Brand Building in Tough Times and Beyond
June 19, 2009
Today, smart marketers are not only strategizing about getting through the current economic environment, but they're also preparing to be ready for accelerated growth when the recovery finally begins. It's a delicate balancing act between short-term and long-term priorities. For many businesses, short-term strategies may center on maintaining volume or gaining share at the expense of competitors. Yet marketers also need to keep one eye on the future and focus on building brand equity.
The purpose of the "Brand Building in Tough Times and Beyond" survey was to better understand marketers' attitudes on the following:
- Brand equity (defined as the added value a brand name identity brings to a product or service beyond the functional benefits provided)
- Brand health (defined as the measure to which your brand equity is increasing or declining)
- Warning signs of brand deterioration (defined as the decline of brand equity)
- Media channel effectiveness for building brand equity
- Short-term versus long-term brand-building strategies
- Response to current economy
- Expected response to post-recession economy
- Two-thirds report that their firms' emphasis has shifted more toward short-term strategies in the last six months. However, marketers are also thinking about how their plans will change when the recession ends and the recovery begins. Media budgets are at the top of the list of activities that will be increased after the recession. Social networking and word of mouth activities follow, as do budgets for innovation and testing and learning. Ideally, three-quarters of respondents would start implementing increased marketing activities three to six months before the recession ends.
- Brand equity is still of key importance, but the metrics have shifted in favor of trackable consumer activity. Today there is more focus on the customer in the areas of customer service, customer experience, and satisfaction. On the other hand, there is less focus on traditional metrics such as brand image and brand awareness. Additionally, employees as advocates for a brand is of critical importance.
- Warning signs of brand deterioration have also shifted to focus more heavily on customer-related metrics in the following areas: slipping customer conversion/repeat rates; slipping percent of customers who rate a brand as "excellent"; and slipping Net Promoter Score (percentage saying they would recommend your product/service).
- Online advertising is now on par with television as being highest in importance for use in brand building. Social media also ranked high in effectiveness in this survey. Traditional media, including magazines, newspapers, outdoor radio, and television, have all declined in importance, in many cases significantly. Respondents rated social media highest when asked which media channel they would like to use to develop their brands but have not been able to implement.
The brands that will survive and emerge as winners from this recession will benefit from the work of smart marketers and brand builders who are able to balance short-term "survivor" strategies with long-term "brand equity" strategies. Importantly, marketers must be able to monitor consumer activity and adjust communication tactics accordingly.
Introduction and Methodology
In April, 2009 the ANA, in partnership with ‘mktg', conducted the "Brand Building in Tough Times and Beyond" online survey. The purpose of this survey was to probe what steps client-side marketers are taking to build their brands in the current economic downturn and what actions they plan to take when the economy recovers. In total, 129 client-side marketers responded to the survey.
Survey participants included members of the ANA Brand Marketer Leadership Community panel. This panel is made up solely of client-side marketers who are periodically surveyed on a range of timely, industry-related topics and can be found at www.anasurveys.com.
Additional participants included members of the ANA's Brand Management Committee, which offers members the forum for sharing best practices, the opportunity for peer-to-peer networking and benchmarking, and the ability to learn about new industry developments. Roger Adams, who has served as CMO at both Lord & Taylor and The Home Depot, is the chair of the Brand Management Committee and also is vice chairman of the ANA.
Survey results were presented in May 2009 at the ANA's Brand Building in Tough Times and Beyond Conference. A panel of industry experts discussed the results in a panel moderated by ANA executive vice president Bill Duggan. Participants included Katy Frohling, senior vice president, brand management and strategy at Wells Fargo & Co.; Chris Jogis, senior vice president, group head, U.S. consumer marketing at MasterCard Worldwide; and Marty Ordman, vice president, marketing and corporate communications at Dole Food Company.
Several of the questions in the 2009 survey had been asked in previous surveys conducted by the ANA-2007's "Brand Deterioration: How to Identify, Measure and Respond" and 2008's "Balancing Short Term and Long Term Brand Equity." This report compares the findings from the earlier studies with the findings from the current survey.
Short-Term and Long-Term Strategies Should Be Balanced
About one-half of the marketers surveyed in 2009 feel that equal emphasis should be placed on short-term and long-term brand strategies, regardless of whether a brand is marketed in a recessionary or non-recessionary environment.
However, among the other half of survey respondents, the majority holds the attitude that the short-term should be more emphasized than the long-term during a recession. Alternatively, the long-term should have greater emphasis during normal economic times than during a recession.
