Recession Proof Brands…

… when the going gets tough, the tough get going,… I recall my Dad using that line more than once.  It usually was associated with some weekly chore which I didn’t want to do, and thus complained that it was really, really hard.  In the end it was always a waste of time as my appeal for mercy never did work,… it merely caused a delay in completing the task.  No one can deny that we are in the midst of a ‘going gets tough’ period,… every day the news reminds us of just how bad it is.  People losing their jobs, with slim prospects of another,… banks going under,… foreclosures and bankruptcies,… tough, tough, tough.  As all this is happening, I’ve been watching closely how certain companies chose to respond.  Some get tough, and get going.  They focus on building talent, capabilities and hope for where they want to be ‘after’ the recession.  Others join the race to the bottom,… watching where others cut left and right, and try and exceed their cuts.  But it’s not just companies,… it’s happening to brands as well.

This past week I read that Starbucks, one of our premier brands, appears to have chosen to join the race to the bottom.  I can understand closing underperforming locations, and slowing their growth to a more reasonable rate.  But what I can’t understand is the news that they are considering coming out with ‘value-priced meals’ to compete with McDonalds…!  Talk about a blow to the brand,… this, for me at least, takes away a huge amount of the glow I’ve always imagined around this brand.  This is a move that screams ‘survive’, not ‘thrive’ or even ‘prosper’.  In Denise Lee Yohn’s piece on brandchannel.com, she defines a weak brand as one that “has little to draw from besides price reductions and desperate promotions to generate interest.”  Sounds like Starbucks.  Denise then goes on to point out what makes for a strong brand.  Two of her points in particular I believe are right on.  First, strong brands are meaningful,… they are “relevant and compelling to its target customer.”  And second, differentiating,… strong brands are ‘different/distinctive’, and different in ways that customers value.

So what does a recession proof brand do…?  They use times like this to focus with laser accuracy on those areas of their performance that fall short of their brand’s promise.  In so doing they create innovative ways to add value, refine service levels, and extend their brand.  It’s a time to become even more unique and in so doing, more desired.  Instead of dropping their price, they bolster their value, and build brand equity.  Another writer that speaks to this same subject is W. Chan Kim, author of Blue Ocean Strategy.  He states, “that tomorrow’s leading companies (brands) will succeed not by battling competitors (race to low cost), but by creating ‘blue oceans’ of uncontested market space ripe for growth.”  He appropriately labels such strategic moves as ‘value innovation’,… I like that. The key is to be recognizably different,… like Cirque du Soleil, Southwest Airlines, or Apple… like Starbucks used to be in its early days.  Don’t follow the others down that slippery slope of marginalized value,… build ladders, bridges and zip lines to new, higher levels of perceived value.  Another Happy Meal…?

Comments

[Duncan Macpherson]

In many ways, Steelcase faces similar challenges to Starbucks. It began with a high quality/high cost product and built a reputation based on that. Over the years, increased competition and offshore manufacturing have forced the evolution of the brand name into "Turnstone, Nurture, Coalesse". The Steelcase brand is still a powerful name in the industry and certainly carries a certain "stigma". That's why it's equally important to market our premium, low cost and healthcare products separately into their own "niche" markets. A return to our grass roots is more important now than ever before in our history. Someone else will always offer a lower price or "similar" product, but it's ultimately the experience that customers buy.

[Mark Greiner]

Two excellent comments,... it all comes down to what Pine & Gilmore call 'authenticity' or being true to one's brand promise. The value meal is true to what McDonald's claims to be (let's just hope they don't produce a music CD).

Thanks,
Mark

[adam hartung]

McDonald's is far from a "great company." But the company is positioned right for the biggest recession anyone alive can remember. It's taking advantage of that position - and in the process will likely crush Starbucks. When people are ready for a cozy chair and soft jazz with their coffee they won't want to stay with McDonald's. But very likely Starbucks will have killed itself by inviting head-on competition with "value meals" that allows McDonald's to crush them. Read more at http://www.ThePhoenixPrinciple.com

[Denise Lee Yohn]

thanks for the shout out, mark, and for the great post -- i completely agree that starbucks needs to reach up, not down -- that is, to build higher levels of perceived value they may well have to introduce "value" offerings but they should do it in a way that reinforces their differentiation.