CRISIS 危 機 DANGER OPPORTUNITY

1. AGENCIES & THE RECESSION:HOW TO TURN CHAOS INTO OPPORTUNITY?MICHAEL KAPFER-GIULIANI,COO LOWE GGK VIENNA

2. CRISIS危機DANGER OPPORTUNITY

3. Crystal Ball Not Required 1 • There is now considerable evidence to confirm that spending through a recession is smart. • From Harvard Business Review to Millward Brown, a wealth of studies support the view that in an economic downturn, brands that play long not short prosper most when the recovery comes. • So the following observations are not a plea to continue brand marketing. We figure you know that. • Here we aim to explore some smart ways to think about marketing and communications during a recession. We’ve based this on both a study of recessions past as well as emerging themes in current crunch communications.

4. Stretch The Gap 2 • A recession can present as an excellent opportunity to build market share at • a better price. • Reducing spend certainly shores up the short term balance sheet, but there • is overwhelming evidence that it damages brands in the long term • It’s important to maintain at best or ideally increase share of voice during a • downturn. History suggests that long term profitability will balance out any • shorter term drop. • Own label and smaller brands tend to be less muscular, resorting to lowering • prices and cutting budgets. They will always find a consumer driven only by • price, but again, evidence from previous recessions suggests strong brands • who hold their position and communicate, win the longer game.

5. Stretch The Gap 3 • So maintaining marketing support and the introduction of new improved • products seems to make sense. • Recessions don’t change fundamental consumer behaviour much, at least • not for products and services that are ‘everyday’ items. • Recessions do however change competitive marketing activity. • Advertising spend tends to react dramatically to changes in • economic activity, contracting far too drastically during recessions and • expanding far too fast during booms. • There is an opportunity in going against this pattern, by in essence, • conducting ‘business as usual’

6. ‘When the going gets tough the tough innovate’ 4

7. Innovate 5 • Professor Andrew Razeghi from Kellogg School of Management, Northwestern University argues that the process of innovation is easier and more cost effective in turbulent times. The question should not be whether or not to innovate but how? • His study of recessions past concludes that difficult economic times expose unmet needs:In 1930 Henry Luce launched Fortune Magazine when everyone had lost theirs. It was a journal packed with human interest stories. It made a relevant contribution to consumers lives. The interest in business was high, Luce listened and responded to an unmet need. • In 2003 when the Dow was at an historical low, Apple continued to invest. Steve Jobs said ‘ our belief was that if we kept putting great products in front of customers they would continue to open their wallets’

8. Avoid The Dark 6 • Whilst many brands ‘go dark’ in a recession, others seize the moment. Maintaining marketing spend in communications and innovation in recessionary times has given birth to some famous and successful campaigns, repositionings and new brand ideas. • COMMUNICATE: KELLOGG’S • Their rival Post cereal cut back in the 20’s whilst Kellogg’s maintained spend. When the Depression ended, Kellogg’s had a clear lead and has dominated the cereal category ever since • REPOSITION: CREST • In the 50’s P&G shifted to a ‘fight’s tooth decay’ message (less money for the dentist) when the category was talking fresh breathe

9. Avoid The Dark 7 • INNOVATE: P&G • In the 1970’s they launched Pringles, expanded Bounce and introduced Era detergent. P&G has seen these periods as a prime opportunity to gain market share at the expense of (smaller) rivals who cut spend and R+D • REPOSITION: BMWThey chose a recession to shift from their sports sedan image, when there was less competitive noise in the market. In 1974 BMW rebranded itself as a maker of luxury cars. It reintroduced itself as the Ultimate Driving Machine • COMMUNICATE: AMERICAN EXPRESS • In the same recession Amex broke the ‘Don’t Leave Home Without It’ campaign. Brand awareness was raised and both the card and traveller’s cheque soared in the upturn

10. Innovate 8 • ‘I think it’s more essential to innovate through a recession and certainly what we’re trying to do at P&G is to continue to bring sustaining and even disruptive new brands and products for our consumers, to make their lives better, to offer them a little more value’ • A.G. Lafley, Chairman and CEO Procter & Gamble • Transcript from PBS Nightly Business Report • http://www.pbs.org/nbr/site/onair/trasncripts/080415d/.