Notable Shifts to Short-Term Strategies in a Recession
In reality, companies have overwhelmingly shifted their focus to short-term strategies. In the recessionary environment of the past six months, there has been a dramatic shift toward short-term strategies. Two-thirds of the marketers surveyed reported that their firm has undergone this shift. In contrast, only 5% reported that their firm had shifted to long-term strategies.
Immediate Sales and Profits Are of High Importance to Senior Management
At present, the vast majority of marketers (90%) report that their senior management places a very or extremely high degree of importance on generating immediate sales and profits. This level is not significantly different from the level observed a year ago.
The Importance Senior Management Places on Long-Term Investing Falls in a Recession
Only 20% of the marketers in the current survey reported that their senior management placed an extremely high degree of importance on investing for the long-term, a level at parity with that observed a year ago.
In 2009, 50% of survey respondents said senior management thought it was very or extremely important to invest in the long-term. This is in contrast to respondents in the previous year, in which 60% responded that senior management found it to be very or extremely important to invest in the long-term. It also correlates to 2009 findings noting that firms have shifted their focus to the short-term during a time of economic stress.
Marketing Actions Are Shifted in a Recessionary Environment
Respondents to the current survey were presented with a list of 11 marketing activities and asked whether, in the current economic environment, each had been shelved (canceled), delayed (will implement when recovery begins), maintained (no change in program), re-thought (reduced), or increased.
Many survey respondents reported that a range of marketing initiatives were being re-thought (reduced) including media budgets, production budgets, and sponsorship and events activities.
The activities most likely to be maintained with no changes in the face of the current recession are research and development and public relations efforts.
The marketing activities that are most likely to have been increased in the current economic environment are pricing deals and social networking and word of mouth activities.
Media Budgets Will Be Increased When Recession Ends
When the current recession ends, the great majority of marketers (68%) expects to increase their media budgets. A sizeable percentage of respondents intends to increase their expenditures on "social networking and word of mouth activities" (41%) and "innovation, test and learn budgets" (40%).
Roger Adams, chair of the ANA Brand Management Committee notes, "Many advertisers have cut media to conserve cash during the deep recession when customers were scarce. Media budgets will need to rise as the recovery begins in order to maintain short-term share and long-term equity. One area to watch is social media. Several advertisers have experimented with relatively low-cost social media during the downturn. This survey indicates many may build on their success and increase social media budgets when the recession ends."
Increased Marketing Activities Ideally Implemented Before Recession Ends
The great majority of respondents (73%) reports that these increases in their marketing activities will, ideally, take place between three to six months before the actual end of the recession. This suggests marketers' optimism as they plan towards a post recession marketplace.
Chris Jogis is senior vice president and group head of U.S. consumer marketing of MasterCard Worldwide and also participates in the ANA's Brand Management Committee. Speaking at the ANA's May 2009 Brand Building in Tough Times and Beyond Conference, Jogis said, "Consumers will decide when these tough times end by starting to spend. We're doing focus groups bi-monthly where we are talking to consumers, and we're hearing a cautious optimism. All of us have access to this syndicated information and the news media, but ultimately, the consumers will decide."
Also speaking at the ANA's May 2009 Brand Building in Tough Times and Beyond Conference, Charles Schwab analyst Liz Ann Sonders argued that there's a reasonable chance this recession has ended. While Sonders noted that she is optimistic about positive news in unemployment figures, home prices, and the stock market, she also said there is the possibility that this will be a W-shaped recovery resulting in a second economic downturn and recovery.
Based on the survey results, which showed that most advertisers planned to increase marketing before the recession ends, and the assertion by Liz Ann Sonders that there's a reasonable chance the recession is over, marketers should immediately assess their marketing plans. ANA Brand Management Committee Chair Roger Adams said that "with three- to six-month lead times for new production plans, work may need to begin now in order to participate fully in the recovery."
Brand Equity Is Still Important to a Company's Success
Marketers continue to see brand equity as a critical element to the success of their firms. Brand equity is defined as the added value a brand name identity brings to a product or service beyond the functional benefits provided. Among the marketers surveyed in April, 2009, three-quarters gave brand equity the highest possible importance rating. This was consistent with the findings from the 2007 ANA Brand Deterioration study and shows that brand equity is equally important in both recessionary and non-recessionary times.
Survey respondents gave a wide range of reasons they thought brand equity was important. Common themes include loyalty, trust, and the ability to differentiate a brand from its competitors. Participants expanded on their responses in the following statements:
- In any economic climate, but specifically in times of downturn, people turn to brand names they trust. Having that brand recognition and existing goodwill with the consumer can make the difference between your product being purchased versus another brand.
- We have one of the most recognized brand names in America, and our measured brand equity lies in the trust consumers have in our brand. In tough times, trust can be a tipping factor in brand choice.
