Cracking the Financial Code
Spending on Branding in the New Normal
Adapted from a Council Perspectives by Charles MitchellCP-016 2010
Council Perspectives
The Conference Board Council on Corporate Brand Management
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The global recession and a worldwide display of questionable corporate behavior
have weakened trust in business and corporate brands. Companies have battened
down the spending hatches and reordered priorities to weather the downturn.
What will the operating landscape — the new normal — look like post-recession?
It will be a tougher place to manage a corporate brand. Companies simply won’t be
able to do things the way they always have. But that may not be such a bad thing.
Editors’ Note: The Conference Board Council on Corporate Brand Management met in Minneapolis in September 2009 to discuss the financial, strategic, and social media aspects of brand management in the post-recession future. That meeting resulted in the Council Perspectives Corporate Brands: Meeting the Challenges of Changing Times, from which this report and two others—Social Media and Word-of-Mouth Marketing: The New Normal and Corporate Brands: Strategies for the
Opportunity or Threat?
Brand strategy begins with a view of what the recession means for your brand, now and in the future. Is it an opportunity or threat? In a time of cutbacks and tight resources it’s easy to lose focus on the long term, to neglect the value and meaning of a corporate brand in favor of quick wins and new products. But the reality is that the decisions you make today about supporting your brand have a dramatic impact on where you will be when the economic upturn accelerates.
The Lessons of History
Previous recessions and depressions have shown that smart companies can position themselves and their brand to take advantages of the opportunities a distressed situa-tion often presents (sometimes created by the mistakes of competitors) to emerge as stronger, healthier, and more primed for growth than when the whole economic mess began.1
The current recession also highlights how losing long-term brand focus can spell disaster. General Motors, a brand which once stood for quality, style, and innovation, strayed so far from the brand promise that made it successful that when recession arrived, the company failed to hold on to its customer base in the face of more innovative and aggressive competitors. AIG is another company that lost its vision of its core product and succumbed to the pressure of Wall Street and the need to produce short-term results at any price. AIG violated the brand promise that had made it a giant in its field— integrity and the guarantee to pay the claims of its policy holders.
DuPont
Emerging from World War I with a tarnished brand image as a war profiteer, the Delaware-based chemical giant outpaced its industry competitors by upping its investment in R&D and targeting that investment toward a few key products (Neoprene, Lucite, and Nylon) during the Great Depression. The company also aggressively marketed its new products, which in turn led to increased consumer demand. Between 1928 and 1941, DuPont reduced its overall R&D spending only once (1932). During that time it set out to remake its corporate brand image from that of a profiteer to a company known for innovation and consumer-oriented products. It introduced a transformational tagline: “Better things for better living through chemistry.” Through an aggressive M&A
The Challenges of the New Normal
Brand professionals are operating in a different world than just a few years ago when it comes to managing the economic and social landscape. Fundamental challenges in the new normal:•
Consumers are less loyal. You need to let them know it’s not about the product; it’s about them.•
Consumers are more educated about buying. Tailor your message to these higher standards.•
Consumers are less trusting; blind loyalty has become a thing of the past. Show them that your brand stands for something bigger than you are.•
New media, especially social media tools, are replacing conventional communication formats. Use social media to “fish where the fish are.”•
Top-level managers do not understand the need for branding budgets. Teach managers to see a brand as intellectual property and a critical component of corporate reputation, revenue, and customer retention.•
Globalization means more brands must translate internationally. Be proactive about understanding and bridging cultural differences. Yes, think globally but act locally.•
Employees must be persuaded to get on board. Count employees as the first-line consumers of your brand.When the economic smoked cleared, DuPont’s image was transformed and the company’s profits soared in a sector that now had fewer competitors.
