Businesses everywhere are going to be affected by the worldwide “credit crunch” in 2009. The scarcity of credit will have a profound impact on capital expenditure and will thus limit the rate at which companies expand, develop new products and replace plant and equipment. The emphasis everywhere will be on maximizing sales revenues, reducing costs and protecting the bottom line. Companies will struggle to pay dividends but this will be essential to prevent share prices plunging further.
Illustration: Jayachandran / Mint
Consumers, too, will be affected. In the West, the optimism and sense of well-being created over the last few years has been shattered. People have seen their investments and savings ravaged and their job prospects undermined. Their faith in institutions has been badly shaken yet they keep faith in brands.
In times of economic crisis, it has become normal to see companies slashing their marketing budgets. Despite all the lessons which should have been learnt in the past, this is bound to happen again. Yet a company’s most valuable assets are its brands and brands need the oxygen of marketing support to flourish. To deny them this is, ultimately, self-destructive. Strong brands provide reliable cash flows and cash is a commodity that has hardly ever been as important to credit-starved companies.
But marketers will have to make their budgets work harder. How?
Here, in no particular order, are some pointers for 2009:
• Many companies own a multitude of sub-brands. Nestle SA is an example. But the company ensures that its name appears on packaging together with the sub-brand name, so that consumers are reminded of the source of the goods irrespective of whether they buy Kit Kat, Milkybar or Fruit Gums. This is good brand husbandry: It subtly promotes the manufacturer’s name and ensures that the goodwill it enjoys for a particular product is shared among all in the range. The key is to ensure that the manufacturer’s name is presented on the pack in a visible and consistent way. So, look at your “brand architecture” and ensure that the corporate name stands out.
• Understanding consumers has never been as important. The world has changed dramatically since the turn of the century. The Indian and Chinese economies have undergone unprecedented growth while Western economies have slowed. But it is undeniable that we have seen a period during which much of the world’s population has experienced profound lifestyle improvements and their expectations have changed. And now we have the credit crunch which will affect everyone. How have consumers’ priorities changed? Marketers will be wise to invest in research in order to understand how they can best serve consumers’ needs and wants and adapt their strategies accordingly.
• As I have said, brands are a company’s most valuable assets. Good managements know how and when to “sweat” their assets. Companies should look to partnerships in order to expand their businesses. “Co-branding” is an increasingly common way of developing new markets for brands at relatively low cost. American Express Co. has partnered with British Airways Plc., or BA, to provide card facilities for BA’s frequent flyers, an ideal market for them. This is an arrangement that suits both parties: They complement each other in terms of prestige and both uphold high standards and are well-regarded. Therefore, companies should look for opportunities to “leverage” the goodwill in their brands by seeking like-minded partners in different industries. As with marriage, compatibility is the key!
• The Internet has been a global phenomenon. It offers unrivalled access to consumers throughout the world. Furthermore, search engines such as Google allow access to target consumers with an interest and propensity to buy in specific markets. Although I do not have data to support this assertion, I believe that this must be the most cost-efficient sales channel of all.
• Finally, people. In the West, our economies are increasingly service-based. May I make a plea to marketers to put people back into people businesses? At every level, our financial services providers (in particular) have abandoned the use of human interaction. This is lunacy. Anyone who has ever tried to contact their insurance company or bank and has been confronted with a series of pre-recorded instructions will no doubt have been tempted to hurl their phone through the window. And anyone seeking to make an appointment to see their bank manager will, in the West, be disappointed: Such people no longer exist. Banks, in particular, have a mountain to climb in order to restore trust and credibility; here the “human touch” is needed badly.
None of these initiatives is, in the overall scale of things, particularly costly. Yet, all are useful for improving business performance and maintaining the brand at a time when economic stringency supervenes. Fighting competitors is one thing: fighting—and beating—recessionary forces is entirely another.
Tom Blackett was brand consultancy firm Interbrand Corp.’s group deputy chairman till 2007. Author of Trademarks (published by Palgrave Macmillan, 1998), he has contributed to several books on brand management.He now works as an independent consultant in London.