- Knowing what our brands stand for and delivering that to customers over the long-term is what earns loyalty. The top-level brand equity is more important than versions and features and must be our Holy Grail even when we are tempted to focus on short-term earnings.
Products, Customer Service, and Employees Are Important to Brand Equity
Respondents in the current survey were presented with a list of ten factors and asked to rate the importance of each in building brand equity for their firm's primary brand. The findings indicate that the most important input is "products." This is not surprising given that satisfactory product performance is a price of entry into any category.
More interestingly, "customer service" and "employees" are ranked second and third. These are closely followed by "websites," "product price/value," "and "marketing communications/CRM."
Katy Frohling is senior vice president of brand management and strategy at Wells Fargo & Co. and also sits on the ANA's Brand Management Committee. She expanded on the critical role employees play in her company during a panel discussion at the ANA's 2009 Brand Building in Tough Times and Beyond Conference. She said, "It's in our vision and values that Wells Fargo team members are our competitive advantage. In fact, we've spent the better part of three years reenergizing our brand. It's critically important to have their loyalty and their collaboration in our efforts."
Effective Measures of Brand Health
At present "customer experience/satisfaction" stands out as the single most effective measure of brand health. Brand health is defined as the measure to which your brand equity is increasing or declining. This factor is most closely trailed by "brand preference," "Net Promoter Score" (percentage saying they would recommend your product/service), and "percentage of market share."
Perceptions regarding which measures of brand health are most effective have changed among marketers over the past two years.
- "Customer experience/satisfaction" is seen as important in both the 2007 and 2009 surveys, but its importance jumped significantly in 2009.
- Other factors that have significantly increased in importance are "conversion rate," and "website traffic"-although this remains at a relatively low level of importance.
- Those measures that have significantly declined in importance among marketers over the past two years have been "brand preference"-although it is still ranked second-and "price premium gap."
Key Warning Signs of Brand Deterioration
According to marketers surveyed, five indicators stand out as the key warning signs of brand deterioration, defined as the decline of brand equity. These are:
- Customer conversion or repeat rate versus competitors slips.
- Percentage of customers who rate brand as "excellent" slips.
- Net Promoter Score slips (percentage saying they would recommend your product).
- Growing disparity between what customers rate highly about a company's brand and its brand goals.
- The reason your product is being purchased is becoming increasingly related to the product's functionality and price.
It is noteworthy that over the past two years, the number of marketers perceiving each of these foregoing indicators as key warning signs of brand deterioration has increased, although the rank order of the importance of these signs has remained essentially unchanged. This suggests that more marketers are focusing in on the phenomenon of brand deterioration itself.
Digital Media Are Seen As Highly Effective for Building Brand Equity
Marketers' perceptions of the most effective media channels for building brand equity have changed considerably over the past two years.
Although television remains the number one channel, the number of marketers who see this medium as highly effective has dropped significantly (from 80% to 64%).
At present, online advertising and guerrilla/word of mouth/buzz marketing are seen as almost as effective as television for building brand equity. This could be due to the lower costs of guerrilla/word of mouth/buzz marketing and because this form of marketing is empowering for consumers. The fact that digital media, including online advertising, guerrilla/word of mouth/buzz marketing, and social media, have increased in importance confirms that marketers believe that you can't build brand equity without a strong presence on the Internet.
Social Media Is the Most Desired but Unimplemented Media Channel
"Social media" stands out as the single most desired media channel that has not yet been implemented by many marketers. This is followed at a significant distance by "guerrilla/word of mouth/buzz marketing" and "mobile advertising."
Panelists at the ANA's May 2009 Brand Building in Tough Times and Beyond Conference shared their experiences with social media.
- Chris Jogis, senior vice president and group head of U.S. consumer marketing at MasterCard Worldwide, says his company has already implemented social media. Jogis says, "People always think of social media as Twitter and Facebook, but it's really user generated content. When we launched priceless.com three years ago, and asked consumers to create their own Priceless advertisements, we got an overwhelming response. But the reason we were able to do that was because consumers were already interacting with our brand, and they were sending in these unsolicited ideas for Priceless ads all the time. In essence, all we were really doing was enabling them to do what they wanted to do and giving them a forum to do so."
- Marty Ordman is vice president of marketing and corporate communications at Dole Food Company. He says Dole is one of those that hasn't yet implemented social media. "We'd like to, and we've been interviewing people and collecting information at this point, but it's just been a bit overwhelming to figure out where to get in and how to get in. We'll walk before we run and try a couple of the tools that are out there like Twitter and Facebook. We just need the resources dedicated to it. It would be wonderful to have a person that is in charge of social media, so we want to make sure we are ready to support it when we do get into that medium."
