Brands on the Brink: Marketing in a Down Economy

What does a down economy do to consumer behavior? Most obviously, it makes people less eager to open up their wallets. According to Janelle James, vice president for global marketing at advertising agency Leo Burnett Worldwide, recent research shows that 80% to 90% of people are willing to trade off or trade down when it comes to shopping. Moreover, said Chris Kuenne, CEO of independent interactive agency Rosetta, many of those customers might not bounce back with the economy. He likened the effect to "a one-way membrane -- it's not like everyone's going to go back to work [when the recession ends] and become much less value-sensitive."

But the general consumer pullback masks some interesting dynamics that marketers could benefit from. "In addition to assessing brands and whether [they are] going to trade off or trade down, people are starting to change what they're doing with their time," James said. That means less going out and more focus on home and family. One firm that has responded to this trend in its messaging is Walmart, whose advertisements go beyond just touting low prices and instead seek to show how those savings can contribute to customers' lives. That's an especially important emphasis at a time when economic reversals have led to a "trust deficit" between citizens and corporations, James noted.

Trading off and trading down is not happening across the board, however, said Eric Smith, who oversees the Norelco shaving business as a director of marketing for Philips Consumer Lifestyle. "Consumers are either trading down or staying within premium." In other words, the middle range of products has suffered far more than the top-of-the-line items that are bought either by wealthy consumers or by people who have decided that shaving -- among other select activities -- happens to be one of the categories where they are willing to pay more for a little luxury or quality assurance. But since mid-range customers are most brands' bread-and-butter, the overall trend still means that "price is becoming a bigger part of the equation than we've seen in the past."

That is true even in categories once perceived as immune to the economic cycle. "There were a lot of jokes that we would be the only thing that was recession-proof," said Douglas Brand, a senior brand manager overseeing Chunky Soup and Chili for Campbell Soup Co. "I think we're finding now that nothing is recession-proof." Consumers' tendency to do a mental calculation of value -- quality divided by price -- has trickled down from major purchases like cars and refrigerators to minor ones, like cans of soup. "It challenges us, as marketers, to be on the top of our game. There's no free lunch anymore. No pun intended."

High Anxiety

According to Lisa Gunther, global director for marketing and brand management at Newell Rubbermaid, one of her firm's success stories during this recession has been Calphalon. The cookware brand has thrived in part because of the trend of staying at home, but also because "Calphalon has capitalized [on that trend] by saying, 'Hey, you can really have a superior experience [cooking], and you can share this with your friends in a superior way,'" Gunther noted. On top of that, marketing for the product line has emphasized its technological leaps -- a degree of quality generic lines can't ensure. "Consumers are looking for reassurance [about their purchases] during uncertain times."

In fact, several panelists stressed that marketers should be aware of the anxieties buffeting potential customers. To Laura Beech, director of online acquisitions and partnerships for American Express, that means helping to simplify consumers' lives where possible. "It has obviously been a year of a lot of uncertainty," Beech said. "Am I going to have my job? Am I going to have my house? What's next? So what's important is staying authentic, staying consistent." One example is the firm's Blueprint set of tools to help people better manage money -- a way of emphasizing the brand's core identity while also appealing to consumers' desire to feel in control. "Showing [customers] that [during the recession] Amex will do what it always has done is important. It's security."

Brand agreed. "There are a lot of things in their lives that are out of control.... What we can do as brands is to try our best to make the consumer feel savvy." At Campbell's, that has meant emphasizing the venerable manufacturer's quality by highlighting nutritional information, moving it to the front of the packaging. "Every little decision does matter." The goal, he said, is to reassure customers that in buying a particular brand, "I made a good decision. Maybe there aren't good decisions being made around me. Banks are investing in bad mortgages. But with the money that I have, I'm doing the right thing and controlling my controllables."

Gunther said that Newell Rubbermaid had done a similar overhaul on the packaging for its Shurline brand of paint applicators. Though Shurline operates in a decidedly non-sexy category -- one where brand recognition is around 5% -- research has shown that customers' desire for more control included wanting to actually touch the paint applicators' bristles before buying them. With a packaging redesign that allowed consumers to interact with the product, Shurline's sales remained flat during the past year, even as the overall category fell by 30%, Gunther said.

Threat of Private Labels

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