I was listening to the radio in my Manhattan hotel room last week when I heard an ad for the Tristate BMW dealers. Unlike many other ads I’ve heard recently, this one did not tout massive price reductions but rather sought to reframe value perceptions. Citing BMW’s heritage as a maker of performance cars, the ad alluded to what has made the brand a success. Then it delivered the value message: By buying a BMW instead of another luxury make, auto buyers can save $50 a month in maintenance. Emphasizing value is what any premium brand should be doing in recessionary times but will it be enough this time around?
In delivering a value message, BMW’s dealers are following the recommended playbook for marketing during recession. Instead of cheapening the brand’s image—the last thing they should do—they are demonstrating the value offered by the world-class brand. The message is reinforced on the Web site of the Tristate dealers: “We design extraordinary cars. It only seems right to offer a service plan to match.”
The radio ad also mentioned low lease rates but emphasized that these rates would only be in effect for a fixed period of time, clearly implying that potential owners should not expect the cost of obtaining a BMW to be cheaper the longer they wait.
The practice of focusing on value rather than sticker price has stood BMW well in the past. During the last recession in the U.S., BMW grew sales using this same strategy.
BMW is not alone in pursuing this strategy. Quoted in USA Today, Kash Shaikh, spokesman for Procter & Gamble’s (PG) fabric-care lines, says, “Value is the magic word. In these economic times, people are doing the math in their heads, and they’re being much more thoughtful before making purchases. … Now, we’re going to be even more focused on helping consumers see value.” The article goes on to report on the new Total Care versions of Tide detergent and Downy fabric softener, products that P&G claims will help clothes stay in shape longer, thus saving on both clothing costs and dry cleaning bills.
In my 2008 Points of View on marketing during recession (April 2008, Marketing During Recession: To Spend or Not to Spend, May 2008: Marketing During Recession: Survival Tactics), I recommended that brands focus on what made them successful and on reframing brand messages to emphasize value. A strong brand can support a price premium in tough times, as long as people believe the brand provides value for money. Most people find security in buying established and reputable brands, and security is something people long for in uncertain times. But looking back on the advice I gave almost a year ago, I wonder if it is really enough to see brands through the current economic crisis.
According to an article in last Sunday’s New York Times, written by economist Robert Shiller, more than two-thirds of consumers think that the current economic downturn will last five years or more. Shiller goes on to suggest that all of the current references to the Great Depression could become a self-fulfilling prophecy.
Whether or not you believe that consumer psychology has the ability to bring on such a calamity, it is clear that we are not facing a short-term recession. We may in fact be facing a systemic, long-term downturn that that could leach the strength from all but the most powerful brands.
If that is the case, one thing will be sure: Unless companies can successfully position their brands as economy options, they will need to focus on real innovation to remain successful and command good margins. On its own, marketing communication can only do so much. Brands may have to go beyond reframing value perceptions and find ways to truly offer substantially increased value through increased product performance or cheaper base prices. Companies that do this and communicate it effectively will be the long-term winners.
So are we facing a long-term downturn, one that will last years, not the usual few quarters? If so, what would you recommend companies do?
(5 votes, average: 3.8 out of 5)
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March 3rd, 2009 at 7:08 am
Hi Nigel, I do believe that this recession will be longer than “normal”, but when we come out the other end, marketing is likely to be transformed. Most specifically, I believe we will have a leaner system — fewer stores and far fewer SKUs. Marketers and retailers have become “flabby” over the past few decades — adding line extensions and “me too” products on shelves and adding shelves in the case of retailers. Neither truly thought about the consumer/shopper in a holistic manner, but rather in terms of their specific brand or category or chain. Both followed the path of more is better.
I think that will change. There will be far fewer overlapping chains carrying virtually the same assortments. And on those shelves, we are likely to find well chosen selections — stocked with consumer needs in mind as opposed to many minor taste/flavor/color variations.
March 3rd, 2009 at 9:19 am
Hello Nigel,
Moreover of the value proposal that brand´s communicate to be in the consumers mind during the recession; it is important to be aware of the “re evaluation” that consumers are carrying out of the products that they acquire according to their needs. Though the consumer in times of good economy, expands his family basket, in times of recession the consumer evaluates not just the value of brands but also the need and relevance of the products that acquires.
Aspirational brands will be always present, but how many consumers can acquire them or not in times of recession, that is the issue. I believe what is important now is to understand:
this new consumer, who is different to the one of past recessions, what products/brands are necessary/relevant to pass out the recession, and which will be the products /brands that once even the recession recover, the consumer will buy, because the value as premium and aspirational brand will remain in consumers.
March 3rd, 2009 at 10:17 am
Nigel
As you noted, financial self-preservation and consumer deleveraging have had significant market place impact on “Nice to Have” vs “Need to Have” category/brand assessments. The price level customers can find on the street reframes the value differential a brand can support at a given consumption rate. In time, financial self preservation will be relaxed and basic human nature will propel the “want to have” ascendancy to a higher equilibrium.
My thinking on this matter is that brands should always be reinforcing their value proposition along multiple dimensions (see: Of Building and pricing brand value, The Six Forces of Brand Value).
We live in unprecedented times that allow marketers to reinforce 1to1 or community communication that can have a dramatic pull based impact on brands. The challenge seems to be reconciling those longer-term initiatives with the street’s desire for shorter-term profitability maximization. Perhaps the meltdown will reframe the playground a bit – allowing all stakeholders to recognize that in fact simultaneous win-win solutions can be had with the consumer and the shareholder, that shareholder value is in fact the same as customer value.
Moving forward, marketers needs to recognize that communicating their brand value has to extend beyond ‘the offer’ else they reinforce the transactional relationship they hope to avoid. As I wrote elsewhere different customers will have different relationship affinities toward their brand (Wallet, Mind, Heart, Life) and so management needs to a make a strategic choice between either trying to manage the value proposition for different customers, or and choosing to embrace a single value stance. Either way I see this as the silver lining to the storm clouds that befall us today.
Thanks for the question
Cheers
Miro
March 4th, 2009 at 2:46 pm
Thanks for the comments.
Paola, you are right that brands need to look forward with the recovery in mind. What they do now will set the stage for whether they bounce back or not. It is also worth remembering that even a detergent brand can be aspirational if the economy becomes bad enough!
Miro, I would love to believe that the inherent conflict between the short-term expectations of the street and the long-term needs of brand builders will be reduced as a result of the meltdown. Just not sure I believe it will happen!