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In a Recession
Beyond Survival Tactics
Nigel Hollis
Chief Global Analyst
Millward Brown
1
Today's agenda
2
Where are we
now?
3
A recession is not
a slow-down.
It is a time to speed up.
4
What a difference a year makes…
Consumer
108.2 175M
Confidence Index*
US Television 116.1M
$67.8B
Advertising
Spending**
$25.7B
Global Ad $639.7B
Spending^ $640.7B
US Online $66.9B
Advertising $21.4B
Spending**
5
Learning
from
recent recessions
6
Some brands benefit from tough times
"I was asked what I
thought about the
recession. I thought
about it and
decided not to take
part.“
Sam Walton, Founder
of Wal-Mart
This quote from Sam Walton makes a nice sound bite and of
course we know what he meant, but Wal-Mart is very much
taking part in the recession. The company reported a sales
uplift of $500 million in the second quarter of this year as
people went in search of cheaper prices.
7
7
The best defense is a strong, innovative brand
8
PIMS analysis highlights winning strategies over a
five-year period of recession and recovery
Marketing Increase
R&D Increase
Admin Cut
Apple may be a unique brand, but analysis of the PIMS database confirms that
increased innovation and marketing support ensure brands win in the long-
term.
The PIMS database contains information on the financial performance of
companies relative to their investment in various activities. Analysis of
company performance during past recessions identified the strategies most
likely to grow market share and profit once the recession was over.
Apart from the recommendation to increase marketing support, perhaps the
most surprising recommendation was to maintain price relative to the
competition. But there is good reason for this. By cutting prices, companies
encourage customers to regard the depressed price as normal, making it very
difficult to return prices to previous levels when the economy recovers. The
result is an almost permanent loss of profit margin, sometimes not just for
one company but for an entire industry.
In an attempt to maintain market share during the last recession, many major
airlines followed one another in a downward pricing spiral. Those cuts may
have permanently compromised the pricing power of the airlines.
Further, consumers often look to price as a signal of quality. By cutting prices,
a brand may undermine perceptions of quality or draw attention to the fact
that quality is similar to competitors. And speaking of quality, whatever you
do, don't cut quality. Consumers are reconsidering everything and checking to
see if they are getting value for money. If they believe they are being short-
changed, they won't think twice about changing brands.
9
Increased marketing spend returns stronger profits
during recovery
Inflation corrected ROCE during recovery (%)
14
12
10
8
% ROCE
6
10
How are companies responding this time?
Innovation 36%
Reorganization 33%
Survival 21%
11
11
So now what?
Beyond survival
tactics.
12
The strategic challenge
13
Do they really need to buy a new car, eat out on Friday night,
or have the windows washed?
13
What have consumers done?
Deferred purchases
Stopped purchasing
Decreased weight/frequency of
purchasing
14
14
Premium brands falling in terms of price
acceptability
10 11 9
7 8 6 8 7
4 4 3
0 0 1 0
-4 -3 -2 -2
-6 -4
-11
-15
-25
premium
mainstream
value
15
But what should these brands do? The last resort is to cut
price. When a brand cuts its price, it is as good as admitting
that it was too expensive to start with. Even if consumers do
not switch, they lose confidence in the brand. Once margins
are lowered it is almost impossible to raise them again.
Instead, brands need to find ways to add value. Frito Lay
have added 20 percent more product to their bags of chips,
improving value perceptions without a significant impact on
margins.
15
The solution will differ by…
Category
Brand
Consumer
16
16
The influence of price varies by category
% concerned with getting
the best price vs. a specific brand
Women's apparel
Grocery stores
2008 average
Cars
Oral Care
Beers
17
Brands with high Bonding and high Voltage
tend to grow and are less likely to decline
% GROWING SHARE ONE YEAR LATER
HIGH
8% 21%
LOW
18
Potential growth depends on how well a brand
converts people from Presence to...
Higher More
opinion appealing Different
+ More
+
appealing e.g. Apple's unique
e.g. Audi's design
e.g. the Starbucks
4-wheel drive experience
In other words, brands that people think are different (in a good
way) are more likely to grow.
19
What is the
winning
combination?
20
The winning combination: the 5 R's
Remind
21
21
Investment in brand support helps grow
share
2
100% R = 0.77
% gaining share
0%
-10% 0% 10%
Media Pressure
(Share of Voice - Share of Market)
22
The winning combination: the 5 R's
Remind
Restore
23
23
Learning from Argentina's financial crisis:
Premium brands
Perceptions of
relevance fell sharply –
costs more than
Familiarity
prepared to pay
100
80
Market shares fell in
line with Bonding 60 Relevance
Source: "The Impact of the Crisis on Unilever Brands' Health: A Strategic Answer"
by Viviana Barcesat ID-Millward Brown and Vanina Gruart Unilever Argentina 24
The examples given here are taken from a paper titled "The Impact of the
Crisis on Unilever Brands' Health: A Strategic Answer" that was presented at
SAIMO Convention in April 2005 by Viviana Barcesat, ID-Millward Brown, and
Vanina Gruart, Unilever Argentina,.
Looking back on the crisis, the researchers found premium brands suffered
most. Brands like Cif surface cleaner, Skip detergent and Dove soap lost
relevance because they were considered too expensive at a time when people
found themselves with lower disposable incomes.
Through 2002, market share for Cif dropped, and so did the proportion of
people Bonded to the brand, not because people no longer thought well of the
brand, but simply because they believed they could no longer afford it. The
issue for brands like Cif was to support perceptions of Cif's superiority so that
when the recovery started, the brands recovered along with the economy.
Brand equity and market share recovered a substantial proportion of their pre-
recession values.
The premium brands that successfully weathered the storm did so by offering
affordable new formats and cheaper packaging, focusing attention on
performance and value, and, when the crisis ended, celebrating with positive
and upbeat communication.
24
Focus on reframing perceptions: efficacy and value
25
25
The winning combination: the 5 R's
Remind
Restore
Reframe
26
26
Differentiation creates more potential for
growth
Potential for Growth
7.1
0.5
-4.3
27
The winning combination: the 5 R's
Remind
Restore
Reframe
Restage
28
28
Reframing perceptions of banking
Substantial value
Corporate Human
Image
29
29
A staff competition turned Howard into a star
30
Other staff were then used to introduce mortgage and credit card
offers but Howard remained a key spokesperson for Halifax until
2008.
30
The revitalization exceeded its objectives
The advertising worked harder than any other bank
advertising
Strong branded impact and shift in consideration from 7th to 1st
31
31
The winning combination: the 5 R's
Remind
Restore
Reframe
Restage
Rally
32
32
Thank you for listening
33