Proctor & Gamble
Bucking the conventional wisdom, Proctor and Gamble upped its radio advertising spend dramatically during the height of the Great Depression, launched new brands and acquired others from weakened competitors—all while competitors slashed their ad spends and marketing budgets. During the 1930s P&G launched and acquired more brands than it did in either the 1920s or 1940s and doubled its ad budget every two years. P&G’s agility also proved an asset: The company successfully intro-duced cheaper and lower-quality products to compete with discount brands, thus preserving overall market share. Boosting its spending on market research (between 1932 and 1942 its market research department budget rose by a factor of four) P&G broke with convention, focusing ad campaigns on the key demographic sector of their purchasers—housewives rather than products. P&G launched the first daytime serial radio program in 1933, which earned the nickname “soap opera” and was squarely targeted toward female consumers. By remaining highly visible and building market share during the downturn, P&G positioned itself for enormous growth in the decades that followed.
3M Corporation
Even in times of economic stress, the Minnesota-based company’s commitment to R&D, to improved manufac-turing and development processes, and to the retention of critical staff has never wavered. Many of its most profitable products were launched in distressed economic times, including Scotch Tape™ during the Great Depression (it helped the consumer make simple house-hold repairs and mend clothes on the cheap) and Post-It Notes™ during the 1980s recession. In the 1930s, 3M funneled about 45 percent of its profits into new product research; consequently, the company tripled in size during the worst decade American business had ever endured.
c o u n c i l p e r s p e c t i v e s c r a c k i n g t h e f i n a n c i a l c o d e : s p e n d i n g o n b r a n d i n g i n t h e n e w n o r m a l t h e c o n f e r e n c e b o a r d 3
Brand vs. Reputation:
Definitions
A brand, whether it represents an organization, a product, or a service, is the entity’s promise of certain attributes and values, quality, performance, and service. A brand embodies what the organization or product stands for and distinguishes it from competitors. Brand identity is made up of the specific combination of visual and verbal components that comprise the brand identity system. These include brand names, logotypes, symbols and other graphic devices, colors, overall corporate voice and visual style, and core positioning messages, such as slogans or theme lines. The corporate brand image, on the other hand, extends to the totality of perceptions resulting from all experience with the brand, including its reputation (reputation is comprised of perceptions of employment, supplier relationship, social and environ-mental policies, ethical conduct, and community involve-ment) as well as communications, quality, and service.
Adapted from Managing the Corporate Brand, The Conference Board, Research Report 1214, 1998.
In an economic downturn, most companies have little margin for error on either the cost or revenue side. For publicly-traded companies, short-term pressures are enormous as the expectations of Wall Street analysts and investors shift to reflect a more challenging and immediate economic reality.
What does this mean for the corporate brand? Wall Street punishes companies that drop revenue. At the height of recession it is all about corporate survival, controlling costs, and protecting revenues. Many companies go into a maintenance mode, looking to cut costs and retain rev-enue and their customer base at the expense of investing in growth. As a result, budget cuts have mostly focused on labor costs because companies (and CFOs) do not want to slash programs that have an impact on revenue. For branding professionals this highlights the critical importance of linking the brand to revenue and customer preservation. This is the time to point out that your brand is your corporation’s intellectual property, reputation, and legal identity and must be supported and protected ade-quately. Strategically, in the longer term, a strong and vibrant brand can actually allow a company to reduce marketing expenditure and serve as a recruiting and retention tool for top talent.
Positioning the Brand for Future
Growth
So how does a brand professional pitch a budget to the C-suite when competition for internal resources is tight and the company is looking to cut costs while preserving revenue?
Council members admit that they struggle with how to make the case to the C-suite that the brand adds value and contributes to the bottom line. “Quite honestly,” says one Council member, “we are not doing our job well. Being able to have a voice with the financial folks is a
For brand professionals, thinking strategically is the first step. C-suite executives need to know that brand profes-sionals understand the overall business environment, can customize a brand strategy that helps them accomplish their strategic goals, and can deliver a plan that works. Brand executives need to move away from measuring their worth by “activity.” The mindset needs to be about strategy and impact related to revenue and customer retention in the short term and potential growth in the long term. In other words, you need to monetarize the conversation. Talk the language the C-suite (and espe-cially the CFO) understands, not the jargon of marketing and brand positioning.
