The future is digital
It’s no surprise to me - or to anyone else who’s ordered online over the past few months - that Amazon would have done well out of lockdown. The Amazon Prime service is pretty amazing and so easy to use (even though the user aesthetics feel a bit 2005). More of a surprise was that Apple also excelled and that Google and Facebook did so well in a quarter when advertising budgets were slashed hard.
Given it was only yesterday that all four were in Washington to explain their dominance to Congress, the regulators now have even more to digest. The Big Four’s combined value, today, stands at over $5tn, at a time when the rest of the US economy shrunk 9.5% over the previous 3 months.
Expect other digital brands to report earnings growth, and watch analogue brands shrink or evaporate.
In my last blog I mentioned BooHoo had done much better during lockdown than other fashion retailers, because its digital business model allows its various brands to test short-run fashion on social media before ordering larger runs, once customer demand for particular products is proven. While BooHoo’s supply chain practices have – not-before-time – been put under proper scrutiny, their agile business model shows how even fashion brands can become end-to-end digital businesses. And this can apply as much to high-end fashion as to mainstream fast fashion. There’s no reason why AI and augmented reality couldn’t enable one-off customisation to create uniquely personalised collections for haute couture brands; purchased online, cut and made to order and despatched from Bangladesh, Vietnam, or Leicester, the very same day.
Wherever you look, digital brands are growing value faster than analogue brands, except in travel, where it’s really hard to think how you could replace the business model of ‘being there’. It’s sobering to note that at the same time Big Tech was reporting blockbuster earnings, BA said its passenger traffic fell 98% in the quarter. IAG’s share price has lost 60% of its value compared to this time last year…
Strong brands stand out in difficult times
Despite digital transformation, marketing basics still apply because human instincts and the way we think (human nature) hasn’t much changed for thousands of years. While some habits might have beenn broken by lockdown, like needing to go to the office, or wearing a suit, our instincts will usually want things to go back to being as they were before.
This is why the ‘4Ps’ rule of marketing remains relevant and is yet to be bettered. Product, Price, Place and Promotion still apply, even though the ‘Place’ is increasingly online.
There is plenty of data to support the rationale that those boards of directors that approve advertising spend, invest in their brands and maintainn good reputations during recessions (‘Promotion’) grow awareness and build Excess Share of Voice (ESOV) during recovery, resulting in market share gains over those that cut marketing spend during hard times.
Pretty much all brands – except, apparently, Big Tech – lose value in recessions, but it’s the strong ones with clear and meaningful propositions (‘Product’) and high awareness ('Promotion') that bounce back quickly. Weaker brands always suffer and many get culled a few years post-recession, after cutting ‘Price’ in a vain attempt to maintain their customer franchise.
So, if brands with strong equity and good bbrannd reputations are almost certain to emerge stronger from this recession, what can be done now to ensure a successful recovery?
Here are five things I can think of:
Review your brand purpose – What business are you really in? Why does your business deserve to exist? If you can’t answer these. two simple questions, you need to revisit your brand purpose.
Look again at how your brand and business model can be digitally transformed – has your business really considered transformation, or has it just built a thin digital wrapper around an analogue business model?
Simplify and refresh your brand experience – brands get stale and fall out of touch with their customers. It’s no coincidence that some of the longest-lived power brands tweak their visual identities regularly to keep them fresh. A tired brand - or a tired or complex online user experience - is rarely appealing.
Invest in brand awareness – those brands that stay front of mind during recessions do better post-recession. Today, this doesn’t have to be conventional ‘above the line’ spend, it can be cleverer and more nuanced using digital channels, but awareness building always requires investment.
If your brand is no longer relevant, invent a new one that is – it’s not just start-ups that can disrupt, re-start-ups can, too, but this requires brave boards and new brand names you can protect across all your increasingly global markets.
Of course, if you are thinking about any of these issues, we’d be interested to talk to you, but even if you aren't, I hope you found this interesting. If you are a brand owner, we think this is a time for bold thinking.
Peter Matthews
Nucleus Founder & CEO
July 2020
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