A senior executive recently shared his plans
for responding to employee queries concerning the much-talked about
potential recession. He told his employee, “We will operate as we
currently are doing. Until we tell you otherwise, manage for growth
as planned.”
His remark would seem to follow the results of
a survey by Mercer Management Consulting which brought together a
select group of 50 Fortune 500 marketing executives to see how brand
equity will be managed as the economy turns down. In a white paper
prepared by Andrew Pierce and Eric Almquist, senior partners of Mercer,
they observe, “Brand-building has always been among [the] first budget
cuts when companies tightened their belts in recessions. The next
few months will, thus, demonstrate which companies and CEOs are truly
committed to brand[ing] as a strategic asset and which will revert
to the habits of the past and slash brand-building investments.”
The survey found:
Nearly all senior managers have come to appreciate
the importance of branding as a strategic asset. They also would seem
to understand that brand-building is multidimensional. One respondent
told Mercer, “We are not talking about just advertising; brand building
is much more than advertising. Brand building includes investments
made in areas such as customer service, product development, and the
customer experience.”
”Brands also cut through the noise of product
channel proliferation, keep your products from becoming commodities,
and provide durable competitive advantage,” the Mercer white paper
observes.
Brand-building expenditures will shift away from
traditional advertising toward new Internet investments. At the same
time, Pierce and Almquist found “most marketing executives believe
traditional advertising is the best method to reach broad audiences.”
If the economy turns down, about 60 percent expect
their brand-building expenditures to remain stable or rise. The remaining
40 percent expect they would fall. “The select — we believe savvy
— group of companies that project an increase (15 percent) come mostly
from non-cyclical and service-oriented industries, such as financial
services, telecommunications, pharmaceuticals, and technology,” observe
the Mercer consultants.
According to the white paper, we can expect a sharper
divide in brand-building than in prior slowdowns. “In past recessions,
the great majority of firms cut back; even companies with a tremendous
brand based on their unique customer-service orientation reacted by
laying off customer service personnel.”
Today, however, Mercer expects a significant number
of companies to take the opposite tack. “There is increasing evidence
that strong brands influence investment decisions and market capitalization
and are significant leading indicators of value growth. This can help
stock prices rebound quickly after a downturn.”
So Pierce and Almquist believe the smart executives
will continue, even increase, spending in a recession. “The true brand
builders will seize the opportunity a slowdown provides. They will
use the Internet to establish powerful new relationships with customers.
And if their competitors pull back, they should capture significant
mindshare and market share.”
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