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click here to comment on an article. ARTICLES The Importance of Branding during the economic downturn. MALCOLM RAPHAEL - March 2009 - posted by The Author heads branding initiatives at Times Private Treaties. In his 14 years of work experience, he has worked in multiple roles – advertising professional, branding consultant and client.
There are numerous seminars and conferences being held to debate whether branding is an investment or an expense. It is intriguing that despite brands being around for centuries and having proven time and again in value creation, we still need re-affirmation of the fact that the need to create brands and nurture them is essential. I am going to briefly build the case again.
What started as a method of identifying & differentiating my horse from yours, branding has surely come a long way. From functional benefits to emotional ones, today brand benefits are layered with the constant endeavor to better competition. However, at the core, brands still serve the purpose of identification, assurance and justification. Justification that I should pay a 300% premium for a particular soap, justification that I need to travel an extra mile to get ‘my’ brand and justification that it’s okay to forgive a bad brand experience. So we see, brands help us command a premium, generate loyalty toward a product and gets consumers to forgive!
Brands to me are like BABIES. They are born out of passion. In the beginning, you don’t know what to do with it and then slowly it all sinks in. That’s when the advertising agency with its strategy kicks in. You give it a name; you dress it up, give it a personality & instill values that you deem fit. Like babies, brands need to be introduced to the world and then in order to grow, it needs to be fed with advertising, promotions and media visibility. This is the investment phase, very much like how parents put in all their hard earned money into making their baby the best, so that it can beat everyone in its class and come through with flying colors.
Then comes the time we all wait for – pay back time. The BABY turns 21 (metaphorically speaking), completes its education and parents start to cash in on all the investment.
The BRAND’s cash registers start ringing and the brand value increases with more investments.
So to capture the growth cycle – a brand is created; makes a promise; it lives up to that promise by delivering good quality and service. This leads to trust, which then translates to customer loyalty and goodwill. And over a period of time, brand value is created.
What’s more important today is not so much about getting convinced about the need to build brands, because that I gather you all must be convinced about, but the importance of branding during the economic downturn we are facing.
Here’s an interesting story a colleague sent me on mail (I am sure most of you must have read it as well). It is about an illiterate man who couldn’t read a newspaper, he didn’t listen to the radio because he was hard of hearing and didn’t watch TV because he didn’t have one. What he had though was a passion to make Vada Pav (the Indian Burger that originated in Bombay).
So he started making vada pavs at a street corner. The vada pavs were so good, that people spoke about it and demand grew fast. So he invested in making more vada pavs, bought extra stoves and employed additional help to keep up with the demand. Sales grew even more and along with it, his ambitions. He then got marketing savvy and offered interesting consumer offers, bought more raw material and expanded his capacity. His vada pav business got him to send his son to college, something which he never go to do.
One fine day, his son returns from college because of his vada pav business, came back home and seeing the kind of investments and scale of operations, told his dad, “Haven’t you heard about the ongoing recession? This is not the time for investment or expansion. You need to cut costs and reduce your employee strength”.
The Dad heeded his son’s advice because he was learned and cut down on his consumer offers, raw materials and reduced staff. Sooner than later, the number of customers who came to the store started reducing. Seeing the reduction in sales, the dad complimented his son, “Thank you son, I am glad you warned me about the recession.”
The moral of the story is quite evident. While it is important to cut down on excesses, it is important NOT to cut down on what matters.
History shows that brands that advertised during a downturn grew multifold in the upturn.
McGraw-Hill Research analyzed 600 companies from 1980 through 1985. The results showed that business-to-business firms that maintained or increased their advertising expenditures during the 1981-1982 recessions averaged significantly higher sales growth, both during the recession and for the following three years, than those that eliminated or decreased advertising. By 1985, sales of companies that were aggressive recession advertisers had risen 256% over those that didn't keep up their advertising. During the 2001-03 U.S. automotive downturn, while rivals were laying off employees, Toyota invested to expand local production and increase its cost advantage. As a result, it was able to gain share and outperform the competition. Invest in creativity The weakness of competitors at a time when most consumers are still spending can be a great opportunity for new business. Some of the most successful companies and products were launched in recession.
(source: Ogily on Recession) GE was founded in the panic of 1873 Disney was founded in the recession of 1923 – 24 HP was founded in the Great Depression of the 1930s Microsoft was founded in the recession of 1975 Apple’s iPod was launched in the recession of 2001 My 5 simple beliefs for the downturn: - Consumers stop spending and start buying. – They get a lot more discerning and that’s where a brand plays an even more important role.
- Just because there is a recession, we are not going to eat less. – We will just readjust our standard of living and tastes. So it’s important to continue building brand salience and preference and constantly add value to your consumer’s lives.
- Consumers start wanting more for the same amount of money. – Money suddenly has increased in value & consumers start looking for value-adds.
- Recession is the best time to consolidate your brand. - Building or sustaining a brand has never been so cheap!. Media is cheaper, lesser brands are fighting for the same space, there’s lesser clutter on TV. Therefore, you can get a higher share of voice at a much lesser cost and what’s more, the consumer has fewer brands occupying his/her mind space.
- The story we tell ourselves change - As Seth Gobain says when times are good, buying things is a sport. It's a reward. The story we tell ourselves is that we deserve it, that we want it. When the mass psychology changes and times are seen as not so good, the story we tell ourselves changes as well.
