Brand management and the jigsaw puzzle of recession

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Writuparna Kakati | 23 Jan, 2009
In economics, the term 'recession' is generally used to describe an economic phase in which GDP (Gross National Product) declines for two consecutive quarters. In most economics, a recession occurs once every four or five years.

Strategies for moving an economy out of a recession vary according to different economic schools. In business management, the same thing happens - businesses try to fight back a recession in different ways. But it is commonly believed that businesses 'get better at what they do during bad times'. Experts opine that when a recession strikes it is a must for businesses to emphasize on its branding so as to pave a smooth way out through an economic storm.

During a recession when prices often rise, layoffs occur, and consumers curb spending, it becomes very important for a business to to decide if advertising budgets should be cut and money shifted to promotions that drives sales. This strategy may negatively affect profits but during a recession, it is most beneficial in preventing market share erosion.

Let's see how an economic slump affects different businesses. Studies have revealed that an a recession does not affect all product categories equally. For example, in the current downturn in Indian economy, a few luxury goods like real estates, textiles, automobiles are strongly affected while most of the necessity goods do not experience as strong of an affect. It is therefore, the approach for coping with an economic slump depends on a product's category. The approach also varies according to a products' brand category; a business which has promoted its brand as the 'cheapest cost' alternative need not change its branding strategy during a recession while another brand which has promoted itself as a 'best quality' alternative may need to change its branding strategy during such a darker economic phase.

How to build or increase market share during a recession or an economic slowdown. It is very difficult but not impossible. During a recession, every rupee matters to consumers and they use greater discretion in making purchasing decisions. They do not want to experiment a new brand and tend to stick with brands they can trust. As a result, businesses often find it difficult to position their brands in a market during a recession. But despite these difficulties, business can gain success if they position their brands keeping in mind their product brand category and the expectations of their consumers. A business can succeed during a recession projecting their brands from a 'value-added perspective' and also from a 'innovative-product perspective.

During an economic slump, It is also possible for businesses to grab success in terms of both market share and brand equity. Several researches have revealed that businesses which promote themselves as self confident during hard economic times perform better not only during the slowdown period but even for the following years. This strategy helps bolstering consumers' confidence making them think that they have chose the right product from the right business at a difficult economic time. In contrast, businesses which spoil their market reputation by taking some preventive measures such as price-reduction and layoff during a recession, are most likely to under-perform both during and after the darker phase of economy.

During a recession, another effective way for businesses to gain on their competitors is to enhance their advertising campaigns. Recession is the time when there remain less "noise" and congestion (fewer advertisers) in the marketplace and it is why the best time to increase consumer awareness at a relatively low cost. In a study of the the 1981-82 recession in the United States, McGraw-Hill Research analyzed 600 B2B companies in 16 different industries. The results revealed that companies which took the recession as an opportunity to increase sales and market share performed better than those who didn't.

The bottom line: Businesses which are jittery about the current slowdown in Indian economy, need to realize that recessions can be good times for them to gain advantages over their competitors and pave a new way for success. Smart branding, advertising and promotional strategies are the keys to solve the jigsaw puzzle called recession.