Also know the economic realities. Understand that the C-suite is under pressure from an abundance of sources and angles. Learn what those pressure points are and tar-get your brand strategy to address them. Especially important is revenue development. After all, if a com-pany is trying to develop revenue organically, how better to do it than by developing the brand?
The C-suite and the board of directors instinctively know there is positive value in corporate name recognition and a strong brand. They know the importance of the brand to the company, but they are still unsure how that returns to the bottom line. Helping them understand that link is a critical part of the brand professional’s job.
For corporate brand professionals some basic tenets of
the new normal include:2
•
Understand the expectations of Wall Street and the investor community. Among the factors analysts look for are a reliable revenue stream (which the brand must support), consumer desirability, and brand relevance. Avoid obsolescence. Expect products and services to be vastly different in five years than they are now and work to position the brand to be associated with changing consumer wants and needs.•
Know the objectives of the C-suite, especially the CFO. Know what shareholders and the board of directors expect of company management and align brand-related programs to those expectations.•
Think strategically. Focus on the link to revenue, customers, and growth. Remember: maintaining the revenue base is critical and programs that contribute to revenue will be the last to be cut.•
Brand management is an internal sell. Don’t assume that everyone, especially in the C-suite, gets it. Talk the talk of finance and business, not of marketing and branding.•
Avoid spikes in spending. Aim for a consistent spend year over year. CFOs and investment analysts do not like surprises when it comes to expenditures, and investment analysts look for a consistent cost structure when they judge the health of a company. Being consistent from a low budget base is part of the new normal.•
Remain lean and spend to a plan.•
As the economy begins to improve, the focus on survival and internal controls shifts to more external thinking and growth. As the C-suite and CFOs come out of the recession weeds, there will be an opportunity to position the corporate brand interally as an engine of growth. Be ready with your arguments—and your numbers.Reconnect Employees to your Brand
Building an internal brand culture is as critical as building a strong external one. The corporate brand is used not only to improve competitive positioning and express company aspirations, but also as a powerful tool to motivate employees, who act as the brand embod-iment when dealing with customers. In an economic downturn, building a strong internal brand culture is a cost-effective way of positioning a company for growth during a turnaround. One action to prepare for success in the new normal: reconnect employees to your brand.
•
Make building a strong internal brand, which boosts employee engagement, an internal business imperative.•
Find and support brand ambassadors internally (and externally).•
Engage employees to live the brand.•
Build trust through simple and concise communication.•
Align the brand across functions and business units.•
Preach that managing the brand is a personalresponsibility—and the responsibility belongs to everyone.
Council Perspectives™
Members of The Conference Board Councils are among the most experienced and savvy executives in the world. Their private deliberations produce rich insights on the most challenging business and societal issues of our time. With their permission, we have channeled their energy and expertise into Council Perspectives, a new platform to voice their views. Council Perspectives is based on sessions from selected council meetings, post-meeting interviews, and other pertinent data, and may sometimes include original content written by council members. It is not intended to be a research report; rather, Council Perspectives provides a unique look into the minds of executives from leading global organizations as they assess, analyze, and develop ways to address critical issues.
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About the Council
The Council on Corporate Brand Management was founded in 1999 as a forum for off-the-record discussion focused on key branding issues and state of the art management practice. Through the exchange of ideas and knowledge, the group seeks to enhance the professional development of its members and improve the corporate brand management function. Members also advise The Conference Board on its communications research and meeting program.
Members must be the senior branding, advertising, marketing or external communications executives from their companies. Members must also be employed by companies that are mem-bers of The Conference Board and that are qualified for Council representation under the board’s policy governing such eligibility.
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