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Strategy in the face of challenging times.

by Danish Chan

5 min read

This isn’t your typical downturn.

High inflation, rising prices, potato shortages, plummeting consumer confidence and a seemingly constant threat of recession is simply exhausting for all involved.

Especially after the few years we’ve had.

And while the economic heartache will be felt unevenly, the truth is, most people, in most major markets are starting to adjust their behaviour, and brands and businesses have to adapt accordingly.

As Michael Corleone would say, we need a wartime consigliere.

People are looking to trade down or side-ways in the face of inflation and uncertainty.

As we witnessed way back during the GFC, consumers are finding different ways to save.

Roy Morgan reported that consumer confidence is 20 points lower than the same time last year. According to Global Web Index – 39% of Australians in January are spending less money. Let’s not kid ourselves – things will get rough.

And that’s not just in food, fashion and energy that will feel the crunch. The rising cost of borrowing will see people seek out cheap money, cheap cover and more affordable luxuries.

Australians have cancelled a subscription
Are cooking more at home.
Delaying big purchases
Reusing product more
Have stopped spending on credit

Five strategic priorities for brands during challenging times.

Priority #1: Don’t just research. Gather intelligence.

People are going to trade up, down and sideways. The first step is know which way they are going to move.

Invest in market intelligence. Which is a fancy way of good research.

If you are the type of person that thinks of research as expensive validation for what smart people already, probably know. You’re probably investing in bad research. Ask the questions that give you a privileged understanding of your customer. Something other people don’t know.

Some tips:

  • Keep an eye out for the new consumer
    Devote a portion of their market research to getting a handle on future changes in consumer behaviour. Are consumers of your brand going to revert to previous consumption patterns when the recession ends?
  • Be smart and apply a healthy dash of scepticism.
    Not because we don’t trust research. But because people are terrible at telling the truth or predicting their future behaviours. Research is as much about what is happening between the charts and quotes than the big hero statistic in the report.

Priority #2: As value becomes more important, people’s expectation on experience will rise.

An increase in price has the unintended consequence of higher expectations of experience and service.

According to IPSOS, two-in-three Americans expect immediate improvements in customer experience when a company raises its prices.

And whilst this is easier for digital ande-commerce brands to innovate their experience, every brand in every category needs to evolve how their experience delivers new value in this new economy.

Source: IPSOS, US, August 2022
Example: Grand Seiko: Making Luxury a Virtual Experience

In 2020, Grand Seiko needed to launch a new timepiece, just as traditional retail came to a sudden halt due to the pandemic. Quickly adapting to the situation, Grand Seiko created an online experience to impress hard-to-impress media and luxury watch enthusiasts.

With a detailed 3D model of the new timepiece, they launched an instagram filter creating the first ever Instagram filter that is attached to a user’s wrist. With more than 300 million earned impressions, a staggering 45% of people who went on to buy the watch have also used the special edition filter.

Priority #3: Look to innovation and promotion to reframe value.

They say necessity is the mother of invention. Well so is desperation and recession.

As consumers need change and the market becomes more cut throat, finding new ways to deliver value efficiently is the secret sauce every brand desires.

Innovative new products, services and new business models may provide differentiated value for customers who are undergoing great changes.

Put another way, double down on reframing your value. Value reframing in marketing is about elevating people’s perceptions of your brand from an unnecessary splurge to the savvy choice.

But this doesn’t just happen. This demands understanding your customer, the market and the hidden opportunity that falls in between.

When you think about innovation or promotions, this is a some good starting points:

  • Understand who your audiences of disproportionate value are.
  • Innovate and promote loyalty beyond the cliches
  • Seek incremental innovation that puts the customer at the heart of the story.

Lego, Netflix and Walmart, which all grew during the 2008 recession because of new products and investments.

Example: Lego in 2008

In 2008, while most companies were scrambling to survive, Lego saw profit growth of more than 63 percent, reaching an all-time high of profitability. Why? There are a few reasons, but the most important was expansion into the global market. While Americans were facing the worst of the recession, Lego expanded into Asia and made concentrated efforts to build sales in Europe.

