Keep Your Brand Alive During a Downturn

A senior executive recently shared his plans for responding to employee queries concerning the much-talked about potential recession. He told his employee, “We will operate as we currently are doing. Until we tell you otherwise, manage for growth as planned.”

His remark would seem to follow the results of a survey by Mercer Management Consulting which brought together a select group of 50 Fortune 500 marketing executives to see how brand equity will be managed as the economy turns down. In a white paper prepared by Andrew Pierce and Eric Almquist, senior partners of Mercer, they observe, “Brand-building has always been among [the] first budget cuts when companies tightened their belts in recessions. The next few months will, thus, demonstrate which companies and CEOs are truly committed to brand[ing] as a strategic asset and which will revert to the habits of the past and slash brand-building investments.”

The survey found:

Nearly all senior managers have come to appreciate the importance of branding as a strategic asset. They also would seem to understand that brand-building is multidimensional. One respondent told Mercer, “We are not talking about just advertising; brand building is much more than advertising. Brand building includes investments made in areas such as customer service, product development, and the customer experience.”

”Brands also cut through the noise of product channel proliferation, keep your products from becoming commodities, and provide durable competitive advantage,” the Mercer white paper observes.

Brand-building expenditures will shift away from traditional advertising toward new Internet investments. At the same time, Pierce and Almquist found “most marketing executives believe traditional advertising is the best method to reach broad audiences.”

If the economy turns down, about 60 percent expect their brand-building expenditures to remain stable or rise. The remaining 40 percent expect they would fall. “The select — we believe savvy — group of companies that project an increase (15 percent) come mostly from non-cyclical and service-oriented industries, such as financial services, telecommunications, pharmaceuticals, and technology,” observe the Mercer consultants.

According to the white paper, we can expect a sharper divide in brand-building than in prior slowdowns. “In past recessions, the great majority of firms cut back; even companies with a tremendous brand based on their unique customer-service orientation reacted by laying off customer service personnel.”

Today, however, Mercer expects a significant number of companies to take the opposite tack. “There is increasing evidence that strong brands influence investment decisions and market capitalization and are significant leading indicators of value growth. This can help stock prices rebound quickly after a downturn.”

So Pierce and Almquist believe the smart executives will continue, even increase, spending in a recession. “The true brand builders will seize the opportunity a slowdown provides. They will use the Internet to establish powerful new relationships with customers. And if their competitors pull back, they should capture significant mindshare and market share.”