Managing your brand in a recession

The decline in general economic indicators of the country, the weakening of the naira against the US dollar, and the global fall in oil prices have many people speculating if Nigeria is heading towards a recession.  But all need not be doom and gloom for marketers, as with proper management, brands can thrive in a recession and even present opportunities for the focused marketer.  Studies from Millward Brown reveal that it is common for marketing spend to be squeezed during economic downturns, with emphasis placed on maximizing short term sales uplifts to help meet profit targets.  But brands need to be viewed as a long term investment, because focusing on short term returns can have long term repercussions.

The pitfalls of price promotions

While common, the use of price promotions to help gener­ate consumer spending during a recession can damage the brand and make it hard to see how damaged the brand is. One brand, with reduced media expenditure, reported in­creasing share in line with promotions. Analysis showed that the share increase was entirely down to the price promo­tions.  When others in your market are promoting on price, it can be hard to avoid joining in, but the results can be hugely damaging to all the brands. For instance some years ago in the U.K., an OTC category was growing. However, as a result of a price war, the total volume sold on promotion increased by 15 percent across all brands for one year. Not only was value driven out of the market, but brand equity declined. Just half the consumers (55 percent) had a strong affinity to any one brand after the price war, compare to 81 percent before.

The dangers of reduced advertising spend

While reducing advertising spend can seem a logical way to increase short-term profitability during a recession, the con­sequences can be damaging. Brands can indeed “go dark” for six months or so with little apparent deterioration in their health. But the problems come in the longer term and once decline sets in, it’s hard to reverse. For example, a brand came off air in one region, but continued advertising in the rest of the country. Within a year, market share had dropped 2 percent in the region without advertising, while holding steady elsewhere. But in the following year, when the adver­tising was resumed, the market share in the region where the brand did not advertise continued to lag behind the rest of the country. At a time when other brands are cutting their marketing research and media spend, media costs are likely to go down, and achieving a strong share of voice can be achieved relatively cost effectively.

Compensating with copy quality

While ideally you should aim to maintain your spend, it is possible to grow your brand with lower budgets, provided the copy quality at least compensates for this. Advertising has a long-term as well as a short-term effect on the brand. Stopping advertis­ing, or cutting ad spend may look like a short-term fix, but you are likely to be setting up problems for the future.

Michael Umogun

What is your strategy for managing your brand in a recession?  In our next BrandTalk we look at what tactics can be used to weather the storm during tough economic times.  Wishing you a productive work week!  Michael Umogun / michael.umogun@millwardbrown.com