Ad Age recently posted a group of articles that should be on your "must-read" list for "Marketing During A Recession". There are some great ideas and case studies of some existing campaigns and some great food for thought as how you advise your clients concerning "price and value".
The first article I had a chance to dissect was "Deal Or No Deal? Cheap Prices Can Maim Your Brand" which talked about how consumers seem to be chasing price by way of promotions or coupons...
"For sure, a recession steeper than any since the Great Depression is creating a huge consumer appetite for deals. Not only did Penry Price, Google VP-advertising sales, tell the Promotion Marketing Association last month that searches for coupons topped those for the pop princess, he said searches on such subjects as "free" and "discount" have shown similarly sharp trajectories since late last year.
The burgeoning deal culture can turn even the most pedestrian items into buzz firestorms. In a segment on ABC's "Good Morning America" on March 20, technology contributor Becky Worley revealed how she hunted down coupons online to buy a $3.49 tube of Colgate for 24?. That sent the word "toothpaste" into the top five search terms on Google that morning, and related searches such as "toothpaste coupons" and "coupons" into the top 20."
In and of itself the use of coupons have changed the scene of current marketing, but what of promotion and how it effects the brand...
"Sunil Garga, principal of analytics firm Mphasize, said ordinarily he would recommend against leaning heavily on price promotion. But these aren't ordinary times, he said, and many consumer-package-goods marketers will have to resort to price promotion for an extended period of time to stave off a growing threat from private label. "Does that tarnish brand image? Yes," Mr. Garga said. "But most companies aren't even thinking about that. Their sales targets are down so much, anything they can do to keep consumers from defecting, they're doing. And I think they'll continue to."
He said marketers will resist cutting prices permanently as long as possible in favor of stepped-up promotion, because temporary deals erode margins less than permanent price cuts.
Keeping market share
It's not clear, however, that price promotion is all bad for brands trying to fight off private label in a recession, according to research by University of North Carolina marketing professor Jan Benedict E.M. Steenkamp.
His study on the subject indicates that from 1985 to 2005, U.S. national brands decreased price promotion both in categories where brands suffered heavy share loss to private label during recessions and in those where they didn't. But brands that suffered little share loss to private label were in categories where price promotion decreased less sharply.
Brands in categories with less share loss to private label increased trade display and feature activity in downturns but by less than those in categories where brands suffered high share loss, according to research Mr. Steenkamp presented in a Sanford C. Bernstein conference call in March.
Directionally, brands that were successful in staving off private label behaved similarly to brands that weren't when it came to promotion. The bigger differences had to do with ad spending and innovation: Successful brands did more of both, according to Mr. Steenkamp's research."
The emphasis you should take away from this with your clients is to not erode their brands during the recession and turnaround, but look for innovative ways to drive value and not deter price and margins.