Brands on the Brink: Marketing in a Down Economy
Published: February 03, 2010 in Knowledge@Wharton
Among
other victims of the recession, brands have taken a beating. Private
labels have gained market share. Consumers are cutting back. Retailers
are turning up the heat. According to panelists who gathered to discuss
brand strategy at a recent Wharton Marketing Conference titled,
"Connecting with the Evolving Consumer," marketers need to be
especially innovative when it comes to making sense of the shifting
economy -- and profiting from it.
What does a down economy do to consumer behavior? Most obviously, it
makes people less eager to open up their wallets. According to Janelle
James, vice president for global marketing at advertising agency Leo
Burnett Worldwide, recent research shows that 80% to 90% of people are
willing to trade off or trade down when it comes to shopping. Moreover,
said Chris Kuenne, CEO of independent interactive agency Rosetta, many
of those customers might not bounce back with the economy. He likened
the effect to "a one-way membrane -- it's not like everyone's going to
go back to work [when the recession ends] and become much less
value-sensitive."
But the general consumer pullback masks some interesting dynamics
that marketers could benefit from. "In addition to assessing brands and
whether [they are] going to trade off or trade down, people are
starting to change what they're doing with their time," James said.
That means less going out and more focus on home and family. One firm
that has responded to this trend in its messaging is Walmart, whose
advertisements go beyond just touting low prices and instead seek to
show how those savings can contribute to customers' lives. That's an
especially important emphasis at a time when economic reversals have
led to a "trust deficit" between citizens and corporations, James noted.
Trading off and trading down is not happening across the board,
however, said Eric Smith, who oversees the Norelco shaving business as
a director of marketing for Philips Consumer Lifestyle. "Consumers are
either trading down or staying within premium." In other words, the
middle range of products has suffered far more than the top-of-the-line
items that are bought either by wealthy consumers or by people who have
decided that shaving -- among other select activities -- happens to be
one of the categories where they are willing to pay more for a little
luxury or quality assurance. But since mid-range customers are most
brands' bread-and-butter, the overall trend still means that "price is
becoming a bigger part of the equation than we've seen in the past."
That is true even in categories once perceived as immune to the
economic cycle. "There were a lot of jokes that we would be the only
thing that was recession-proof," said Douglas Brand, a senior brand
manager overseeing Chunky Soup and Chili for Campbell Soup Co. "I think
we're finding now that nothing is recession-proof." Consumers' tendency
to do a mental calculation of value -- quality divided by price -- has
trickled down from major purchases like cars and refrigerators to minor
ones, like cans of soup. "It challenges us, as marketers, to be on the
top of our game. There's no free lunch anymore. No pun intended."
High Anxiety
According to Lisa Gunther, global director for marketing and brand
management at Newell Rubbermaid, one of her firm's success stories
during this recession has been Calphalon. The cookware brand has
thrived in part because of the trend of staying at home, but also
because "Calphalon has capitalized [on that trend] by saying, 'Hey, you
can really have a superior experience [cooking], and you can share this
with your friends in a superior way,'" Gunther noted. On top of that,
marketing for the product line has emphasized its technological leaps
-- a degree of quality generic lines can't ensure. "Consumers are
looking for reassurance [about their purchases] during uncertain
times."
In fact, several panelists stressed that marketers should be aware
of the anxieties buffeting potential customers. To Laura Beech,
director of online acquisitions and partnerships for American Express,
that means helping to simplify consumers' lives where possible. "It has
obviously been a year of a lot of uncertainty," Beech said. "Am I going
to have my job? Am I going to have my house? What's next? So what's
important is staying authentic, staying consistent." One example is the
firm's Blueprint set of tools to help people better manage money -- a
way of emphasizing the brand's core identity while also appealing to
consumers' desire to feel in control. "Showing [customers] that [during
the recession] Amex will do what it always has done is important. It's
security."
Brand agreed. "There are a lot of things in their lives that are out
of control.... What we can do as brands is to try our best to make the
consumer feel savvy." At Campbell's, that has meant emphasizing the
venerable manufacturer's quality by highlighting nutritional
information, moving it to the front of the packaging. "Every little
decision does matter." The goal, he said, is to reassure customers that
in buying a particular brand, "I made a good decision. Maybe there
aren't good decisions being made around me. Banks are investing in bad
mortgages. But with the money that I have, I'm doing the right thing
and controlling my controllables."
Gunther said that Newell Rubbermaid had done a similar overhaul on
the packaging for its Shurline brand of paint applicators. Though
Shurline operates in a decidedly non-sexy category -- one where brand
recognition is around 5% -- research has shown that customers' desire
for more control included wanting to actually touch the paint
applicators' bristles before buying them. With a packaging redesign
that allowed consumers to interact with the product, Shurline's sales
remained flat during the past year, even as the overall category fell
by 30%, Gunther said.
