Brand investment in a recession

06 March 2009
In times of a recession, the temptation is to cut all budgets.  The marketing budget, including any costs associated with brand protection and investment, are usually the first expenses to be cut. But investment in your brand during economic downturn, including developing new branding and marketing strategies will strengthen your brand, improve customer loyalty, and increase your long-term profit margins.

Brand Finance plc, the world’s leading independent brand valuation consultancy, updated its BRANDFINANCE Global 500 report in September.  This report reveals the impact of this year’s economic downturn on the 100 leading global and US brands, and has wiped $67 billion (or 4.2%) off brand values since 31 December 2007. 

As the financial crisis spreads, share prices have dropped around the world, and this is now impacting on brand values.  Despite the drop in brand values, investment in your brand will provide your organisation with long-term financial benefits – just stick to the basics.

Any long-term branding strategy requires an audit of your brand portfolio.  Keep your most important brands and the brands where you can see opportunities for growth.  Ensure you have adequate registered protection for your most valuable brands.  Cut or sell any brands from your brand portfolio that can be phased out.

Recognise that customers are not always rational during times of economic need.  What is driving your customers at the moment?  What motivates them to buy your products?  Researching your customers’ needs and finding out how they identify with your products is important.  Convincing others to invest in this research will be difficult, but worthwhile.

The results of the research should guide your marketing strategy.  Do you need to reposition your brand to identify with your customers’ needs?  If necessary, develop and employ a marketing strategy that aligns your brand and product with your customers’ needs.

Aligning with your customers’ needs will bring many benefits.  Not only will you strengthen your relationships with your current customers, but you are also likely to attract new customers.  Customers will associate with your brand on different levels.  You will own a stronger brand and brand loyalty will improve.  Your long-range profit forecasts and margins will increase.  Aligning with your customers’ needs during an economic downturn makes good commercial sense.

Opportunities may exist for product line extensions.  These opportunities can foster your brand’s development and improve profits.  A great example of using product line extensions to evolve a brand is McDonalds’ healthier choices value menu.  McDonalds identified a group of customers and targeted that group with a unique marketing campaign. McDonalds has now reported a 14% growth in profit for the third quarter worldwide when some businesses are struggling to preserve market share.

New licensing arrangements that align with your customers’ needs could also improve margins.  Be careful to stay true to your core brand values when taking on any new licensing initiatives.  Adopting a new arrangement that does not fit with your core customer base could be disastrous.

You may be tempted to drop quality standards to reduce costs.  If customers lose confidence in the quality of your product, then they will respond by moving on to a brand that does deliver on quality.  Cutting back on quality could increase short-term profit margins, but are more likely to eat away at your customer base and lower long-term profits.

Resist any temptation to compete on price.  Customers who buy when prices are low will not buy when prices return to normal levels.  Look after the customers you have and look for ways to encourage these customers to continue buying from you.

Keep contact with your customers.  During economic downturns, customers do not stop buying.  Instead, customers are more selective.  As others cut their marketing spend, you can grab a larger share of the marketing time.  Explore alternative and cost-effective opportunities to communicate with your customers.

In times of worldwide financial crisis, negative growth, economic market downturn and declining brand values, it seems difficult to justify investment in brands.  But investment in your brand is critical to preserve and grow market share and place your organisation in a position to benefit when the financial crisis is eventually over.

An edited version of this article was published in FMCG, February 2009.

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