11. Recession Strategies 9 • A year ago Counsel, our trend agency at Lowe, was already talking about two emerging trends: • Less is More: An antidote to Consumer Overload • Gentle Revolution: A Search for a Softer World • Whilst we can’t be sure of how consumer attitudes and consumption behaviour may change, there is a view that for many in developed markets, this recession will act as a necessary correction from over consumption to a life with less stuff but more meaning. • So whilst we were talking these trends in 2007, the recession has every chance of accelerating them.

12. Leading Edge Consumer Intelligence

13. Challenging a Global Culture of Excess In a world of limitless choice ‘less is more’ has emerged as the new mantra of leading edge consumers. Now that the mainstream has finally woken up to the environmental impact of excessive consumerism there is a new spirit emerging which calls for greater restraint and reevaluation of what we actually need, value, own and consume. “I think consumer habits are changing all around. I can imagine that excess will soon be totally politically incorrect - embarrassing, not glamorous.”Writer, New York, May 2008.

14. Consumer Overload The existence of so many unnecessary consumer goods trigger questions about what we actually need and want.

15. Lifestyle Downsizing The term traditionally used to describe negative corporate growth, has been re-appropriated to express a positive lifestyle choice centered around the desire to simplify and reprioritise. From the rise of work/life balance and ‘quality of life’ To the rise of the ‘downwardly mobile’ generation “After being disheartened by the lack of morals held by corporations, and the tedious hours our parents have worked with no time for themselves, more people in their 20s and 30s are deciding that working more than 40 hours a week is not what they want.” Life Coach, Sydney 2008 “The rise of the downwardly mobile generation is something happening in Japan, whereby young people are less obsessed with the ‘hot job’ preferring to live a happier, more fulfilling life on less money.” Contemporary writer, Tokyo 2007

16. Simple is Good - Why Pay More? No longer seen as ‘down-market’ or associated with being poor, simple, good quality, no frills products and services are emerging as the badge brands of the ‘savvy’ consumer. Now that the concept of ‘trading down’ has been embraced by the mainstream, consumers are learning to be even more canny with their purchases. Avoiding the ‘rip-off’. It’s all about getting quality at the best price, not quantity for next to nothing.

17. Implications for Brands - No More Bullshit The modern, intelligent consumer is increasingly aware of the brand marketing process - and beginning to question its value and motives. In an era where basic products are transformed into experiences or emotions, there are opportunities for those who have the courage to provide simple, good quality and efficient products that people want.

18. Gentle Revolution: The Search for a SofterWorld

19. Seeds of a Cultural Shift - A Softer World In an increasingly hard edged, superficial and individually focused world consumers are seeking a deeper, softer, more meaningful attitude and approach to life. Analysis of global leading edge culture over the last year has identified a number of separate trends. Together they reveal a significant cultural shift, with implications for how consumers behave and what they want in the future. This trend is further accelerated by the economic crisis.

20. Antidote to a Selfish and Superficial World Greed is Not Good - At a time when statistics indicate that the mainstream now has a greater reliance on the individual vs. the group, leading edge consumers (particularly in the West) are challenging the impact of individually focused culture. “Money Can’t Buy You Love is an old song, but it is a new tune for consumer society, ‘retail therapy’ offers only a brief if addictive high.” http://www.henleycentre.com Even the neo-conservatism movement is declining: “Neo-conservatism ‘is now in a shambles’ and its failure has demonstrated ‘the danger of good intentions carried to extremes’.” Francis Fukuyama, quoted in The Scotsman, February 2006

21. Alternatives to Traditional Capitalism What is emerging globally can be seen as a new form of ‘empowered consumerism’. One that offers alternatives to the mainstream capitalist economies and appeasing ethical concerns. The 00’s have become more about what we do than what we own. No more ‘profit at any cost’ Rise of brand philanthropy Bartering and swapping “Zopa was borne out of the feeling that society was changing, craving independence from corporations and rejecting the "me me me" ethos spawned in the Eighties.” Vogue, July 2007

22. Re-connecting with Nature After ‘urban’ living dominating mainstream aspirations, recent evidence indicates that reconnecting with nature and the countryside is emerging as the choice for today’s leading edge consumers. Rural retreats Hobby farms Festivals Summerhouses Wild food “I recently bought a piece of land which I share with a couple of friends. It is my little getaway, when life in the city becomes too busy. It is the place where we chill out, where I get new strength.” Writer Hamburg, June 2008 Summerhouses - Copenhagen

23. Be RELEVANT 21 • Consumers are increasingly demanding relevancy as an antidote to excess and blind consumerism. • Why do I need this? What do is do for me and my family? Why does this matter in our lives? Is it worth it? Is it value for money? • Brands are working harder to explain specifically, the role they play in consumers lives. We may witness an increased emphasis on solid supporting evidence, rationales and convincing functional messages to overcome consumer reluctance or cynicism.

