How should brands behave post recession?

In Silicon Valley the recession is over.  Houses are selling, people are being hired and consumer spending is up.  While the same may not be true of the rest of America, or of many countries in Europe, it’s clear that most of the major economies are clawing their way out of recession.  This creates an interesting challenge and opportunity for brands, not just in terms of financial gain, but also in terms of how they are positioned.  During recessions consumers behave differently, they measure brands differently.  In recessions price, for example, is king.  Other factors such as what the brand says about our status, matter a lot less.  In other words consumers are wired differently in recessions and will listen to different messages and join in different conversations about brands.

So what should brands do when the good times return?  First, they shouldn’t wait.  Any brand that hasn’t already defined how it will adapt as the economy improves will get left behind.  But to do that brands need to understand the exactly what their customers are talking about now that they weren’t talking about six months ago.  This kind of research can be done by analyzing social networks and other online communities but it has to be done properly and taken seriously.  Indeed I’d argue it that this research in to the attitudes and opinions of the post recession customer is the most important act a marketer can undertake right now.  Good research will provide the platform for the brand for the coming years.  And let’s face it the next few years are crucial in the brand wars.  To make the point, I worked with brands that studied how customers attitudes had changed going in to the recession.  This research changed their messaging and their behavior at a crucial time.  One of these brands has since been widely recognized as a poster child for dealing with a recession.

Of course the research is only the first step.  Brands need to figure out how how to act on that research.  They need to decide what conversations they can now leave and which they can now join, how to behave in those conversations compared to the past.  In short it’s a whole new playbook.  For brand heads sitting there without a post recession playbook, this ought to be a worrying time.  For those with one in hand, these are the good times.  Enjoy!


Is the PR industry still in recession?

PR people tend to be glass is half full people.  This means that when the recession started they tended to put a very brave face on it and were almost in a north African river (denial).  Indeed it was only when things had hit the bottom that many PR heads would really talk about how bad it had been.  But has the industry really started a recovery?  Here are some arguments for and against:

FOR:

1.  Clients have released project dollars that had otherwise been held on to

2.  Budgets cuts are no longer taking place and in some cases clients are modestly increasing their spend

3.  Staff are starting to get recruited as agencies feel more confident of their revenue streams

4.  Staff who are moving are starting to look at agency work rather than in-house.  In-house is often considered the safe place to be in a recession (relatively)

5.  New business opportunities have improved for agencies and the process has become more normal (number of agencies involved and budgets are back to normal)

AGAINST

1.  The release of project dollars is potentially just a year end phenomena.  Many clients have calendar fiscal years and so they are now starting to think about their budgets for 2010.  If they don’t spend their ’09 budgets they will have a challenge getting $$ in 2010.

2.  PR budgets are generally linked to the sales of companies.  Given sales are still sluggish, across the board rises in PR spend are unlikely for quite some time.

3.  While the new business environment is much improved it is still very tough relative to a non-recessionary environment.  Procurement departments have used the recession to sharpen their teeth and get better deals.  It will be some time before agencies can get back the concessions made during the recession – if ever

The above would suggest that as an industry we are still in the early stages of the recovery (assuming you are still a glass is half full person).  But what it really says to me is that we should not be looking at the recovery as a chance to get back to where we were but rather as a reminder that we need to innovate and come out of the recession offering a better solution to the one we did going in.  This is easier said than done and I suspect that many agencies will look at progress in social media and feel that they can tick the box called innovation.  I’d urge them to think again.  The shift towards digital is important but every part of the industry has embarked on that mission.  Real innovation is spotting the less obvious challenges and embracing them along with the obvious.  Good luck in that challenge.  Oh, and if you figure it out, do let me know!


The end is nigh… so what s next?

So, economists seem to believe the worst of the recession is now oer in the US and that we may even see some economic growth in Q4. As we pull out of this I started to wonder what scars this recession would leave and whether it has really changed the way we do business. My observations:

1. Businesses have all learned how to cut costs. Some of have done so intelligently, others… not so much. I believe there will be a generation of businesses, post recession that struggle because they made the wrong cuts. There will be others that now realize they were wasting a fortune before the recession and will forever be leaner businesses.

2. Businesses have learned new ways of generating income. While my study is hardly scientific I believe hotels, like airlines, have started charging for more and more things AND they have raised the prices on things that were already extras. I just stayed at a hotel that wanted to charge $5 for the Snickers bar in the minibar. I suspect that price will remain long after the recession has ended.

3. Businesses have learned about the power of customer service. Actually I should say SOME businesses have leaned about the power of customer service. The ones that have will at worst survive this recession and the ones that haven’t are dying right now. Customer service is better than any new product or service. It is loyalty, feedback and free marketing. Why some businesses fear it is a mystery to me.

