It's Tough Managing a Brand in Bad Economic Times

I was moderator today of a panel discussion in Philadelphia on marketing during the economic downturn. That panelists, from companies like QVC, AstraZeneca, Siemens Healthcare, and Digitas Healthcare, were very engaging and thoughtful.

We got into the issue of brand and what has happened to brand during this recession. Every one of the panelists talked about how they have been able to manage their brands through the downturn. It has been tough. Customers are increasingly looking for price reductions and challenging the price differential of the brand.

The key is to establish the brand as either the high-end, differentiated value post or at the opposite end at the cost-savings. The difficult position is to be in the middle. This is a key illustration of what we have learned about strategy from people like Michael Porter and others. Find your point on the value frontier and manage your brand accordingly. Best of all, take a dual action to cut costs and add value in other ways, a la Southwest Airlines. But, recognize that when you respond to requests to lower price you are, in fact, undermining your brand value. If you established price at the appropriate level of value, it should hold, all things being equal. Obviously, all things are not equal, but you do not have to match a discounted price--in fact, it will destroy your value.

Think about what has happened in retail. We have Nordstrom's and Nieman-Marcus at the high-end and Wal-Mart and Target at the low end. These companies know their place and their brand promise. In the middle are companies like Macy's that has become one big sale. Macy's has taught the customer that nothing at their store is of value if it is not on sale. Nordstrom's has held to its yearly sale and has refused to discount. It has risked some market share to maintain its brand. Wal-Mart owns the low-end, discount brand in retail. Target now has been differentiating itself against Wal-Mart and gaining share. But, that share is likely not coming from Wal-Mart, but rather from companies like Macy's.

At one time, companies like Macy's were able to be a brand for all people. Sears had that status in an earlier time. Markets are becoming more segmented. Brands, by their very nature, segment markets--they meet specific needs of certain segments of the population. It is dangerous when people cannot determine what a brand stands for and who it is for--that's the middle ground where companies enter the death spire.