Investing in brands even when times are tough
The COVID-19 crisis is changing the landscape for consumers and brands alike. Though it is a challenging time for many, opportunity may exist for brands to capitalize on shifting consumer preferences and priorities. In considering ways in which to adapt to the current moment, brands should look at lessons learned from previous crises.
In that vein, we looked back at other crises in recent history and highlighted three key insights for brands today.
External forces create needs that brands can satisfy
In History: During an economic downturn, consumers often reevaluate priorities. As a result, their needs and behaviors evolve, making understanding customer preferences and adapting to them critical. In 1973, an energy crisis emerged which contributed to dramatic fuel shortages and inflated oil prices in America. That same year, to monitor fuel consumption, the U.S. released its first miles per gallon report. In that report, the Toyota Corolla was second to the Honda Civic in fuel efficiency. When the energy crisis helped spur the 1970’s recession, Honda dropped its advertising budget while Toyota adhered to its long-term marketing strategy, continuing to invest in building their US brand and preparing to expand manufacturing capabilities in the 1980’s. By 1976, American consumers flocked toward fuel-efficient vehicles, and Toyota surpassed Honda and VW as the top imported carmaker in the U.S.[1]
Now: The ongoing COVID-19 pandemic has uprooted daily lives and routines. Stay-at-home orders have created a gaping need for food and necessity delivery services. Tech giants and startups alike have worked to satisfy this need, with companies like Amazon, Uber, Walmart, Instacart, FreshDirect, and Shipt all playing crucial roles during the pandemic. However, like the 1970’s fuel crisis, the pandemic will eventually subside. Whether demand for grocery and necessity delivery subsides along with it remains to be seen. However, if demand does dwindle, there may be little room for multiple players. Marketing investment right now could determine the few lasting winners in this new, booming industry.
[1]“When a recession comes, don’t stop advertising,” Forbes.com
Customer acquisition and retention drive creative brand building
In History: In the 1920’s, Post Consumer Brands was the leader in ready-to-eat cereal. When the Great Depression hit at the end of the decade, Post cut expenses by limiting research and development and by reining in its advertising budget. Rival Kellogg Company doubled its spending on advertising, invested in new channels like radio, and introduced new products like Rice Krispies. In the aftermath of the recession, Kellogg’s revenue grew by 30 percent as it overtook Post as the category leader.[2]
Now: Creativity during the pandemic has been driven by a desire to support communities and front-line workers. For example, in response to national supply shortages, spirits manufacturers like Tito’s have repurposed supply chains to produce hand-sanitizer. In addition, Hershey’s partnered with DC Comics to create “Superhero Milk Chocolate Bars” to send to front-line heroes during COVID-19. Creativity, especially in support of the collective fight against the pandemic, may build brand equity on the other side of COVID-19 and help propel brands to the top of their respective sectors.
[1] “When a recession comes, don’t stop advertising,” Forbes.com
Acquisition is a significant opportunity for brands that have deep pockets
In History: Events such as the Y2K scare, the crash of the dot-com stock market bubble, and the September 11, 2001 tragedy combined to bring about a recession in the early 2000’s. As the recession hit, Smucker’s pursued new customer segments by acquiring JIF and Crisco from Proctor and Gamble, bolstering its portfolio, even amidst a downturn. In a nod to its success earlier in the decade, Smucker’s further expanded during the 2008 financial crisis when it purchased Folger’s. The peanut butter, oil, and coffee brands remain important parts of Smucker’s strong brand portfolio today.[3]
Now: While it may be too early to see the full picture of acquisitions during this pandemic, there are indications that several companies are following Smucker’s playbook. For example, Netherlands-based Just Eat Takeaway recently acquired Grubhub for $7.3 billion and while a deal like this could transpire in any market climate, the Dutch food delivery service capitalized on an opportunity to pursue a new geographic segment in America while demand for food delivery services is high.
[3] “How to Market in a Downturn,” Harvard Business Review
Understanding your customers and investing in your marketing and brand strategy even in the face of economic constraints is both a business necessity and an opportunity.
History has shown us that companies who commit to long term marketing strategies, even through market uncertainty and downward trends in the global economy, come out ahead. Though the general long-term economic impacts of COVID-19 remain to be seen, specific brands are already taking steps to emerge from the pandemic stronger and more attuned to their customers’ needs. Brands that wish to come out the other side of COVID-19 in a better position can look to history for winning strategies and tactics.