Crunch time for brands

It’s not just consumers who are suffering with the recession.

Hardly a day goes by without fresh news of another brand’s woes. MFI and Woolies have gone; Whittards is going…and news today that even the luxury brand Chanel isn’t immune to the economic downturn in being forced to lay off 200 staff.

However with the credit crunch biting further, brands must resist the knee-jerk reaction of making carte blanche marketing cuts as a means of slashing costs to protect profit margins.

To quote Sun Tzu - the clever combatant imposes his will on the enemy, but does not allow the enemy's will to be imposed on him.

As past evidence shows from a 1998 PIMS consultancy survey, brands that hold their nerve tend to win out. Research amongst 1,000 consumer- facing brands showed that during the 1991-93 recession that while those who cut marketing spend made higher profits during the recession they then went onto lose market share after this. Converse to this those brands that maintained spend or even went on the offensive and increased their marketing activity achieved higher brand vales after the recession.

Of course maintaining marketing spend by itself won’t necessarily attract customers or drive sales if the category as a whole is afflicted by the recession.

Instead marketers must seek to adapt the marketing mix. However while price reductions and special offers can drive traffic (think of M&S 20% ‘one-off’ sales days before Christmas), mid-to-high level brands need to be wary of doing this too often or for sustained periods as it could cannibalise revenue and/or erode brand equity.

The smarter brands will look beyond price discounting in matching their product offering towards consumer needs within the present economic climate. One example is the Morrisons supermarket chain which ran a high profile celeb driven advertising campaign before Christmas. While I’m not a fan of the ads per se they have been part of a concerted effort to make Morrisons more appealing by visibly and better communicating their offering of “freshness and value” just as the recession was kicking in.

This message has been supported by additions and amends to their product lines (including re-launching their value range) and refurbishing their stores to accentuate strong points such as allowing shoppers to see that bread was baked on the premises.

Like Morrisons, brands who invest in reinforcing their brand values and maintaining their marketing spend in the right areas will stand a better chance of emerging unharmed. Ending with another quote that echoes the thinking of Charles Darwin - it’s a case of survival of the fittest.