24. Be A SOLUTION 22 • If your consumers are facing new problems, give them new solutions. • Is there less income to the household? • Is it their first recession? • Do they need to understand new ways to do old things? • Can your brand reframe itself as a solution? • Do you want them to look at what you make in a new way? • Do you have a product that can make a meal go further? • Can you reinforce your ‘great meaty flavour’ without the price of the meat?

25. Be PRICE AWARE 23 • ‘In a typical consumer goods company (USA) a price cut of 5% has to generate increased sales volume of 19% in order to pay for itself.’ • McKinsey • That almost never happens • Now is the time to study price sensitivity in your market • BUT remember what you had to do to get to your price

26. Be MORE 24 • Value for Money is a long debated and much bandied phrase. It does not mean cheap. • In the transaction between consumer and brand, does the consumer feel the deal is good, that for what they paid, they got something worth having? • Value Plus • Consider what else you can add to the deal. • ‘no matter what business you’re in you can redefine value for the customer’Fortune Magazine January 2009

27. Be CARING 25 • A recent survey from Edelman amongst 6000 global consumers, concluded that a changed, more caring consumer has emerged who now considers brands who care and do more beyond their product are worthier of their consideration and loyalty • Added Value now includes a brand who does more. Unfortunately, naming and knowing who those brands are is more difficult. • There is always someone more unfortunate than us. Increasingly consumers want to do good through their brand choices, but they need to know who the do good brands are. • (Edelman Good Purpose Survey 2008)

28. Be ACCESSIBLE 26 • Acknowledge that in difficult times, some consumers will seek affordable ways to access brands. • Consider strategies that give them an entry point to your brand idea, your reason for being • Tier strategies work for luxury, for fashion and for automotive. A BMW 3 series is different from the 7 series, but they are both a BMW experience • Giorgio Armani Luxe is private invitation couture • Armani Exchange AX sells $50 jeans

29. Be LOVING to LOYALISTS 27 • Know the 20% who make the real difference to your brand • Find them, romance them, reward them • Through tough times, if they’re already in love with you they’ll be • least likely to stray • Keep the conversation going • Reward their loyalty

30. Communication Trends 28 • Building on Counsel’s analysis, and with a new ‘crunch lens’, communications are already emerging that respond to these trends:HOME + HEARTH • Consumers are less driven by dreamy indulgence or thrills and spills escapism. Campaigns are starting to feed the need to settle in, find comfort in the familiar, the reassurance of family, friends and home. • NOSTALGIAMore brands are starting to reinforce their heritage as a reminder of the pleasure they’ve brought in times past as well as their enduring quality. What Why When Prep Application Links

31. Communication Trends 29 • COMMUNITY • A strong trend when we discussed it a year ago. Now even more relevant • As consumers start to think ‘us’ not ‘me’. Hard times are better together. • Orange isn’t talking about the future anymore but ‘Together we can do More’

32. Reframe Me 30 • Talking about what you offer in a fresh way, through a ‘recession lens’. • Actively providing a solution to a problem the consumer is feeling. • Target (USA) has redefined many of its products in the context of alternatives to a previous (more expensive) lifestyle

33. Cut It Out 31 • Recognise the growing appeal of the discount coupon. Already a familiar part of the US consumer culture, European and UK consumers are now not viewing these types of promotions as downmarket. • In December, Conran, Selfridges + Harvey Nichols, all premium London stores, circulated 20% discount coupons. These brands and their consumers would have previously thought they were beyond such marketing. Now its viewed as something supportive and useful. • In recession it’s the brands that DO not SAY that form closer bonds with their consumers.

34. Summary 32 • Find your core, your relevance and communicate it • Be Simple • Be More • Be Caring • Be Accessible • Love your Loyalists • Add value don’t cut price • Maintain your share of voice or increase it if you can • Deal time with Media

35. No Gain without Pain 33 • ‘Marathon runners and Tour de France racers will tell you that the hardest parts, the uphill stages, are where the lead changes hands. • That’s where we are. • When this recession ends, when the road levels off and the world seems full of promise once more, your position in the competitive pack will depend on how skillfully you manage right now’ • Geoff Colvin • Editor • Fortune Europe