Branding during challenging times
Brands are built on the value proposition platform. The basic logic has been that in the ever competitive market place characterized by decreasing information asymmetry between customers and companies, increasing customer power allowed by the Internet, flattening of boundaries between economies, fragmented media and communication overload, branding is an effective strategy for companies to cut through the clutter, engage the customer and build both customer loyalty and the bottom line.
What do tough economic conditions do to branding? By focusing on superior quality and creating engaging customer experiences, brands have been commanding huge price premiums over similar private label products. The argument has been that customers buy not just for utilitarian consumption but also for the brands' symbolic value.
But tough economic conditions turn such equations upside down. Customers who were buying high end brands to symbolize prestige are finding that they can no longer afford such indulges. They start pruning their purchases of such symbolic products. Especially given the proliferation of store brands in literally every product category, which not only boast of comparable quality but also low prices, customers start reevaluating their buying behaviors.
They downgrade to the basic minimum which is offered by these private labels. As such, customers tend to migrate from purchasing brands to purchasing private labels. Even though much has been written about the captivating power of brands and how they can ward off competition from private labels, situations of economic downturn challenges such arguments.
The most common strategic mistake that most companies make is to try to retain their customers by competing with the private labels by slashing prices. Such a decision can prove very detrimental to the long term equity of the brand.
Engage the customer: Economic downturns can offer excellent opportunities for brands to engage customers in innovative ways. As customers are cutting down on consumption, brands can initiate measures that take customers mind off the difficulties of consumption and focuses on the worthy features of the brand. Such situations can prove to good times to initiate procedures to co-create value with customers.
A slightly related example is that Singapore Airlines' strategy during the deadly SARS that hit South East Asia. When customers were very scared of flying and airlines were flying their flight nearly empty, Singapore Airlines (SIA) started offering very innovative vacation packages. Such innovative options used to engage the customers helped SIA to minimize its losses. But more importantly, such measures ensured that SIA was successful in protecting its brand image and brand equity.
Create excitement in customer experiences: Brands should use all of their strategic arsenal to create exciting interactions with the customers. Such initiatives can range from special deals to surprise the customers, product bundling to enhance value, promotions with creative alliances (such as with celebrities, traveling etc) to rewarding customers for their loyalty through special gifts, brand credit and so on.
Such initiatives not only take the focus off of price but also reiterate the brands' commitment to engage and value customer patronage. Such initiatives also allow companies to experiment with new steps. For example, recently Starbucks advertised that customers who volunteered for local community work for two hours would receive a free coffee. What is interesting about this initiative is that this was not a corporate level initiative but rather a local initiative that a couple of stores in one city undertook. Such initiatives not only enhance the brand image in the eyes of the customers, but also create additional reasons for the customers to continue to patronize the brand.
Offer customers viable options: Market conditions during such economic turmoil also offers brands opportunities to test waters with some new offerings, which can be different product variants, new products, new service offers through brand alliances and so on. Brand can experiment using a distribution channel such as Wal-Mart for example, to reach broader customer segments.
Such new options serve two purposes. First, they allow the brand to carry out pilot studies of such new offerings in the market, gather customer reaction and test its own competence in the new situations. Second, and more importantly, such initiatives sends a very strong signal to customers that the brand cares about the dire economic conditions and that the brand is trying to reach out to the customers by creating new options for them. Creation of such goodwill will not only help earn customer loyalty in the present time but also will help companies to cement such relationships when the economy bounces back and customers start evaluating their options.
Conclusion
Branding is not viable only in thriving economic conditions but is also a very viable strategy during economic downturns. All those who have announced the demise of branding because of the global economic meltdown may after all be surprised by the staying power of global brands. By building on the platform of superior value propositions, enriching interactions and enjoyable experiences, brands have established a very strong relationship with customers.
What do tough economic conditions do to branding? By focusing on superior quality and creating engaging customer experiences, brands have been commanding huge price premiums over similar private label products. The argument has been that customers buy not just for utilitarian consumption but also for the brands' symbolic value.
But tough economic conditions turn such equations upside down. Customers who were buying high end brands to symbolize prestige are finding that they can no longer afford such indulges. They start pruning their purchases of such symbolic products. Especially given the proliferation of store brands in literally every product category, which not only boast of comparable quality but also low prices, customers start reevaluating their buying behaviors.
They downgrade to the basic minimum which is offered by these private labels. As such, customers tend to migrate from purchasing brands to purchasing private labels. Even though much has been written about the captivating power of brands and how they can ward off competition from private labels, situations of economic downturn challenges such arguments.
The most common strategic mistake that most companies make is to try to retain their customers by competing with the private labels by slashing prices. Such a decision can prove very detrimental to the long term equity of the brand.
Engage the customer: Economic downturns can offer excellent opportunities for brands to engage customers in innovative ways. As customers are cutting down on consumption, brands can initiate measures that take customers mind off the difficulties of consumption and focuses on the worthy features of the brand. Such situations can prove to good times to initiate procedures to co-create value with customers.
A slightly related example is that Singapore Airlines' strategy during the deadly SARS that hit South East Asia. When customers were very scared of flying and airlines were flying their flight nearly empty, Singapore Airlines (SIA) started offering very innovative vacation packages. Such innovative options used to engage the customers helped SIA to minimize its losses. But more importantly, such measures ensured that SIA was successful in protecting its brand image and brand equity.
Create excitement in customer experiences: Brands should use all of their strategic arsenal to create exciting interactions with the customers. Such initiatives can range from special deals to surprise the customers, product bundling to enhance value, promotions with creative alliances (such as with celebrities, traveling etc) to rewarding customers for their loyalty through special gifts, brand credit and so on.
Such initiatives not only take the focus off of price but also reiterate the brands' commitment to engage and value customer patronage. Such initiatives also allow companies to experiment with new steps. For example, recently Starbucks advertised that customers who volunteered for local community work for two hours would receive a free coffee. What is interesting about this initiative is that this was not a corporate level initiative but rather a local initiative that a couple of stores in one city undertook. Such initiatives not only enhance the brand image in the eyes of the customers, but also create additional reasons for the customers to continue to patronize the brand.
Offer customers viable options: Market conditions during such economic turmoil also offers brands opportunities to test waters with some new offerings, which can be different product variants, new products, new service offers through brand alliances and so on. Brand can experiment using a distribution channel such as Wal-Mart for example, to reach broader customer segments.
Such new options serve two purposes. First, they allow the brand to carry out pilot studies of such new offerings in the market, gather customer reaction and test its own competence in the new situations. Second, and more importantly, such initiatives sends a very strong signal to customers that the brand cares about the dire economic conditions and that the brand is trying to reach out to the customers by creating new options for them. Creation of such goodwill will not only help earn customer loyalty in the present time but also will help companies to cement such relationships when the economy bounces back and customers start evaluating their options.
Conclusion
Branding is not viable only in thriving economic conditions but is also a very viable strategy during economic downturns. All those who have announced the demise of branding because of the global economic meltdown may after all be surprised by the staying power of global brands. By building on the platform of superior value propositions, enriching interactions and enjoyable experiences, brands have established a very strong relationship with customers.
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