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How brands can be successful in a recession...
At Cogent's brand event on 17th June, Leslie de Chernatony spoke about how brands can beat the recession and looked at previous studies to understand what value is and where it comes from. A synopsis of Leslie's presentation follows.
Introduction
“It was the best of times, it was the worst of times” – Charles Dickens (1859) A Tale of Two Cities.
What can we learn from the past? What have brands done and how have brands managed to survive? They are pumping stronger values. They are daring to challenge. Leslie offers some useful tools for marketers to rethink what is going on. Simplicity is the name of the game.
Six Key Principles For Success In A Recession
During the recession in 1990/91, Ford stopped innovating and the Focus was delayed by 5 years. In the short-term, Ford Europe reported good results, but in the longer-term, it was the worst decision they could have made. This highlights the need for marketers not to only take a short-term view during a recession.
Leslie recommends the Marketing Science Institute (MSI) database of research (www.msi.org). From this database, there are six key principles for success in a recession…
1. Boost advertising spending – Those organisations who are investing are able to stand the test of time. The customer doesn’t become schizophrenic during a recession! The customer probably becomes more aware of price, but simultaneously becomes aware of their innate values and thus wants a brand to be able to tell a story about themselves.
2. Take a long-term view – By taking a long-term view of the brand, marketers should not see the brand as a cost, but as a basis for return. Firms that cut have lower long-term stock returns.
3. Bolster national brands – The sad truth is that consumers do become more aware of price and own labels present a proposition. Consumers switch to own labels quickly, but after the recession, tend to switch back slowly. Therefore, you’ve got a problem if you play the game of “let’s reduce price”.
4. Know yourself – Organisations should adopt a proactive and strategic stance and combine this with their internal culture. If you are lean, mean and customer-centric, you are more likely to respond and try new things. For example, Pret a Manger is experimenting with different offers.
5. Focus on customer satisfaction and retention – Firms that emphasise getting revenue from customer satisfaction have better financial returns. How can you build a relationship but at the same time, cut back on costs?! For example, Birmingham International Airport now charge for dropping off at the airport. At the end of the day, you have got to have a basis for charging more, not just because the bottom line isn’t looking too good.
6. Make the case for marketing – The MSI says that those brands that really thrived in the last recession were all about developing tools to quantify contribution. We keep talking about New Product Development, but there has been a move to New Business Development. For example, Crushpad (www.crushpadwine.com) is an organisation with a completely new business model. Similarly, the Build-a-Bear Workshop offers customers an experience. Another example of New Business Development is the Filthy Food Company (www.filthyfoodcompany.co.uk); an organisation which has understood the drivers of value with not a new product, but a totally different business approach.
Context
Leslie argues that there are two types of brands. Successful brands during a recession are those which start with a ‘big idea’ and underpin this with a set of values. This means everyone actually living these values and not just being able to recite them. Therefore, the net result is that fiscal value is created.
On the other hand, we see a context where the brand is all about an identifier whereby a brand becomes little more than a strap-line mentality. Therefore, instead of creating value, we see the brand being viewed as a cost within the organisation. These brands are destroying value, not creating it.
What is value?
Value can be simplified into a basic equation: benefits vs. sacrifices. Benefits come from attributes and outcomes, whereas sacrifices are both monetary and non-monetary…
BENEFITS:
Attributes: Quality; Core Factors; Added featurs; Customisation.
Outcomes: Personal benefits; Social benefits; Utilisation benefits; Financial benefits.
SACRIFICES:
Monetary: Search cost; Acquisition cost; Cost of use; Maintenance cost; Disposal cost.
Non-Monetary: Relationship cost; Psychological cost; Time.
Leslie recommends using the ERIC framework to show value opportunities. ERIC (Eliminate, Reduce, Increase, Create) comes from a book called Blue Ocean Strategy by Kim and Mauborgne. Leslie also recommends Cameron’s (2006) simple model which characterises an organisation by showing to what extent it has a structure that can cope with being flexible, and to what extent the organisation takes an internal or an external perspective.
Leslie concludes that:
We need to invest in a recession
Value is assessed through values
Value is a trade-off
We need to clarify the sources of value
The ERIC framework can be used to show value opportunities
You may also want to review Leslie de Chernatony’s books…
From Brand Vision to Brand Evaluation: The strategic process of growing and strengthening brands
Creating Powerful Brands (with Malcolm McDonald)