How to Build Brands in a Recession
Bernardo Geoghegan with Sabina Schapiro
1999 was a hard year for Argentina. Besides the worst economic recession in 10 years and rising unemployment (15% Oct 99) we had national elections and a change of governing party. It was a real crisis together with an expectation crisis that strongly affected consumption: for the first time in ten years, supermarkets' billings didn't grow.
This situation affected brands very strongly. According to a Nielsen study that analyzed 35 product categories, the market share commanded by leading brands went from 69.9% in the end of 1997 to 64.9% by the middle of 1999. They lost position not only because of a generalized decrease in consumption but also due to growing importance of value brands and own label.
In this context, what can we do to help our clients protect the product-user relationship that is at the core of every brand?
Building on the learning from Ogilvy in Asia we carried out a two-part research project to explore what type of communication works better to protect brands in times of recession, not just through TV or print but in every point of contact, especially at the point of sale.
RELATIONSHIP IN CRISIS
You don't look at me anymore
Our research showed that consumers feel somehow abandoned by big brands. In a way they feel brands are indifferent to their situation and don't do anything for them.
As the communication reel from the last year shows, many brands fail to adapt their message to the new mood. Others just don't say anything: explaining why brands don't do anything for them, respondents in our research gave the example of a leading brand that had dropped its prices without communicating the fact.
The sad fact is most leading brands do things for people during a recession but people fail to see them.
Comparing the period of Jan/Nov 99 with Jan/Nov 98, prices in supermarkets went down by an average of 5%. It is true that part of this was caused by the growth of value and own label brands. But it is also true that many national leading brands were forced to drop their prices. Brands struggle every day in a constant war of margins and discounts. But who is taking the credit with consumers? For the most part, supermarkets are.
Somebody to watch over me
During the recession all supermarkets, despite their positioning, base their communication on price and, compared to FMCG categories, increase their ad spending.
All of them publish some kind of price folder which, as we have seen, acts as an aid to consumers. And they do it more frequently - every two weeks instead of just once a month as in the past.
Price 'festivals' multiply one after the other and during the periods of the year when people need extra monetary help (changes of season, back to school) supermarkets have special offers.
Own label brands keep growing. They offer an affordable alternative to main brands and a better image alternative to B brands. As they grow they modify the perception of value in the consumer. And as a result, they appear to be more in tune with people's concerns than brands are.
However, focusing only on price has its disadvantages too. Although own brands appear closer to the consumer, few manage to build loyalty. Centering their proposition only on price or communicating price and forgeting other values doesn't help to build supermarket brands.
As we have seen, people become multi-shopper: they visit more than one supermarket per shopping trip looking for the price offers in each one. On the other hand the WPP BRANDZ study, which measures the strength of brands, showed that the proportion of price-driven and repertoire consumers for supermarket brands in Argentina is much higher than in other categories.
In the end, what this tells us is that people don't form new enduring relationships. It is as if after getting divorced from their brands, they can't find true love again. They only engage in interested relationship with supermarkets. And, as Rory Sutherland from OgilvyOne has stated, loyalty does not result from marriages of convenience.
How to avoid getting to this stage? Here are three actions brands can take to improve the relationship with their users during adversity.
Acknowledge the problem
It is a common saying that the recognizing the problem is the first step towards the cure.
One way brands respond to the problem of recession is denial: they ignore it and act as if nothing happens. Another way they react is by hiding or escaping.
But there is a third way that can help save the relationship: face the problem, deal with it and do something about it. How?
First, recognize the mood of your users and how it affects the modes in which they relate with brands. Then, let people know you understand how they feel.
Acknowledge your users are concerned with price and value. Although they may be spending the same or even more on everyday products, they want to feel they are managing the budget responsibly.
There is a concern over whether big brands should address the issue of price.
Some marketers tend to think that they don't have to because it may go against the value of the brand. They believe that price in communication is the territory of value and own label brands. That is true, since price is the core of these brands' proposition.
However, in a recession mood, showing concern about price and acting responsibly about it, is a value in itself.
For leading brands, having this value in their value set may help strengthen the relationship with the user or client, while not having it may be interpreted as indifference.
But there are ways and ways you can acknowledge the problem and show you care.
