Once again, the branding ‘prophecy’ has been confirmed. Brands lost on average 30% of their value in the last year. Much of this drastic reduction can be attributed to the economic crisis and the local currency devaluation.
We say that the branding ‘prophecy’ has been confirmed because brand behavior is not uniformly reflecting currency devaluation only. There is a more important component in brand value, which is able to ensure value even in periods of crisis. A more detailed analysis of the 50 most valuable brands in Brazil shows that a group of them have lost more value than the currency devaluation, others somehow have withstood the process of decline and others - around 10% - have had an increment in value.
BRANDS IN TIMES OF CRISIS
The major challenge for brands in times of crisis is to balance their long-term brand building strategies with the immediate needs of volume generation, especially promotion-led. The temptation is to dive into price promotions to meet immediate needs, but in the long run it can damage brand equity.
Brand performance analysis clearly shows this phenomenon. Big brands that are too focused on volume have suffered more in the downturn than brands with high added value that justify the premium. One good example is Bohemia, which has presented a value growth trajectory every year, even in the current period of crisis.
Innovation is another aspect that ensures brand value. An example is the pharmaceutical retail brands Raia and Drogasil, which merged and went public, bringing a new dynamic to the category.
The base of this valuation is the innovation that was introduced within the business model. As evidence, we can quote state-of-the-art logistics for stock control and product offers suiting seasonal needs, as well as the introduction of a service offer positioning that goes beyond medicine sales. Following the examples seen in the United States, brands have been offering consulting services to consumers, involving recommendations on skin care, hair care, make-up, as well as more specific care for infants and the elderly. (The latter is a segment that deserves higher emphasis due to the volume that it represents now, and their more specific needs).
THE POWER OF CONNECTION
Brands that make a higher connection with consumers, involving both functional and emotional aspects - even those that are vulnerable in times of crisis - can return to prosperity when consumers regain their consumption power.
Something that should not be overlooked in times of crisis is the real pressure that consumers face to balance their family budgets. Brazilians come from the golden age of consumption euphoria, with a scenario of economic stability and credit availability. The need for rational consumption is a game-changer that is establishing new patterns.
In this trajectory, benefits attributed to brands have to be much more robust to justify consumption, making it even harder for the brands. Some consumer segments are looking for brands that promote philosophical and existential propositions. Following these paths fulfills consumers’ needs for some social and political activism, pushed by the economic pressure, and it could yet prove to be a significant challenge for brands.