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Brands and the Great Recession

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 What recession

Companies around the world irrespective of their industry, products, scale or scope seem to share a very fundamental and very strategic attribute—sell to more customers at a price as higher than the cost as possible in order to grow, be profitable and to be able to sustain such success.

Although the end goal of profitability and success is shared, the means to achieve that goal and sustain it over long periods of time is as varied as possible. Among these myriad means is one dominant, shared belief—the branding route to success.

Increasingly companies are realizing the importance, inevitability and innate necessity of building, nurturing and maintaining brands that resonate with customers as one of the surest routes to sustained differentiation, profitability and success. Brands have acted as very powerful vehicles to communicate stories, often mythical, that engages and connects customers to the products. Brands have proven to be very resilient channels for companies to communicate and create a resonating personality and identity for the whole array of products and services being offered.

Given these attributes of brands, companies that have created powerful brands have been able to command price premiums, get away with not having price promotions to lure customers and have been very successful in the face of the onslaught by store brands. As such, an Apple iPod can cost almost twice as the next most popular music player and still be the market leader. Starbucks can have a very loyal base of customers who would rather pay a higher price for cup of coffee than buy coffee from a competing company. Singapore Airlines can consistently be the best airlines in the world with a very devout customer loyalty that is unheard of in the airline industry.

However, the global economic recession seems to have challenged these fundamental strengths of brands. Media accounts of customers abandoning brands in favor of cheaper priced products have questioned the central tenet of branding itself. Are brands and branding viable only in times of economic well being? Are brands and recession mutually exclusive? And most importantly, how can companies protect and even grow their brands in face of seemingly challenging times such as global recession?

Brands and Loyalty

In analyzing the relevance of economic recession on branding, it is important to understand why customers would buy brands in good times. Is it all about having the money? Or is it about some other aspects inherent in brands?

The revolution brought about by the penetration of the Internet and globalization has inundated the market with innumerable number of products of every kind, which has enormously increased options for the customers. However such proliferation of products combined with constant bombarding of messages in print, electronic and online media by companies have only added to the confusion and made buying an extremely stressful activity for most customers. Evaluating different products offered by varied companies across multiple attributes can not only be extremely time consuming but also would demand a high level of product knowledge and expertise on part of the customers. It is in such scenarios that brands can be invaluable.

At the most basic level, brands help ease such stressful decision making for customers. By symbolizing certain combinations of unique features and attributes, brands serve as very useful and simple external heuristics for customers to informed buying decisions.

Brands enable customers to sift through the mountains of information, make informed choices based both on functional and symbolic value. Most products offer customers the dual benefit of functional and symbolic value. Given the access to instant and constant infor- mation, customers may easily compare the functional features such as price of the product, the quality of the product based on user reviews and even the product variants by browsing through multiple online forums.

However, despite all such advances, discerning the symbolic value can still be a challenge. Symbolic value of any given product/service is built on perceived prestige, social class, and signaling abilities. Brands, with their brand identity and personality can make it easy for customers to efficiently assess the symbolic value. ustomers patronize not just because they have the money but because they trust the brand in delivering on certain important attributes.

Given these reasons, would a general downturn or an economic recession force customers to completely abandon brands? The answer is no. Customers would obviously feel the pinch of spending on expensive brands in times of recession. But the inherent trust they would have developed toward their favorite brands, the value propositions offered by the brands and the mutual relationship between the brands and the customers remain intact. As such, from the customers’ perspective, their relationship with brands extends beyond the financial reasons.

From the perspective of the brands, the trust based relationship becomes even more important during times of recession because that is when brands can strategically and proactively nurture the relationship. Therefore, the question becomes one of scaling down both the expectations and the value propositions in such a way that it does not destroy the mutual relationship built on trust but at the same time would allow the customers to continue their patronage of the brand.

Brands and Recession

So if the underlying trust based relationship between brands and customers that drive the patronage, and not merely financial well being, then how can companies manage such a relationship during recession and more importantly how can they use the unfavorable economic conditions in their favor? Broadly, brands should strive to highlight the positive aspects of the relationship with customers such as the unique value proposition and the engaging brand experience and downplay the focus of the premium pricing, combined with some proactive tactics to demonstrate that the brands care about the customers’ hard times. In particular, the guidelines below highlight some essential steps that brands can take to manage such a trust based relationship.

Reinforce the unique value proposition. Customers are lured to brands for two reasons. One, the functional value is better than other commodities. Two, the symbolic value of the brand allows them to express themselves. Given that brands are usually premium priced, brands should reinforce the overall unique value proposition that they offer customers. As the functional value of any product is the basic attribute, brands would do good by highlighting the symbolic value. And such a strategy would involve being consistent with the brand identity, nurturing the societal and social image of the brand and the associations the consumption of brands would bring to bear. Brand identity denotes the attributes that define the brand.

For example, Starbucks’ identity is created around offering customers an excellent ambience to enjoy their coffee. Altering such a basic attribute during recession could be disastrous as it would fundamentally alter what the brand stands for. Such a strategy would facili- tate customers to continue to be brand loyal.

Highlight the brand experience. Second, brands should highlight the brand experience over other attributes. Customers tend to be loyal not just for the products/services, but more because of the holistic experience offered by the brands. For example, although Apple’s iPod is a revolutionary product, it is the whole experience of buying music online via iTunes, the sense of belonging to the global Apple community and being associated with probably the most innovative company in the world that lures customers.

Similarly, IKEA does not offer just furniture but the complete experience of making a home for its customers, which makes it such a cult brand. As such, changing the composition of such overall brand experience, even during recession can be a strategic mistake. Instead, brands should highlight such experience that would have created good memories for customers.

Demonstrate proactive concern for the customer. Third, brands should proactively communicate to convey they care about customers’ challenges. Recessions are tough times for customers. Brands should demonstrate their appreciation toward the loyalty of their customers. For example, Toyota and Honda began an extensive campaign to reward any return customers to show their appreciation. Furthermore, brands should enhance customers’ trust in them by not only acknowledging the tough time customers are going through but also by proactively engaging them via brand activities, brand promotions and brand community involvement.

Such initiatives would not only cement the relationship between the customers and the brand, but would also strongly signal the socially responsible facet of the brands, which could garner it additional customers as well.


It may be very easy to succumb to the temptation of reducing prices and making it all about the price. But such a move would only negatively impact the brand equity. Brands would do good by following these three broad guidelines to protect their brands and the loyalty of their customers even in times of recession. And, as times have shown, brands are resilient when strategically nurtured and maintained, even during times of recession.

Martin Roll is a leading global expert and advisor. His clients include Fortune 500, Asian businesses, and start-ups. A frequent guest lecturer at INSEAD and other global business schools, he is the author of the bestseller Asian Brand Strategy.

Print ed: 08/10


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