Want to kill the festivities at your next party? Ask for a show of hands. How many in the room think there will be an economic downturn in the near future? You’ll see a lot of hands go up, however reluctantly. You’ll also see a lot of moods come down and you’ll probably be asked to leave the party. Don’t expect to be invited next time, Debbie Downer.
China. North Korea. Syria. Terrorism. The less-than-inspiring election in the US. The fact that Wall Street is still too big to fail and still operating with very little adult supervision. There is quite a bit of instability out there and just about anything could set off another recession. That’s bad news for all of us but it should be especially alarming for any business, B2B or B2C, that has been neglecting its brand(s). Weak brands suffer disproportionately during a downturn. When budgets get tight, decision makers and purchasers start looking for two things: Safety and bargains.
When customers want bargains, they look for anyone willing to help them stretch their budget and sell to them at a discount. Weak brands succumb to the temptation to cut prices almost immediately. Why? They’ve got nothing else to leverage. They’ve never given their markets reasons to need them. A weak brand has established no brand loyalty in its market and knows its customers will bolt for a cheaper offer at a moment’s notice. The trouble is, the customers are still apt to move on even if the brand does cut its price. Why? Because there will always be another weak brand out there willing to cut even more. This sets up a price war, a race to the bottom, and anyone participating, no matter how much value they add, becomes just another commodity.
When customers look for safety, they look for ways they can justify their purchase. A strong brand has given its market reasons to walk right past the competition to knock on its door. Those reasons remain in place during hard economic times. Consumers will spend more on a piece of furniture if they can think of it as an investment that will last a lifetime. Commercial purchasers will spend more on a piece of equipment if they can demonstrate it will generate a greater ROI. And sometimes all it takes to make that demonstration is to point to a familiar brand name. That’s the strong brand advantage.
As strong brands enjoy pricing resilience during lean years, they can also take advantage of premium pricing during fat ones. Strong brands have been known to charge 13% more than their competitors for, basically, the same offering. Protection against downward pricing pressure during recessions is just an added benefit.
Don’t get me wrong. Everybody hurts during a downturn, even strong brands. The point is that weak brands are positioned to be crushed. Some will even go out of business. Strong brands are far better-equipped to survive. Strong brands cut last and cut least.
The best reason to concentrate on building your brand now, before the economy falls into the next trough? Once a recession hits, it will be too late. Whatever marketing budget you have now is likely to be cut – probably, drastically so. Everyone knows that marketing is more important than ever when sales are down. But, all too often, it’s also the first budget to get reduced when resources tighten up. Act now while you have the wherewithal.
Finally, it takes time for brands to develop strength. Once your strategy is defined, once your brand promise is refined, once your marketing communication tools are in place, it will take a few rounds of sustained interaction with your market before customers begin to internalize your messaging and form a real bond with your business. Just how long it takes will depend on your market and how well-branded you are to begin with.
So, if you think a downturn is imminent, now is the time to carve some dollars out of your budget to develop a robust brand strategy, to shore up your brand architecture, to invest in your visual identities and marketing communication. Do whatever it takes to be positioned to survive the next recession, whenever it may arrive.
Best Branding Reads – Week of October 3, 2016
Supreme Court to decide if offensive names such as 'Redskins' and 'Slants' can be trademarked
Brandtalk readers know my disdain for Redskins as a brand name. But Slants may be different.
What The Art World Teaches Brands
“Brands are moving away from capital as their main reason to exist.” Really?
Facebook Marketplace Looks to Take on eBay and Craigslist
Next, there will be a Trivagio-like aggregator to place your ad on all classified sites.
Brand Valuation – Branding Roundtable No. 24
Brand valuations are essential – but they vary widely.
How CEO’s Shape Brand Perceptions
Branding initiatives are CEO-driven. If she’s not pushing it, the initiative will fail.
Apple Logo Origins
Designer of Apple logo tells the truth about how it came to be.
25 Questions Every Start-Up Brand Must Ask
An excellent checklist for any new enterprise. This is how you start up a brand.