Strategy

Brand strategy: Don't go changing

A downmarket message can backfire even in tough times.

You’d be hard pressed to find many shopaholics these days. According to a recent study by the Boston Consulting Group, 62% of Canadians plan to reduce their spending over the next year, nearly three-quarters of us will buy more products on promotion and 69% will put off major purchases that can wait. Retailers have already seen signs of thriftier consumers. Seasonally adjusted sales fell 5.4% in December, the largest monthly drop in more than 15 years.

Those depressing figures have some companies reassessing their marketing strategies. Successful brands, though, should resist the temptation to stray from their core values. Take the experiences of Harry Rosen Inc. During the recession in the early ’90s, the men’s clothing retailer introduced a $495 suit, hoping it would boost sales by attracting less-affluent customers. The feel of the garment was a bit like cardboard, admits Larry Rosen, chairman and CEO of the Toronto-based company. And instead of bringing in new shoppers, it disappointed existing customers who bought it. “We’ve learned in these times you have to stick to exactly who you are and make sure you don’t look desperate or out of character,” Rosen says.

But acting out of character may be precisely what struggling brands need to do in tough economic times, since they might be able to capitalize on the fact that cash-strapped consumers are re-evaluating all their purchases. For example, Japanese automaker Nissan Canada during the early ’90s was plagued by an unclear image, lagging quality perceptions and declining market share. But by repositioning itself as a company that understood the frustration of car owners and a marketing campaign built on The Satisfaction Commitment, Nissan was able to grow its market share to 3.8% from 3.4% and increased sales by $80 million in just under a year.

Brand changes during downturns are usually much smaller, such as lower prices. Yet, even seemingly minor adjustments can have a significant impact. Savvy marketers, says John Quelch, a professor at Harvard Business School and author of numerous marketing books, will downsize products to achieve a lower price point (such as Pepsi offering an eight-pack instead of just a 12-pack) or unbundle products from their service plans to give customers more control.

Slashing prices just to maintain market share is a big mistake, warns Quelch. “You undercut profit and cash flow, and cash flow is king in a recession because credit is not readily available,” he explains. An even bigger mistake is lowering the quality. “The consumer will notice, and that will detract from your brand over the long term.”

Before making any changes, marketers should clearly understand the impact on their consumers, says Ken Wong, a marketing professor at Queen’s University in Kingston, Ont. People in dire straits might appreciate stripped-downed products, but cheaper variations of luxury goods will likely alienate the rich. Consumer segmentation studies can help identify whether changes are necessary, he adds.

London-based ad agency M&C Saatchi PLC has identified eight different types of U.K. consumers based on their attitudes toward the economic slowdown. Crash Dieters, which make up more than 20% of adults, plan to cut all non-essential spending until conditions improve, while the 15% known as Justifiers will still pay extra for quality as long as they can rationalize it.

Segmentation studies may even reveal whether a company should re-prioritize its customer segments. In a recent article in The McKinsey Quarterly, David Court, a director in the Dallas office of the consulting company, pointed out that baby boomers have long been a favourite consumer target, but their relatively high spending rates were fuelled by the “wealth effect” of real-estate appreciation, actual and expected gains from stocks and borrowing against those assets. “Today, the one-two punch of depressed housing values and big losses in equities means that many boomers face uncertain retirement prospects and can’t continue to spend as they once did,” Court writes.

Regardless of the target, Wong says advertising needs to communicate a bang-for-your-buck principle. Quelch agrees, and adds that businesses also need to show an appreciation for people’s troubles. As he puts it, “A brand has to hold the hand of its customers through a recession, and that means feeling their pain.”