The first half of 2001 has been marked by
mass layoffs, nosediving stock prices and
the ongoing tech meltdown, challenging
senior level decisionmakers to manage
their businesses in a manner that drives shareholder
value and profits. Since increasing sales is difficult
in today's economy, the inevitable focus is on
how to reduce costs and responsibly cut what is
usually called discretionary spending.
But what counts as discretionary spending varies
by company, and its
definition for any
particular enterprise
speaks volumes
about the CEO's priorities,
the company's
commitment to building long-term profitable
customer relationships and its understanding of the
organizational capabilities that truly drive customer
value. If senior management considers a brand to
be a strategic weapon-a key asset that creates sustainable
competitive advantage-they will not subject
their brand marketing to discretionary spending
cuts. Rather, they will nurture the brand and
find ways to keep it relevant, even during rocky
times. In fact, shepherding a brand involves more
than just getting better ad agency creative or better
leveraging marketing spending. Brand commitment
requires a philosophical commitment to putting the
customer, his evolving needs, connection to the
company and reason for believing in what the
brand stands for at the center of all company
actions and culture.
In the most holistic sense, the brand provides
not only strong protection against competition but
insulation against deteriorating economic conditions.
It is a key tool for gauging customer circumstances
so that the company can recalibrate its
approach in order to remain relevant-that is, company
management must understand the customer's
emotional and social "context" for making decisions.
During economic slowdowns, customers
may prioritize more and differently, allowing fear
and uncertainty to seep into their psyches. But they
still make purchases, and they continue responding
to brands they consider relevant, whose core value
propositions resonate and which are flexible
enough to accommodate any changes or disturbances
to their psyches.
With investment dollars scarce, companies must
still prioritize their spending. When prioritizing
resources-gauging which aspects of the business
mix should be modified, optimized, maintained or
reduced-marketers may ask themselves:
" What is my core customer's mindset right now?
" How does that affect the brand relationship?
" Are the key touch points where my brand creates
its strongest bond with my customer the same
as they were last year, or have they shifted (that is,
are customer care and reassurance more important
now than breadth of product mix or fast delivery)?
" Is the company still investing adequately in
the organizational capabilities that are critical to
delivering against the brand's long-term promise?
Consider how three corporate leaders Palo Alto,
Calif.-based Hewlett-Packard Co.,
Seattle-based Starbucks Corp. and San
Jose, Calif.-based eBay Inc.-have fared
in understanding the importance of
their respective brands even in a down
economy. Recently, Hewlett-Packard's
(HP) stock has been depressed and its
financial results disappointing. Still, HP
continues to invest in its brand and
what it stands for: innovation, or what
CEO Carly Fiorina calls "invention." The
company has been conducting a highprofile
communications campaign
focused on "reinventing" HP, part of a
broader plan to reconnect with its innovative
heritage while reinventing the
way it builds customer relationships.
Meanwhile, despite continued uncertainty,
Fiorina refuses to reduce costs at HP Labs. She will
not back away from her front-end organizational
change initiatives, designed to lead to better sales
and service for HPs core customers. Ultimately, she
may forgo additional spending on the
"reinvent"communications campaign, but given her
other choices, this might be the least brand-damaging
alternative.
For its part, Starbucks has turned specialty coffee
into a billion-dollar business, thriving by focusing
on how the consumer wants to receive its offering:
the full experience, including the ambience
and service level. It invests in building its brand by
ensuring that customers have a consistent, positive,
enveloping experience, leading to loyalty and
strong word-of-mouth. This has insulated Starbucks
in this economic period; despite consumer belttightening,
Starbucks still boasts crowded coffeehouses
with rising comparable-store sales. The
experience's affordable nature has been coupled
with its eye on the basics, such as service improvements
that allow Starbucks to satisfactorily serve
growing numbers of customers during peak morning
rush hours or innovative new product introductions,
such as iced drinks, to drive non-peak
hour sales.
If anything, Starbucks is taking advantage of the
downturn by boosting investment in the branded
customer experience while competitors cut back.
The company is launching its Coffee Ambassadors
program, designed to ensure that Starbucks, at
50,000 employees, has the same passion and knowledge
about coffee that it had as a 3,000-employee
firm. It also recently announced a partnership with
Microsoft to install technology in retail stores that will
give visitors a direct Internet connection.
Auction site eBay, on the other hand, wants to
extend the brand beyond its core collectibles business
with the aim of creating a global trading destination.
This kind of transformation is
difficult in any economic environment,
but eBay is doing it by implementing a
few key strategic imperatives, including
product category expansion (cars, computers,
sporting equipment, toys), pricing
format extensions (named prices and
fixed prices) and making it easier to
shop by offering services such as credit
cards, insurance, shipping and "Buy-itnow"
options. Moreover, eBay is consciously
taking advantage of customers'
heightened sensitivity to value during a
recession to move toward this broader
positioning more quickly, whether serving
as the liquidator-of-preference for
dot-com computer and networking
equipment, or as the vehicle to put $50 to $100
cash in the typical eBay seller's pocket. Its savvy
brand understanding may mean eBay is one of the
few businesses to not only use the downturn to
reposition its brand, but to turbocharge growth.
Indeed, smart companies will use the slowdown
to reassess and shore up their brands in line with
changing customer needs and perceptions, and use
it as their guide to ensure everything they do with
their limited resources is focused and relevant.
Companies should not let the mistakes of a bull
market, enabled by an erroneous view that "brand
equals a lot of advertising," scare them away from
making true brand investments. They should use
the lull to reconnect with their brand in a way that
will guide them through an economic downturn
and position them out front and running when the
recovery begins. #
Michael Dunn is president
and CEO of Prophet, a San
Francisco–based strategic
professional services firm.
The brand
provides...
insulation
against
worsening
economic
conditions
ECONOMY$ The downturn’s advantage
Slowdown uncovers a better brand plan
By MICHAEL DUNN |
|