How can you incorporate the price message into the brand message without affecting the brand? Can you use it to your advantage to make the relationship stronger?
It is not an easy subject. Once you recognize the need to talk about it, you had better do it right. You've decided to face the situation... but what to say and how to say it?
There seem to be three main strategies to address the issue of price/value: 1) communicate performance to justify price; 2) communicate special discount as opportunity; and 3) communicate price reduction to reinforce brand proposition.
In our research we explored how people respond to each of these strategies and what is the impact on the brand. Each approach has its pros and cons; the suitability depends on the type of category, the type of brand and the proportion of each type of consumer (loyal, repertoire and price driven) your brand has. Let's see:
- "Because I'm worth it" - communicate performance to justify price.
The strategy is not to lower your price and communicate that your brand is worth it because it performs better or yields more. In a time of uncertainty yield and quality reassurance can be very powerful.
However, this works better in those categories where performance is a real concern for the consumer and there is an image that low price brands may not perform as well as leading brands. There is performance risk and you only remind the consumer about it.
For example, the diapers category has a very concrete risk: if they don't absorb enough, they don't last and your baby gets wet. Being the leader in terms of perception, Pampers strategy was to reinforce the message that even when they cost more, they absorb more and last longer. So ultimately, they end up costing less:
"With other diapers you spend a lot because they don't last much. Now spend less and keep your baby comfortable for longer. Pampers baby stretch."
The message reinforced perception of Pampers' quality and at the same time showed the brand was concerned about what is going on in people's life because it was talking about savings.
This strategy works better with loyal consumers since it provides reassurance and reinforces their belief in the brand. It is giving positive reinforcement of their behavior. But for repertoire and price driven consumers it doesn't give them new arguments to use the brand.
- "Wow, look at this opportunity" - communicate special discounts
Discounts are nothing new. The trick is communicating them as a response to the situation. In scanning mode people are constantly looking for opportunities to save and make their budget last longer.
Take, for instance, the case of Brahma beer: they offered discounts of 30% and six cans at the price of four. Taking advantage of the proximity of national elections the campaign communicated the discounts as political messages against privileges.
One of the outdoor posters said, "Brahma is not making promises. It is telling you what it is going to do. 30% off. Pack of 2 large cans at an incredible price".
Our research showed that impact was very positive. Besides the economic benefit of the discount, it was perceived as an effort of the brand to adapt to the situation.
It's little twinkle, a little help consumers are waiting for. In fact, one survey showed that 35% of consumers wait for these kind of special discounts before buying a brand.
However, In categories where people may see a risk of quality suffering because of the discount (i.e. milk), it has to be clearly perceived as a temporary adaptation of the brand without casting shadows over product quality or performance.
This strategy works better with repertoire consumers since it gives them an extra reason to pick your brand from the repertoire.
- "Hey pal, I'm doing this for you" - communicate price reduction to reinforce brand proposition.
The strategy is to communicate the price reduction in a way that not only shows your brand is close to the consumer but also reinforces your main benefit.
It is potentially the most rewarding strategy in terms of relationship building but also the most challenging: you have to find a meaningful link between price and the main benefit of your brand.
It works better with leading brands, probably because it is the kind of message only a leader can deliver. Here are three examples:
|Brand||Brand proposition||Brand proposition + price reduction|
|McDonald's||Have a good time||We reduced the prices of our combos|
We know it is not going to change your life, but at least you will enjoy a good time.
|Coca Cola||Always Coca Cola||A six pack at a special price so you can enjoy the real taste all week.|
|Skip washing powder||Top technology||Incorporating high technology we managed to reduce prices 20%.|
The impact of this kind of message is very positive showing the brand knows the people and adapts to the reality. It also conveys a sense of honesty and care. Users enjoy a moment of recognition.
This strategy is very strong with loyal users since it reinforces the brand proposition. But it also works with repertoire and price driven users since it gives them a hard reason to try or use the brand.
In summary, there are different strategies to deal with the issue of price and value in the communication of a brand during a recession. To decide which strategy to use you should consider what sort of brand you have (category leader or challenger), what proportion of each type of user your brand has (loyal, repertoire and price driven), whether there are perceived performance risks in the category which you can address with your brand and whether your brand proposition can be connected to the price reduction in a meaningful way.