4. Businesses have learned who their best people are. Hiring people is relatively easy compared to letting people go. Letting good people go is especially hard. Strangely though, I’ve heard so many business leaders talk about how their business is better now that they are smaller. Hopefully, what we all learn from this is that at the heart of our businesses are some great people whose views, opinions and ambitions we need to listen to. But we mustn’t stop doing that when the recession ends.

These four lessons are the ones I’ve taken away from this recession. I’m sure other businesses will learn different ones. I’m also sure there were several lessons I missed. If you think I did miss one, please let me know. Right now is the best time to learn!


The uneven nature of a downturn

All recessions are not created equal that’s for sure. While it is pretty clear that many businesses are feeling the effects of the global recession that is upon us, some are feeling it more than others. Sector to sector comparisons are obvious. I’d rather be in the technology business than the car business for example. However, even within sectors there are businesses that seem to be doing relatively well, while others in the same sector are crashing and burning. Some are losing because they are selling the wrong product and some are losing because they have the wrong customer base. Some are losing because they do all their business in one country, while others are winning for the same reason, they simply operate in a different country. The reasons why people are winning and losing can be due to good or bad management, or down to history. The physical markets people are in were decided a long time ago in many cases – long before the financial markets crashed and took the economy with them.

All of this unevenness (is there really such a word?) makes for some interesting management challenges. For example the cost of leaving a market can be higher than the short term savings achieved by getting out. Equally, changing your customer base isn’t easy when markets are like they are right now. Put another way it is hard for executives to marry the short term financial goals of a business, with the right long term business goals. As a result, I would expect some pretty lumpy performance from companies in the next year or two. This isn’t what financial markets like but for many companies it will be unavoidable. The most important thing is that businesses run their businesses profitably and conserve their cash during a period like this. It is then also important that they learn from this recession. Recessions expose the weaknesses of a business. Ignoring those weaknesses is perhaps the worst mistake a management team can make. All business leaders hate recessions but they are a great test of you and your team and of the business you are running. How well you do is interesting. How much you learn from the test and apply to your business is really important.


Recession or Growth Market?

Mixed results from technology companies in recent weeks have people speculating that the tech market is still in or perhaps heading for another recession. A closer examination of the data does of course tell a different story. Indeed close examination can tell you almost any story you want it to. In recent weeks we saw Intel raise guidance on profits and Apple again exceed expectations. We then saw IBM miss its numbers due to weakness in some of its markets in Europe followed by Lexmark that missing its profit forecasts. These contradictory results have been attributed to economic cycles, business management and simple poor forecasting. What’s clear however, in almost all cases is that sales have actually been rising. Even IBM, which has sales that rival the GDP of some countries, saw an increase that would satisfy Alan Greenspan. Wall Street, however, doesn’t care about sales that much. Wall Street cares about margins and of course earnings – and most importantly future earnings. It’s this last point that still seems to be where the tech industry is struggling. The bumpy state of world markets is making it hard for most businesses to project with certainty. The good news is that almost all the trends in tech sales are up. Of course there are sectors that are struggling but the encouraging news is that in general sales are trending in the right direction. The real challenge for the tech industry would however appear to be how to break out of low GDP-like growth and get back to the high growth rates achieved in the late 90s. Companies like Oracle are saying that growth will only come by acquiring market share. That seems rather a defeatist approach but who am I to argue with Larry Ellison. Actually I will argue with him on this point. The tech industry has a great chance to break out of GDP level growth but only if it wants to. I think the drivers of potential change exist. For example the growth in wireless technologies that make infrastructure way simpler for businesses and individuals to deal with. This growth is fuelling the opportunity for millions of people to access technology and technologies previously available only to the likes of the Fortune 500. At the same time the success of On Demand software such as Salesforce.com is showing that if you make it easier for people to access the technology they’ll buy it. At this point both of these areas of technology are relatively small when compared to the large traditional enterprise software and hardware markets. But I’d argue that if the industry really does focus on reducing barriers to technology in the same ways these markets have then growth could once again be quite explosive. Look hard at all the small businesses you know and ask if they use all the technology they could. The answer is no in almost all cases. Of course most businesses now own a computer but an alarming percentage of companies still don’t have a meaningful online presence. Add to that the unsophisticated approaches to distribution and purchasing that most small companies use and you see how big the potential opportunity is for just a few areas of the small business market. Getting to this market is of course easier said than done. Barriers such as affordability, accessibility and reliability still need to be adequately addressed but again examples such as the OnDemand software solutions from Siebel and Salesforce show that when you tackle these issues markets open up. So in closing I guess the message I want to leave is one of optimism about the long term opportunities facing the tech industry. This optimism, however, rests on the tech industry’s ability to create new markets by tackling the barriers that exist rather than simply fighting over existing market share.