executives ranked the corporate brand as the third most important corporate asset after human capital and an established customer base. However, worryingly, only 40% of the sample felt that senior executives 'paid only lip service to brand considerations'

Brands are arguably the key assets that a company possesses and they should therefore be a top-priority for senior management and not seen as something left solely to the marketing department. They represent the embodiment of a company's differentiation and positioning. For service businesses, the organisation and its people are the brand. So in a downturn it is even more crucial to maintain, and if possible to build, brand equity – as President Obama's Chief of Staff put it: 'You never let a serious crisis go to waste … It's an opportunity to do things that you could not do before'.

So the key question is: Who will be the winners following recovery? There are three key lessons from past downturns, all of which require dedicated CEO involvement.

First, the temptation to cut marketing investment in an attempt to be 'leaner and fitter' should be challenged – can lead to emaciation and eventually failure.

Companies often make cuts across the board, especially where it is 'easier' to make short-term cuts such as R&D, training and yes, in marketing, but these are the value-creating activities whichdrive long-term equity. Cuts may also result from a blind application of a marketing budgeting process based on a percentage of sales or some other standard procedure. This can lead to a vicious circle of falling prices, lowered quality levels and further reductions in marketing investment. If you have to make cuts then this should not be across the board but through a careful analysis of marketing objectives and priorities and by cutting less productive activities and less profitable markets and customers, replacing them with specifically targeted activities.

UK food retailers have been shrewd in responding to the downturn with 'meal deals'.

Even at the upper end, Waitrose has launched its Essentials range, which has shown recent growth. Sainsbury's was the overall Marketing Society winner this year for its 'Feed your family for a fiver' campaign which built upon the 'Try something new today' campaign. This was based on research that showed a consumer perception that Sainsbury's was more expensive than its rivals at a time when shoppers were reducing their budgets, buying more on promotions, trading down and cutting back on convenience foods. The resulting campaign helped to reposition Sainsbury's, and numerous metrics show that it has reversed its misfortunes.

Working smarter and using more of a 'judo' metaphor to make your budgets work more effectively is another response. This can be through greater use of 'guerrilla' methods, word of mouth, digital marketing or by doing the unexpected. It can also be turning a possible weakness, to an advantage. For example, McDonald's used the famous 'McJob' negative perception ('a low-pay, low-prestige, low-dignity, low-benefit, no-future job in the service sector') to run an internal branding/HR/communications programme with their employees based on independent research. The results have been substantial with positive internal impact on employees and on their market position.

Second, there is an even greater need for focus – on clear brand positioning and across the brand portfolio.

Today there are too many brands and too many products chasing too many consumers. Consumers also have increasing buying power and much better information than in the past as a result of communications technology, globalisation and higher marketing sophistication. Younger consumers do not appreciate being 'marketed at' and are suspicious of traditional marketing communications, often creating or preferring their own word of mouth or community exchange.

The result of all of this is brand fragmentation, frequent lack of brand focus, and a dilution of marketing resources – i.e. failure to put enough 'muscle' behind a focused range of brands. This is why many of the big consumer goods companies such as P&G, Diageo, Danone and Unilever have been 'pruning' their brand portfolios and concentrating their investment on so-called 'power brands'.

Successful brands occupy a strong position in the consumer's mind, which is where the crucial battle takes place – consumers own the brand in this sense. In the strongest cases this can even be reflected in everyday language, for example (in English at least) Xerox; Kleenex; Scotch tape; and nowadays 'to google' has become a verb.

Strong brands should exemplify a clear value proposition – Volvo stands for safety, BMW for driving pleasure, and Mercedes for engineering. In retailing, Tesco's focus on customers is absolute. Its core purpose 'to continually increase customer value to earn their lifetime loyalty' – is not just another bland mission statement but something which runs right through the whole organisation. For example, constant customer question times and spotlights, employees as customer champions, doing 'small, simple, helpful, relevant things' for customers and instilling the marketing discipline from the CEO to the checkout staff.

In this sense, the brand embodies the strategy for the business or product and so the brand strategy should be integrated within the overall strategy for the business

Third, get the branding basics right – maintain trust with the consumer and remain authentic and honest.

Trust has become a particularly salient value in all markets not just in finance. Especially in a downturn, consumers will be loyal to brands they can trust. The young, particularly have become sophisticated critics of marketing hype and are quick to spot conspicuous fakery or unethical practices. Heritage stories are particularly beneficial and it is the CEO's job to ensure that this story remains central to the brand and company's position.

I worked as adviser to the Caterpillar footwear brand, which was hugely successful in the 90s with fashion-conscious European teenagers who related to the authentic American origins of CAT's construction company heritage – work-wear, rugged, industrial, 'walking machines'. Likewise, Levi's was built upon its cowboy origins, Timberland on the outdoors and Nike on athletic performance. This also means fair pricing, not low pricing necessarily but true value for money. Or it could be based upon innovation (Nokia, Nintendo) or service.

So, in conclusion, it is vital in a downturn – when it is easy for companies to become distracted by adverse market conditions of one form or another – for strong CEO involvement to manage their brand equity as a key strategic asset and to nurture it with care.

Chris Halliburton is Professor of International Marketing at ESCP Europe.

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