Threat of Private Labels
Panel moderator Patti Williams,
a Wharton professor of marketing who studies the role of emotion in
consumption, said that offering a greater sense of control and
certainty "goes a long way towards thinking about how to help consumers
manage those emotions that might get in the way of customer loyalty."
According to Philips' Smith, losing that loyalty is a persistent
danger because of the rising market share of private labels. "Once you
lose a consumer to a private label, if it does a decent job, you're not
going to get them back."
Kuenne said there were "three weapons" in the fight against private
labels. One is innovation. "The moment when the value proposition of
your product begins to collide with those of private labels, you have a
very, very big problem," he noted. "You should have a continuous
pipeline of ways of differentiating your product." The second is
managing a product throughout its logical life cycles. As it becomes
less new and less differentiated, prices should fall to reflect the
product's lower, entry-level status. According to Kuenne, Gillette did
this successfully by introducing the pricey Fusion razor as generic
versions of its Mach Three razor came online.
Finally, brands should work with retailers on category management
for when they square off against private labels. "What happens to
retailers when they squeeze branded items off the shelf?" Kuenne asked.
"Private labels only work when there's a branded competitor that
establishes a price umbrella under which the private label can
operate." By "rationalizing the shelf," he said, everyone wins: Stores
get sales, consumers get choice, and brands get an adequate amount of
shelf space.
That partnership with retailers isn't always easy, Kuenne added.
Brands might have to concede more in negotiations than they are used
to. But one thing they can share is consumer insights, Brand noted. "We
can go to the retailers and say, 'I'm the Campbell Soup Company. No one
knows the soup shopper better than the Campbell Soup Company.' You
can't allow [retailers] to out-understand [your consumers]." By sharing
insight and news of products still in the pipeline, a manufacturer can
help shape the way a retailer thinks about what products to stock and
where to put them.
Keeping Up with Consumers
Meanwhile, the Internet has given companies new ways to reach out to
and interact with consumers while their attitudes toward brands have
changed along with the economy. One channel has been the growing number
of online forums devoted to particular customer segments -- like Café
Mom, an information-sharing site aimed at mothers. "It's important for
consumers to see that companies are listening to them," said Beech, who
argued that in a time of Facebook, blogs and Twitter feeds, "being
relevant" is not a luxury; it's a necessity.
Of course, when conversation about a brand isn't happening
organically on independent online real estate, there are things
marketers can do to spur attention. "You can't force someone to talk
about your product," said Angi Rassi, a marketing manager for General
Mills who currently oversees the Kid Yoplait brand of yogurt. "It
really keeps us on our game when we play in this space."
Rassi, who spoke on a separate panel titled, "The Era of the
Empowered Consumer," said General Mills takes a three-step approach to
"invite people into the conversation." Consumers might be offered
coupons, then steered towards a dynamic new product and finally invited
into the process to offer feedback. Brands might maintain a Facebook or
Twitter presence, or work with a site like Café Mom. "We're engaging
consumers where they already are," she said.
But General Mills also has a couple of proprietary networks,
including My Blog Spark, which engages upwards of 2,700 bloggers "who
have signed up to receive the latest and greatest inside tips and
news," Rassi said. "So we know them very well. We don't always reach
out to all of them with all information, but we would reach out if we
knew it was something they were very passionate about." A second
network includes 175,000 consumers who sign up to get new products in
the mail. "These are the people who talk to their friends about
everything," she said. But nowadays, instead of just doing it over the
backyard fence, they can spread news far and wide via online
communications.
One population marketers can count on to spread the word is teenage
girls. "Teenage girls think everybody wants to know about them, their
love life and even their facial care products," said Rassi's
co-panelist Katie Cheng, a group product director responsible for
Johnson & Johnson's Clean and Clear brand. "Also, they think
anybody can be famous." Combining those insights, Cheng's firm marketed
a facial product called "Morning Bust" through a contest that had users
submit 15-second videos to YouTube of a college roommate waking up.
With winners earning the right to produce a commercial that would
premiere during the inaugural episode of a new MTV show, the goal was
to have the user-generated videos go viral themselves.
"The buzz that was generated on that program had a huge halo effect
for the Clean and Clear brand," Cheng said, who noted that shipments
were up 80% over the previous year.
Still, Cheng cautioned that the myriad new voices marketers are now
able to monitor -- or even influence -- shouldn't distract them from
also following the protocols of traditional market research. "It's so
easy to have the knee-jerk reaction of: 'Oh, but we heard that the
consumer wants this,' and, 'Oh, we heard that this is something we
should provide.'...Traditional marketing research, where you take the
time ... to really think about how to provide a benefit to the consumer
and what she really wants, is something that you have to keep in mind
when developing materials even though you feel like you've gotten a lot
of feedback from stuff that's [considered] 'instant.'" Given the
challenges brand managers are facing today, "we ... have to maintain a
distinction between what is legitimate information and what is
nice-to-know information, and focus on what is actionable."
