In the past year there has been much publicity in the business media on how to "recession-proof your business" - advice on steps to ensure your business rides out the economic storm. Not much attention, however, has been given to the implications this recession has on the branding sector.
In SA, branding is a major industry. The main players reported a combined annual turnover in 2008 of an estimated R300m. With the advent of the recession, 2009 is looking far less profitable, with an industry-wide downturn of an estimated 25%-30%. This decline is a direct result of the economic downturn, as branding is often seen as a discretionary marketing spend. Projects that build long-term brand value are wrongly viewed by many marketers as not having benefit in these cash-strapped times.
Before the recession, conspicuous consumption was the buzz-phrase. Celebrity culture ruled. Bling was in. The more excessive the behaviour of celebrities, the more popular they became. The result was a conspicuous spending culture adopted by the masses. As a result, there was more brand spending, with the emphasis on what is known as second-tier and third-tier benefit. For example, a watch was no longer seen primarily as a tool to tell time (first tier). The emphasis was on what the watch looked like (second tier), and what wearing it would tell others about you (third tier).
Because of this shift, many brands let some of the basics slip.
In SA, there has been a knee-jerk reaction to the recession, with brands focusing on pushing product sales through promotions and price cuts. All of this is applicable, but only within the scope of the specific brand promise. If the reaction is outside what the brand stands for, the result will be a figurative "cheapening" of the brand, which in the long term will do more damage than good.
During the recession of the 1970s Rowntree, which manufactures the ever-popular Kit-Kat, made the wafer's chocolate coating thinner to cut costs. The result was a loss in market share that took years to recover. The company had eroded trust in its consumer base by changing the understanding of the Kit-Kat offering. Companies can't afford to lose consumers' trust and should only make changes that are within the parameters of the brand promise. Brands shouldn't walk away from their positioning, but tweak it to fit the times. Most importantly, they shouldn't cut quality.
During and after the recession, the brand space will focus more on austerity, real value and "getting back to basics", a thinking that needs to be communicated by brand consultancies to their clients, and fast, as the results of this shift are already evident.
In the US, Hyundai has been the only major car manufacturer to report growth in the dismal 2009 market. Its cars perceptually offer a first-tier benefit to their consumers - a reliable, fuel-efficient vehicle that gets you reliably and safely from A to B. The shock of the recession has forced consumers to base purchasing decisions on products that do what they are meant to do, rather than what they tell others about you. Brands that can quickly refocus and deliver on the core brand offering will do better now, and in the future.
Advising brands on how to shift their thinking is the role of brand consultants. The quicker they can help the industry understand the shift, and show their clients how not to focus on short-term revenue alone, the better the long-term results will be. Companies need to be authentic in the relationships they have with their clients as well as build real value for the consumer.
There is a big task at hand for the branding sector as a whole. These consultants need to guide their clients and educate them on the changing nature of our brandscape - from one that was more about conspicuous consumption to the future, which holds brands as being more authentic and austere; a difficult mind-shift during these turbulent times.
- Swart is CEO of The Brand Union
