Brand value is a tension between short-term returns and long-term investment. Striking the right balance is the difference between building or eroding brands. Mortgaging the future for the present is a constant pressure, especially during downturns. But no matter what the economic situation, every innovation and investment in the future competes for present-day dollars.
Consumer decision-making is a tension between what to save on and what to spend on. As I joke, only Elon Musk has more money than God. All the rest of us live on a budget. Even in good times, consumers are deciding what to spend less on to spend more on something else. Tough times affect what’s prioritized, not prioritization itself.
That’s marketing in a nutshell—the tensions of brand value and consumer decision-making. They are intertwined. Which becomes obvious during downturns when the tug-of-war between the short-term and the long-term is harder to balance because the prioritizing practiced by consumers gets more severe.
The temptation during downturns is to sacrifice margins with discounts or shrinkage, or both, in order to keep shelf space and be more affordable. This helps in the short-term but such actions erode long-term value and equity.
The essence of brand equity is pricing power. Brands build reputation, quality, voice and image as part of an overall value proposition that commands a particular price. When a brand walks away from its pricing power for short-term gains, its value proposition changes for the worse. Recovering pricing power lost to discounting is often more costly than the gains realized by giving it up.
Not to mention that markets react unfavorably to brands that eat into future earnings through a loss of equity. True for consumers, too. Any squeeze on household budgets forces consumers to rethink the value of what they buy in order to take things out of the ‘priority bucket’ to toss into the ‘save money bucket.’ The only way to avoid de-prioritization is to keep building value. Which means that the answer marketers need for the short-term is the same as that for the long-term.
Brands should never take value out, especially not when value is being taken out of everything else. The imperative for brands is unchanging: Keep Adding Value. That’s the short-term way to remain a high priority with consumers while also building long-term value.
Contributed to Branding Strategy Insider By: Walker Smith, Chief Knowledge Officer, Brand & Marketing at Kantar
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