Jun 20 2010
The global economic crisis has led to customers downgrading their purchases in terms of both quantity and quality, and are asking harder questions about how your product or service is truly differentiated from others. In ordinary business situations, and especially during economic downturns, the power of a brand can truly never be underestimated in answering this basic consumer need.
The benefits of having a strong brand are much talked about and obvious – ability to charge premium pricing, faster trials, greater loyalty, lower long-term marketing costs and the potential for a “brand family” over time (launch new products and synergize). Not enough realization has happened, however, on how investing in building a strong brand helps the owner organization ride through downturns or threats in the external environment.
Beyond an overall economic slowdown, there are a few other specific situations that can test the resilience of a brand. These are (i) an aggressive competitive action, (ii) a negative public relations incident, (iii) a decline in the owner company’s investments (eg. through prioritization of other businesses) or (iv) the maturity or obsolescence of category.
• Competitive Action – We often see situations where an established brand is challenged by a local/global competitor with all the right elements going for it (concept, pricing, product, heavy support plans). Consumers are enticed to try the new brand with a new to world proposition, trade is incentivized to stock and display only the new range, and the challenger often attempts to “reframe” the existing brand as old & outdated. We saw Colgate attacked in the global toothpaste market over the last 2 decades but it is still a significant player in the market today. Of course, at some stage most of its consumers would have tried the competitive brands but Colgate has managed to hold it’s own over the years primarily because of it’s brand equity (the trusted, health-providing, doctor-recommended brand for the family). It has also had to re-invent itself with value corrections, premium upgrades (Total), line extensions (Gel, Herbal) and stronger advertising. However, none of these would have worked as well without the inherent strength of the mother brand.
• Negative PR incident – We’ve seen multiple PR incidents over the years (food products and halal, cola drinks, skin creams etc.). However, Coke/ Pepsi /Pringles/Olay etc. have not only survived but also thrived. Had they been weaker brands, a consumer would have easily switched over to an alternative snack brand or drink at the store. These brands have built and continue to build a rock solid relationship with their consumers, delighting them with product improvements, entertaining/informing them with communication and satisfying them (and trade) with their value equations. Another example is Marlboro – the brand has survived and continued to grow even as the parent company has been saddled with expensive lawsuits and strong public opinion against smoking.
• Decline in Owner Company investment – There come times when the owner company is not able to invest in sustaining or growing a brand, due to the need to divert money to another part of the business (either consciously or due to a crisis). This typically also happens in a cyclical manner, lasting for 1-3 years before one can invest across the board or management changes and wants to change strategy. On the other hand, sometimes a brand is only supported periodically instead of receiving year-round support. In such situations, only a strong brand will retain the majority of it’s consumer base even in the absence of product innovations/news, advertising (to remind them before next purchase and to stay top of mind) or trade spending (to convert shoppers into buyers). Consumers and trade trust the brand, have benefited from it over the years and keep it in their consideration even if it is not being actively marketed. In India, a local brand called Thums Up was acquired by Coke and deprioritized in marketing spending. However, the brand refused to “go away” and the company having realized its potential has started to invest again.
• Maturity / Obsolescence of Category – An example of maturity might be the diaper industry in Western Europe and Japan. With child birth rates declining, the category is actually shrinking in these and other developed markets. However, strong brands like Pampers have managed to ride the wave successfully by reinventing themselves – driving market share in what is left of the category and extending the brand by introducing new innovations (eg. diapers that baby can wear while swimming or pull-on pants).
In conclusion, I would like to reinforce the importance of investing in building a rock-solid, “brand manager proof” brand. A brand that outlasts the dozens of managers it has over time, who each try to leave a “legacy” by changing strategy in some way or other. Building this foundation not only rewards the owner with higher financial returns in the good years, but also helps sustain those returns in the inevitable downturns.
BlueSteps Member Guest Writer
Rahul Malhotra is Regional General Manager (Americas, Asia-Pacific, Middle East, Southern Africa) and a member of the global executive team for one of Shell’s global downstream businesses. He is directly responsible for a P&L of about $1.5b, about 1500 direct / indirect employees and serves as chairman/director on multiple boards in his business, including JVs with the government and listed companies. Prior to this, Rahul worked for many years with Procter & Gamble in the marketing function, on diverse businesses and markets (Japan, India, China, South-East Asia, South America, Australia/NZ, North Africa, Eastern Europe etc.). Rahul and his family live in Singapore. He may be contacted at firstname.lastname@example.org.
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