- Companies including Wells Fargo & Co. currently have positions that focus solely on social media. Katy Frohling, senior vice president of brand management and strategy at Wells Fargo & Co., says the company has a vice president dedicated to social media strategy. "We've done a lot of ‘test and learn' to show that there is an ROI on many of the programs, so that makes executive management much more comfortable."
Brands Position Themselves to Get Through Tough Times
Marketers were asked which brands have smart brand strategies that will not only get them through tough times but will also position them well for an economic recovery.
Common brand strategies employed by smart companies include consistency of message, an emphasis on value, continued investment in innovation, and a strong marketing presence throughout the economic downturn. Here are some examples of the actions successful brands are taking in tough economic times according to survey respondents.
- They are maintaining their presence in the market in spite of the tough economy. The really smart ones have increased their advertising spend to take advantage of lower prices, thus increasing their awareness levels which could help them as the economy returns.
- They continue to invest in innovation and marketing of their products and services even in tough times. Consumers can switch to store brands during these tough times, and it is important that your brand message be out there pointing out the brand differences and attributes.
- They're balancing customer concerns of today with long-term brand image.
- They're listening carefully to constituents, acting on suggestions, and engaging in conversations to improve products and services.
- They are still advertising. They didn't go dark and wait it out. They were aggressive in the media marketplace.
Survey respondents were also asked to list specific companies and the smart strategies they are using to get through the recession. A few brands were mentioned repeatedly.
- Apple: They are doing what they do best-staying true to Apple.
- Hyundai: The Hyundai Assurance promotion (which allows people to return their cars if they lose their income in the next year) has separated it from the clutter and likely will drive newfound consideration. It has also tapped into a cultural concern, positioning itself as a selfless corporate citizen. This is a brand equity move that it should focus on sustaining.
- McDonald's: They offer value-priced meals with healthy choices and snacks that are geared to multiple audiences (kids, teens, 20-somethings, and parents). There is a tie-in to current movies to keep them relevant with a reason to advertise.
- Southwest Airlines: It maintains its ongoing advertising, while recognizing that other airlines have changed pricing to add fees.
- Wal-Mart: They balance price and value.
The findings from this study indicate that marketers are focusing more on short-term strategies to maintain volume in tough economic times even though they place equal value on short-term and long-term marketing strategies. Short-term strategies include delaying or re-thinking some marketing initiatives while relying on pricing and promotional activities in the meantime. However, encouraging results from the study show that marketers are not giving up on brand building as seen in senior management's commitment to long-term investment in brands as well as low levels of canceling or delaying implementation of many marketing activities.
Here are a few next steps to consider:
- Focus on your consumer. Get back to the basic fundamentals on which marketing is built. Cater to your consumer to build loyalty over the long term. Work to improve customer service and the customer experience overall. This is the time to analyze current marketing programs and focus on measurement to cut the fat to make brands more effective.
- Consider the tight economic times an opportunity to build brands. Brand authenticity and confidence can be a point of differentiation in a marketplace now driven by price promotions and other short-term tactics. During uncertain times, consumers look for safer bets in brands they already trust and know to ensure each dollar they spend is being spent wisely. Don't shortchange your brand by abandoning brand-building strategies. Instead, think of ways you can respond to changing consumer needs in a credible, but empathetic manner; avoid doing long-term damage to pricing or brand equity.
- Think about value over price. Brands that focus solely on price promotions to maintain volume may fall victim to consumers' demand that prices stay low even after the recession. Think about aligning short-term promotions with long-term gains by integrating brand building into promotional activities that deliver on both price and value. Added value experiences have the potential to strengthen current consumer loyalty, create new advocacy, and drive loyalty way beyond the recession.
- Think innovation for long-term growth-even during a recession. Use this opportunity to innovate and create new brand dialogues with the consumer beyond price promotions by looking for ways to add value to the consumer experience. Innovation can include creating cross channel partnerships, brand partnerships, retail strategy, or even thinking about utilizing different media channels and mixes. Innovation can also mean thinking inwardly about acquiring talent and research and development as well as probing what "value" means to the consumer. Many brands forget about innovation during a recession, but it could be the edge that propels you past competitors after the recession and beyond.
This is an uncertain environment for consumers and marketers alike, but it is still an exciting time for brands as marketers innovate to proactively respond to today's challenges. The ANA believes that what is certain about brand building is that marketers must continue to give brand building the priority reflected in this study in order to survive and thrive in the future. This can be done by sharing best practices, case studies, and key strategies, so that brands will be equipped with the knowledge to succeed today and for years to come.
To read the entire white paper with data charts, download the PDF version.
"Brand Building in Tough Times and Beyond." ANA/'mktg', 2009.