How important are brands in tough economic times?

Can brands be the silver lining? :

Prasanna Perera, Marketing and Management Consultant Chartered Marketer, CIM, U.K.

The cry in the corporate world is to cut costs. Downsizing, lay-offs, outsourcing, re-engineering ... the list goes on. Even expenditure in brand building is on-the-line. The logic seems to be “Invest in brand building when things are going well and cut down on brand building when times are tough.” How logical is this argument?

It is worthwhile to examine the basics. What does a brand achieve?

It helps to identify a product or service.

It differentiates a product or service from competitors.

It helps sustain customer loyalty and trust.

It helps generate large positive cash flows.

It helps enhance profitability in the long term.

Against these deliverables of brands, is it sensible to cut back on brand building during tough economic times? I disagree and believe that this is the last thing an organisation should do, since brands are the most durable and valuable assets of any organisation.

What are the negative aspects of not investing in brands?

Brands are not built overnight. You need to sustain investment over a period of time.

Brand awareness and loyalty levels will decline, resulting in brand switching.

Competitor brands may capitalize on the situation and strengthen brand equity.

Brand lifecycles will be unnecessarily disrupted, resulting in cash flows worsening.

Brand image and reputation may be effected, resulting in lack of shareholder confidence.

Despite these strong enough arguments for brand investment, why do organisations take risks with their brands? My thoughts are as follows:

1. A leadership that does not understand the power of brands.

2. A leadership that does not believe in brands.

3. An organisational culture which is cost oriented. (cut costs across the board!)

4. A non-assertive Head of Marketing, who cannot safeguard the brands.

5. An extremely unhealthy financial situation, which leaves the management with no option

Let us examine organisations that keep investing in brands, despite business turbulence. (Please note that I am quoting these examples based on my understanding and observations of market activities).

In Sri Lanka, Munchee would be a good example. A concerted effort is made to sustain the Munchee brand awareness levels and recall levels. The result is that Munchee continues to strengthen their market leadership in confectionery products. Despite the entry of Airtel, Dialog continues to keep their brand in the limelight, engaging in brand building and equity enhancement activities.

Although as a market leader Dialog is bound to lose some market share to Airtel, by investing in the brand this can be minimised. A prudent point to note is that brand building is not all about advertising, using mass mediums. Below-the-line activities could be even more effective and efficient. A good international example would be Nokia.

As a global market leader, Nokia needs to keep their brand in focus, given the competitive pressures posed by competitors such as Sony Ericsson and Samsung and the overall global economic downturn.

Another relevant global example would be Singapore Airlines. Despite the gloom facing the airline industry, Singapore Airlines has only rationalised costs in non-value creating areas of operations. Branding investment remains robust and hence, the airline is able to weather the storm.

It is worthwhile to remember that a strong brand is the best insurance policy in times of economic downturn. Why? Because customers do not want to experiment with unknown brands and take further risks.

Take the example of Nestomalt, Anchor, Panadol, Sunlight, Lux, Exide, Samahan, all brands of great strength in their respective categories. These brand owners keep investing in their brands, despite shrinking disposable incomes and the resultant decline in demand. Why? Because tough times don’t last forever, but tough brands do!

What areas of brand building expenditure can be rationalised?

This is a question I am confronted with on a daily basis. My answer is as follows:

1. Focus expenditure on the existing portfolio of brands in the short term.

2. Delay new brand launches in a prudent manner taking into account market and competitor factors.

3. Marginal brands may need to be temporarily withdrawn from the market.

4. Explore advertising and promotional methods which are innovative and cost effective. Below the line activities may have greater mileage at least in the short term.

5. Enhance the skill levels of the brand management team, so that multi brand portfolios can be managed and handled.

6. Ensure that all brand expenditure is measured for effectiveness and efficiency. (Brand expenditure accountability)

Brand Custodians (Managers) should change their mindset to Business Managers. Why? Blindly increasing market share is dangerous in depressed markets. When to adopt a hold strategy and a growth strategy is important, and this thinking will be achieved only if Brand Managers think like Business Managers as well. Profitable increases in brand market share is the ultimate goals in successful Brand Management.

There are many non-value creating activities in organizations, where unnecessary expenditure is incurred. Rather than indiscriminately cost cutting in value creating areas like brand building non-value creating activities should be identified and expenditure curtailed in same.

Marketers have the responsibility to stand up and guard their brands, both internally and externally. In doing so, paying attention to the accountability of expenditure is important.

“You can keep cutting costs, until there are no costs

to cut. This is the simplest thing to do.” (Anonymous)

“Rather than cost cutting, how about cost rationalisation.” (Anonymous)

“If you think brand building is expensive, then wind up the business now.”

(Anonymous)