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Brands and Bad Times

Ramesh Jude Thomas,
President & CKO EQUiTOR Management Consulting Pvt. Ltd.

The biggest analysts and pundits could not see a 20k market could go into free fall. No one imagined that some of the most revered names in the financial world would disappear overnight.
And then I saw the darnedest sight: An ad for Merrill Lynch in The Economist. Were these guys completely cuckoo?
Consider this. The Bank of America paid $ 50 bn for this company with one leg in the grave. What were they thinking?

To answer that we need to ask why the really smart guys retain their marketing budgets in bad times?

1. In a downturn most companies will slash their marketing spends. The entire expenditure in the category falls. Guess what? The guy who retains his marketing spends suddenly has a much higher share of voice. When there is less noise in the market, you can only sound louder.
2. When the media market shrinks, deals abound. You end up getting much better value for the same budgets.
3. Your confidence infects the entire eco system. The trade pushes your product harder.
4. Finally, when things turn around, folks will always remember the good stuff that they used in bad times.

When 9.11 happened, most airlines were dead certain that the world will stop flying from 12th September. In the face of this gloom, a certain Mr. Ahmed Makhtoom ordered $ 26bn worth of aircrafts and kept advertising. Emirates haven’t seen a drop of red ink since then. How many airlines can claim a similar record.

Apple has not cut back a penny from their original plans or got rid of a single person in an economy that shed over a million jobs by the close of last year.

In November this year, Bharti unveiled a 15 crore logo to reflect its $10bn ambitions.

Are these guys gamblers? Or just fool-hardy fruitcakes with king-sized egos? If you go a little below the surface some interesting threads begin to show up: Great confidence in their reading of the market, a very well thought out, distinctive offering and an almost arrogant sense of conviction.

But what really separates the men from the boys is a management which seriously believes that their brands are real business assets. If you were certain that over half the value of your business exists only because own the word COKE or INTEL or DISNEY, would you starve it?

The moral of the story is that sound offerings with quality leadership will always back themselves to win under any conditions. At the worst of times, enough people have to fly, borrow capital, stay in hotels, and buy a meal.

The million dollar question is will it be your meal or capital that these folks will buy.

2 comments:

suparna said...

...Definitely if one has a good product or an organization to back up, recession will not scare the wits out of them.Capitalizing the market during a downturn helps in capturing mindspace and also adds to the common conviction that the product must be good with inherent qualities to withstand the market

Suparna ghosal

PRAKASH said...

Interesting article. I think this puts the emphasis on two core attributes - one of which is highlighted in the article - the value of the brand and the investment in it in the form of marketing spend. On the other hand, the other aspect is the fundamental asset underlying the brand...and this is the old brick and mortar ! So Apple (incredible design and product), Intel (fastest chips with a worldwide network), Mcdonalds (hygiene, safe, consistent), Bharti Airtel (All India extensive network, full bouquet of telecom services, excellent service ),Toyota (quite simply the most reliable cars), Google (the most sophisticated search engine by some distance developed by some great brains), Singapore or Emirates (the worlds best airlines - safe, great service, great planes), Gillette (the best shaving equipment in the world)

I think investing in marketing spends where the quality of the underlying asset is in doubt or not unique, may not (nay...will not !) help. Coke is probably an extreme case where the brand is 99%and the quality of underlying asset is irrelevant. In short if American Airlines were to heavily invest in marketing spends while keeping the same quality of service, it would not add any value to its brand.

Prakash Kamath