|
Strategic
Brand Management
___________________________________________
Recession
Stress Busters
 |
Pranesh Misrai
Director, Lowe Group. |
|
|
Black
Tuesday, September 11, 2001. New York WTC razed to
the ground. Stock markets around the world tumble.
Fear engulfs the air. Populations move down a notch
on Maslow’s hierarchy: physical safety is the
dominant need. Airline companies go belly up. Cash
is king. A wrong time to invest in stocks. Right?
Wrong! Black Tuesday was the best time to turn cash
into stocks. Those who were brave enough to do so
are smiling all the way to the bank now. It is not
a new story, but we don’t seem to learn the lessons.
Invest in a bear market and sell in a bull market:
that is the surest way to fortunes.
It is the same story with Advertising investment.
When economy hits a downturn, companies tend to enter
a “Lemming Mode” when it comes to advertising
investment. Lemmings, a breed of arctic rodent, follow
a strange ritual of committing mass suicide by jumping
into the ocean while migrating. When panic gets advertisers
to freeze advertising, they probably display as much
of brainpower as the poor lemmings.
But marketers do not learn. Advertising investment
in the US shrunk by 16% last year. During the economic
meltdown in South East Asia, Indonesian advertising
industry shed 50% of its value in local currency –
and 85% in US dollar terms. In Thailand, advertising
reduction was 22% during the 1998 recession.
Recession: A Share of Voice Opportunity
Recession, on the other hand, is a time of easy pickings
for the astute marketer. Just as Black Tuesday was
an opportunity for the smart investor to pick up great
stocks at throw away prices.
Because competitors spend less, it is possible to
increase share of voice even by maintaining advertising
spending.
As advertising budgets crumble, advertising rates
soften. So, maintaining advertising spend on the brand
would mean increased advertising exposure.
TV viewing habits also change during a downturn. Consumers
adopt a “fortress mentality” and tend to
stay at home and watch TV. News program ratings go
up. So, with an identical media plan, audience delivery
is likely to be higher during a crisis.
Recession:
A Brand Building Opportunity
There is a tome of documented evidence that empirically
proves the theory:
“Spend during recession, and thou shall reap
benefits in the years to come.”
The idea of studying the impact of advertising during
a recession goes back to the 1920s when Roland S.
Vaile tracked some 200 companies through the recession
of 1923. In his article in HBR, he concluded that
companies with the biggest sales increases during
this period were those that advertised the most. But
Vaile did not take into account profit or market share,
so his news was not so seriously received.
After World War II Buchen Advertising set out on a
similar mission. They tracked four periods of recession
and added dimensions like profit and market share.
This is what they found: companies who reduced advertising
during the recession experienced a slump in sales
and profits. Even more significant, they continued
to lag behind during the recovery phase as well.
Some of the latest evidence comes from analysis of
data put together by Profit Impact of Marketing Strategy
(PIMS). PIMS is arguably the most robust database
that has been used to study the impact of marketing
strategies during recession on profitability.
Tom Peters, the management guru, called it “the
world’s most extensive strategic information
database”.
PIMS database has its origins in 1972. It tracks data
encompassing 3,500 countries – largely in North
America and Europe – over the years.
In 1999, Tony Hillier published a paper in the Journal
of Marketing Society, UK, outlining the findings of
a research based on 1000 companies in the PIMS database.
All these companies had encountered a period of recession
for two years followed by two years of recovery.
The research tracked profitability during recession
and recovery and change in market share during the
recovery phase. Companies were divided into subgroups
depending on the strategies they employed during the
recession, so the effect of these strategies could
be measured. The three sub-groups were:
• Those who chose to cut advertising,
• Those who maintained and
• Those who were brave enough to increase their
spending.
Figure1 shows that those who cut advertising tended
to have better profitability during the recession.
This is to be expected, because the saving in advertising
expenditure went straight into the bottom line of
these companies during the recession year.
However, the picture changes when you look at Figures
2 & 3, which pertain to the phase of recovery.
During recovery phase the companies that increase
ad spending came out as winners both in terms of profitability
and market shares. This study proves conclusively
that increasing communication during recession will
yield long-term dividend in terms of profitability
and market shares - the two key indicators of brand
building.
Recession:
An opportunity to get close to the consumer
Consumers do not stop buying brands during a down
turn. On the contrary there is a flight to quality.
When there is uncertainty all around, consumers seek
the sanity of reliable brands. For example, reputable
banks in Indonesia had a surge in deposits during
the economic meltdown of 1998.
Marketers who understand this changing mindset can
hit pay dirt! These are some pointers:
• Consumers seek out brands that provide security
– great opportunity for brands that can promise
to keep you healthy, protected and insured. Advertising
that builds big brand imagery will also implicitly
provide reassurance.
• Since there is a shortage of cash, lower unit
prices can reduce switch to cheaper brands. It is
worth launching smaller size packs (like sachets)
at affordable prices. Walls launched a smaller size
bar of Magnum ice cream in Thailand during their recent
recession and increased market share.
• Tired with the general doom and gloom all over,
consumers tend to seek escape. This creates opportunities
for products that offer “small luxuries”
like ice cream, lip sticks, candies, cigarettes, SMS
messages on cell phones and so on. The other opportunity
is to entertain consumers through the tone of voice
of advertising, so that they forget the grim realities
of life for a while. Advertising that makes consumers
smile will work well during a downturn.
• Given the pressure on income, some lower end
consumers would be forced to downgrade to cheaper
alternatives. It is an opportunity to launch a value
brand. Companies who add a cheaper value brand to
their portfolio during a recession manage to keep
most of the down-trading consumers within their fold.
Unilever launched a value detergent brand (named Surf)
in Indonesia during recession and managed to build
a brand with 13% market share within two years. In
Thailand a new beer called Chang was successfully
launched during the recession. It was a good quality
beer at half the price of the market leader.
• Consumers appreciate it when brands give up
“packaging frills” and pass on the benefit
to them. Dumex, a baby food brand in Thailand, increased
its share from 13% to 24% by introducing lower priced
pouch packs, while reinforcing the brands international
expertise in child nutrition.
Summing
Up
Astute marketers look at recession as an opportunity
rather than a threat. The brave hearted who invest
in brand building during a recession will gain long
term competitive advantage for their brands.
The author can be contacted at
Pranesh.Misra@lowemail.com
.
|
|
|
|
|