Example: Netflix during the bust.

For Netflix, this moment of truth was during the bust. Netflix had attracted three million more subscribers by the end of 2009, and its stock price rose by 57 percent. Part of the reason for Netflix’s timely success was its ability to stand in as an alternative to cable and satellite TV services, which were a far more egregious monthly expense. Consumers preferred paying a fraction of that cost for similar entertainment value, and Netflix won out in the end.

Priority #4: Plan for recovery, not just recession

Economic pressure, like the future, is unevenly distributed.

And when under pressure, boards and marketeers alike tend to sacrifice long-term strategic priorities for survival. It’s well documented from previous downturns that reducing ad spend is associated with declining sales and weakened company performance in the long run.

The secret that is easy to forget in the midst of re-structures, shrinking budgets and crunched margins is that every strategists should be thinking of how to exit the recession well. Recessions are temporary. Now is the time to focus on building strong brand and experiences that will continue to drive differentiation and growth when everybody else is stagnating.

Example: Taco Bell and Pizza Hut take advantage of McDonald’s short-termism.

In the 1990-91 recession, Pizza Hut and Taco Bell took advantage of McDonald’s decision to drop its advertising and promotion budget. As a result, Pizza Hut increased sales by 61%, Taco Bell sales grew by 40% and McDonald’s sales declined by 28%.

Source: Forbes – When A Recession Comes, Don’t Stop Advertising (2019)

Priority #5: Double down on your difference.

When the macro cultural trends are so unavoidable, it’s overly comfortable to race to the middle. Act and sound like most other brands because it’s the safe thing to do.

The most common shift in strategy we see is every brand looking to become a cost leader. It makes sense, as people tighten their belts, you make your brand more affordable and thus more appealing. Unfortunately, unless you had a cost leadership strategy prior to the down turn, you’re just playing a losing game.

This is exactly what the smart people at Harvard Business Review found – when differentiators moved toward a cost leadership strategy, it didn’t help them. In fact, they found that changing strategy did not increase firm chances of surviving the recession, nor did it improve the firm’s revenues or its finances.

The truth is a differentiator will never out-cost leader a cost leader.

Instead, now is the time to focus on your unique competitive advantages. The points of differentiation in your product, service or brand that make it more valuable and relevant.

This is about being different by reframing value. Not commoditising it.

Example: Virgin Atlantic stuck to its glamour and humour.

During the GFC, Airlines were all headed to struggle-town. With falling demand, soaring oil prices and increasing focus on aggregator sites and cost-leadership players, Virgin had its back against the wall.

However, Virgin Atlantic took the decision to increase marketing spend when everyone was cutting back. It doubled down on it’s “rockstar” ethos with campaigns such as Still Red Hot and its “You’ve either got it or you haven’t”, James Bond inspired global campaign. The fame building phase helped Virgin Atlantic thrive in 2012 and beyond.

Some final thoughts…

When things are going great, brand, advertising and experience feels like investments.

When times get hard, these same things feel like luxuries.

Everything we know about marketing science and effectiveness during challenging times tells us, whatever you do, don’t stop. Don’t go dark. But to do this, every conversation about creativity or customer needs to have a commercial lens.

Know the value of current customers, and new customers. Understand the impact of experience and brand. The world moves fast, even in recessions. And things will get rough.

Those that refuse to stop will find themselves ahead of the pack when everyone comes back up for air. That’s what it means to be a ‘wartime consigliere’.

Have a question for Danish?

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Danish Chan

→ Danish is one of the most awarded strategists in the world, having worked on some of the most iconic brands in the last decade including Virgin Atlantic, Coca Cola, and Volvo. Danish spent his career helping to make modern, connected strategy integral to world-class effective work. A co-founder of Untangld, and a founding partner of By The Network, Danish is also a regular judge at the Effies and WARC Global Effectiveness Awards and a contributor to popular industry rags.

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