The concept of “belt tightening” is integral to the vocabulary of economic bad times. Whether we call it a recession, a slow down or simply a hic cup, the press is rife with examples of belt tightening: consumers are tightening their belts and spending less, business are tightening their belts and reducing capital expenditures, cutting back on expansion plans or laying off employees. On the surface, it makes good sense. If you have less, spend less.
But for a brand driven business the impulse to tighten its belt to protect against economic adversity may be bad medicine. It very well might make the business more susceptible to the anticipated reduced economic activity; it might even cause the business to decline more precipitously than had it spent some money intelligently.
Roaring economic times disguise many strategic mistakes. We get sloppy when sales grow quarter after quarter, and we get cocky when virtually everything we do seems to result in increased sales. Frequently, we lose sight of the market that we originally targeted and inadvertently venture into new, less profitable, and more competitive markets. It’s a no brainer. Everything we do bears successful results.
But in less frothy times, consumers become more discerning. As less cash is available, consumers must make choices and whether they choose your brand depends on what they think of it.
It is precisely when these symptoms begin to surface that a brand driven business would do well to audit its brand strategy: to conduct market research to confirm its understanding of what associations its consumers make with the brand. What values do consumers associate with the brand: luxury, value, reliability, performance, comfort, rarity, exclusivity, and creativity? And how successful is the business in delivering on its promise to its consumers? Has the brand earned the consumer’s trust?
While these kinds of studies cost money, the information they provide is invaluable. It is critical to a brand-driven business’ ability to successfully navigate a difficult economic environment. While the competition’s knee jerk reaction to slash costs might appear to reduce the business’ vulnerability to reduced business activity, this strategy has the perverse effect of locking the business’ into what might be a failed strategy, a strategy conceived in flush times with little or no attention to detail. Drastic cost reductions reduce flexibility. When coupled with a lack of information about the brand’s current relationship with its consumers, these reductions raise the ante, and in effect commit the business to an all or nothing bet that its failed strategy will help it succeed in tough times.
I’m not recommending overspending or spending indiscriminately as bad times approach. Nero fiddling as Rome burned is a strong enough image to indicate the foolishness of this approach. But, I do advocate adapting to changing economic facts on the basis of current market data and re-examining where the business actually stands in relation to its brand equities. In weakened economic times, spending a little money can save a lot more
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