Who takes care of the brands?

Forbes România
10 august 2009

Everyone is facing a crisis. The consumer makes savings, increases interest rates on loans, decreases sales, and the market is flooded with promotions, especially for consumer products. Visibly, marketing budgets and implicitly those for brands are decreasing. Incredible, but true! We have encountered cases of budget cuts of up to 90%. Let’s say that a brand decreases its marketing expenses by 50% compared to the previous period when sales were tight. Sales may drop as well. Of course, there is no absolute direct relationship between sales and marketing. However, what if in this strange market there were some ”smart guys” who said: ”The market has fallen, but we will continue to be close to the consumer – in his mind, soul and refrigerator, without launching deceptive messages, without tricking him regarding the quality or weight! We respect our consumer because he pays our bills! ”. The natural continuation of this logic is a solid management of costs, shelf price, sales channels and brand. Today, more than ever, consumers appreciate stability and honesty.

Given that the only tool for differentiation and sales is (guess who?) the brand, cutting marketing budgets seems like pure suicide. I doubt there are many managers who know the band ”Suicidal Tendencies”, but their behaviour shows that they are huge fans. Speaking of the dairy industry, it is worth examining the market a little bit and it will be noticed that solid brands, built on real strategies and not on ”flu-flu” are resisting even now. Explanation: some well-known dairy brands have adopted the strategies of impulse brands – totally unsuitable strategies for the category in which the consumer, in general, behaves differently, with the obvious aim of quickly increasing market share and stock market quotation for the benefit of investment funds that have bought significant parts of them. Because of this, we are already witnessing massive falls in inflated market shares, falling shelf prices and absolutely amazing and mathematically unprofitable promotions, thus trying to keep products on the shelf.

However, what do we do, as most of these product categories go down with sales? For example, beer or the meat and meat cuts industry. Nothing easier. The strategies applicable until last year are no longer working. Today, there are businesses and brands that know they are living ”bad times” and no longer think about double-digit growth and profits. There are those who think strategically for survival, those who realize that survival as a notion implicitly means overcoming obstacles for a better period and those who are prepared to endure and act in a market far from recovering. The most opportunistic brands and there are plenty of them, still have a chance if they start thinking long-term.

The human factor, involved in brand management, can lead the brand up or into bankruptcy. The shareholders are the ones who have to decide, even if they delegate the responsibility of the brand management to the directors from the specialized departments. Managers have limited terms, generally up to four years, so they tend to maximize results at any cost during the term. ”Maximizing” strategies usually have a negative downside, and the examples are obvious. This time, the shareholders are the ones who have to be vigilant with the brand, they are its ”custodians”, taking the responsibility of the strategic decision from the marketing department. I am convinced that I will be criticized for this opinion, but the explanation is simple: the shareholders stay, the managers come and go. At such times, the only real asset owned by shareholders is the brand that has to make money today, tomorrow and the day after tomorrow. For another period, the role of ”custodians” of the brand belongs to the shareholders, the marketing departments being the ones that propose and implement strategies.

We have already encountered examples of owners of large companies and major brands who have returned to the helm after several years of delegation to management teams. I can only welcome these changes because the owners are the only ones who can act entrepreneurially. Management teams perform in periods of growth or stability. In times of crisis or recession, they avoid radical or risky decisions. It is normal! It’s about their seat, performance, bonuses and career. Today we have to go back six to eight years ago, when business was building at a fast pace, in a difficult economic climate, based on quick and often risky decisions. The mental decoupling from ”as it was last year” is mandatory for those who want to win in this strange market.

So who loses and who wins in this strange market where commercial disputes multiply, products on the shelf become cheaper below the limit of profitability and gigantic promotions are made? It could be brands and companies that prove honesty, solidity and a little humour.