We know that good marketing practice means knowing: (1) who your
target market is; (2) what problem(s) your target market is trying to solve; (3) what your brand’s value proposition
is; and, therefore, (4) whether your brand will solve your target market’s problem.
But recessions can be tough on brands because the relationship between consumer problems
and brand solutions often becomes decoupled and preconceived mental models we hold of our markets are called into question.
That’s why we see brands trying to reposition in an effort to remain relevant (think: Starbucks) or hold onto their
original position in the hope that the brand will survive the recession (think: Singapore Airlines or Abercrombie & Fitch).
At the start of the recession, Abercrombie &
Fitch declared that it would not lower its prices even though sales were down 34% year on year and David Cupps, the General
Counsel and Secretary at Abercrombie & Fitch, was quoted as saying the brand would not offer hefty discounts because
such “discounts could hurt the brand’s integrity and appeal in the long run” (Los Angeles Times, December
13, 2008). In May 2010, same store sales at Abercrombie & Fitch were down 3% year on year at a time when rival stores
were starting to show small gains. One commentator suggested that Abercrombie & Fitch might have lost its appeal and
is no longer seen as cool by its target market (www.MarketWatch.com, June 3, 2010). By staying true to its brand position, did Abercrombie & Fitch fail to stay relevant in a changing market?
Singapore Airlines is another example of a brand that stayed
committed to its market position during the recession. Just before the financial markets collapsed in 2008, Singapore Airlines
converted two of its US-Singapore routes to business class only. The cost to travel on this route was $8,000. Rather than
reposition the brand, Singapore Airlines instead choose to park planes and cut costs in an effort to ride out the recession
(Fortune, June 24, 2010). A clever move from a marketing point of view and hopefully one that will pay
off for Singapore Airlines.
Not only does the
relationship between consumer problems and brand solutions become fragile during such turbulent times but the recession has
also exacerbated a general mistrust consumers already had toward brands. This is why some brands have no choice but to reposition
or, in the case of AIG, rename. Bloomberg BusinessWeek (June 7, 2010) reported that AIG has sold and its
fund management division, which is now called PineBridge Investments, sold its auto insurance division, which is now called
21st Century Insurance, renamed it core property casualty company Chartis and renamed its annuities business
National Western Life.
Singapore Airlines decided
to remain focused on its brand position on the basis that the recession, and its effects on corporate travel, was cyclical.
Indeed, recessions are cyclical but in the case of the Great Recession, the recession has been longer
and deeper than any we have experienced in our life times. It takes a bold company to do what Singapore Airlines did.
Jenny Darroch is on the faculty at the Drucker School at Claremont Graduate University.
She is an expert on marketing strategies that generate growth. See www.MarketingThroughTurbulentTimes.com
brand management, marketing strategies, marketing in a recession, target markets, value proposition, consumer trust,
Abercrombie & Fitch, Singapore Airlines, Starbucks, AIG.