Excerpted from BusinessWeek, “Best Global Brands: Gutsy marketers spend into the teeth of a recession”, by Burt Heim, September 18, 2008
* * * * *
Every time a recession threatens, executives glare at the balance sheet and wonder aloud about one particular expense: brand building. Trimming the marketing budget can seem eminently sensible. After all, doing so won’t hurt product quality or, most likely, next week’s sales. As the business climate has worsened in recent months, a number of blue-chip companies have announced plans to cut marketing costs.
Then there are the other guys—companies that refuse to let tough times distract them from their long-term brand-building efforts. Sometimes they see a recession as the perfect moment to get a leg up on a weakened rival. Others strengthen their brands to ward off discount competitors. Still others feel they have a knockout new product that requires support.
“There’s always pressure to cut,” says Jez Frampton, chief executive of Interbrand, a brand consultancy, which typically advises clients to spend harder during a recession. Consumers, he argues, “are more conscious they’re spending their hard-earned money. It increases what they expect they should receive in return.”
* * * * *
Still, it requires a gutsy chief marketing officer to ask the boss to invest in something as squishy as brand-building when the economy softens. CEOs typically set marketing budgets as a percentage of expected future revenue, a number that often shrinks in a downturn. Results-hungry investors, meanwhile, want marketing money spent on activities that ring cash registers now, like promotions or coupons. Even the competition can create temptations to play it safe. Advertisers closely monitor how often their ads appear vs. the competition’s. They call this their “share of voice.” A pullback by a timid rival gives penny-pinchers an excuse to pull back while still preserving share and save money. And most companies succumb to the pressure. During the last two recessions, in 1991 and 2001, overall ad spending fell.
* * * * *
Real life isn’t so simple, of course. Many factors determine whether spending into a downturn will work, not least of which is the quality of the product and the advertising. Plus, the consumer you thought you knew, pre-recession, can be almost unrecognizable. When times get tough, people reexamine old habits and brand loyalties. Their tastes shift dramatically as they cut back. “The rate of change can be phenomenal,” says John Hayes, CMO at American Express. In the past year alone, he notes, consumers have far more negative perceptions of debt and spending on themselves.
* * * * *
Defensive Spending
Many companies that continue to invest in their brands during a downturn are not so much going on the offensive as playing defense. AmEx is no exception. CMO Hayes says he has been “doubling down” in recent months on messages that promote trust and security.
Often a downturn ups the ante in a defensive battle companies have been fighting for years. In such cases, pulling back is a false economy. In 2000 Kellogg’s decided to increase its advertising spending to brand its cereals as premium products and avoid being commoditized. The strategy so far has worked. In the first six months of this year, Kellogg’s was able to pass along higher ingredient costs, while many other food companies couldn’t. “We believe it’s critical, when the economy gets tougher, that people should be seeing the value of our brands constantly,” says Mark Baynes, Kellogg’s chief marketing officer. “Brands are much more than flakes in a box.”
Kimberly-Clark, which owns the Kleenex brand, is also playing defense in the U.S. To justify charging more than its rivals, Kimberly-Clark is following the usual playbook for packaged-goods companies: creating new iterations of the same product—extra-soft tissues, anyone? It’s also trying to forge a more personal connection with consumers by spending heavily online and on TV. “The worst thing you can do,” says CEO Tom Falk, “is pull in your brand-building spending and become more of a commodity.”
* * * * *
Offensive Spending
Then there are the companies that go on the marketing offensive. In some cases, they are perfectly suited to hard times and simply want to remind customers that they represent good value. Wal-Mart Stores, for example, has recently upped its advertising spending and returned to selling itself as a champion of the low- and middle-income consumer.
Some companies, having reached the top, are willing to spend to stay there. Louis Vuitton plans to continue to boost its marketing budget, downturn or not. “We never change the long-term strategy because of short-term problems,” says CEO Yves Carcelle. Louis Vuitton’s aim is twofold: keeping the aspirational masses hooked on classic luggage and handbags and ensuring that fashionistas continue to see the company as edgy.
Even underdogs can show some bite during a downturn. Amid slowing sales in the U.S., Volkswagen is going after a niche its Detroit rivals have pretty much left for dead: minivans. Pushing its new Routan minivan, says VW marketing manager Brian Thomas, strikes at the soft underbelly of his rivals: The Big Three have slashed ad spending on minivans, and the entire industry is running ads promoting fuel efficiency. That makes minivans a comparatively quiet niche, one in which its theoretically easier to grab consumers’ attention.
Edit by DAF
* * * * *
Full article:
http://www.businessweek.com/magazine/content/08_39/b4101052097769.htm
* * * * *
Want more from the Homa Files?
Click link => The Homa Files Blog
* * * * *
The Homa Files 
Leave a comment