Chief Client Solutions Officer LATAM
Mexico is in a time of economic uncertainty. There is no open talk of economic recession but GDP shows little growth and the dollar reached a historical high against the Mexican peso, whilst trust in government is at an all-time low.
At times like these, marketers tend to shift their focus from long-term strategy to short-term sales. Many will choose to meet revenue targets by lowering prices to maximize short-term sales while cutting investment in long-term brand-building activities.
However, lessons from recent recessions provide powerful arguments for maintaining a longer-term view, even in the face of pressure to cut advertising in favor of promotions. Marketers who resist this pressure and use their budgets effectively and creatively will find that their brands emerge from the tough times in good competitive shape. Players that go in the opposite direction and engage in price wars may seemingly solve the immediate challenges but are damaging the brands’ equity and, ultimately, their revenue and profit.
THE POWER OF ASSOCIATION
While economic conditions are continually changing, successful brands have learned that despite the particular challenges of any given moment, the need to keep building strong associations between a brand and the consumers is permanent. Furthermore, because the volume of communications that the market generates is low due to the crises, it is the perfect time to invest. This approach seems counterintuitive but has been proven across the most varied recession scenarios, benefiting those who have understood it.
Our analysis (see chart below) shows that the strongest brands – those in the BrandZ™ Global Top 100 – have outperformed both the S&P 500 and the MSCI World Index since recovery began in mid-2009. Clearly, brand strength needs to be nurtured and maintained through good times and bad. Doing so, the brand’s equity becomes both a shield when the crises arrive, minimizing the negative effects of the environment, and a boost to the market share of the brands once the crises has passed. Once the dust settles and the economy recovers its pace, the efforts made in the middle of the turmoil pay off.
To make things more complicated, the Mexican consumer has changed too and will continue to do so. Technology has transformed how we interact with one another and with brands, and of course, the way we buy.
The power of social media has been demonstrated in Mexico. With an estimated 50 million Facebook users (roughly 70% of internet users, 40% of population) and close to 10 million Twitter accounts, it is not surprising to see new independent digital media outlets with a reach to rival traditional mass-media. Think of werevertumorro with 15 million Facebook followers, 10.3 million YouTube subscribers and 6.6 million Twitter followers; or El Pulso de la República with 1.2 million YouTube subscribers. The influential power of Aristegui Noticias (5.2 million followers in Facebook, 4.6 million in Twitter) created an outcry over president Enrique Peña Nieto’s $7 mansion, the “White House scandal”. These factors both influence and help to explain the all-time low approval score for the President´s performance, at 2.8 out of 10 (Survey conducted by Millward Brown through Google Consumer Surveys).
Brands would do well to read the politicians’ current situation; people, either in their roles as citizens or consumers, now have a voice that is immediately heard. Traditionally, brands and politicians lived in a one-way communication cycle. Now, through social media, the everyman has the power to give instant feedback, which opens up new possibilities and brings new responsibilities for everyone.
MOVING WITH THE MARKET
Brand owners can no longer expect people to adapt to their business practices; marketers need to adapt to people’s new behavior and expectations, and even collaborate with their consumers or risk being swamped by new entrants and innovative business models.
Consider Uber and how it has disrupted the transport industry in Mexico City. Uber is one of those rare businesses that truly think outside the box. They constantly surprise users and prospects alike with creative value propositions. For example, in response to taxi drivers’ demonstration against Uber, they gave two free rides up to $150 Mexican pesos (around USD$10).
While Uber certainly sacrificed immediate profit with this initiative, through it they built strong associations with the brand, and even better, their app downloads soared, opening the door for a massive number of potential users. The whole event serves as a great example of both building long term equity for the brand, even at the cost of sacrificing short term sales, and of the creative use of social media, being available where it is most relevant for their target market. Uber doesn´t advertise in traditional media, but the free ride campaign resonated strongly without any media investment. The brand followed up this momentum with UberPet, UberCulinary and a joint promotion with Häagen-Dazs that surprised and delighted users, continuing to strengthen its equity.
AMAZON FLOWS INTO MEXICO
Surprisingly, only 20% of 51.2 million internet users make online purchases. This seems a huge opportunity for Amazon, which has just landed in Mexico in a formal way. It already enjoys a strong positioning and has a significant base of clients that mainly use the US store. It will challenge mainstream retail businesses to fully embrace e-commerce as a vital strategy for growth, with excellent consumer experience and logistics. It will also nudge every business to deliver products faster, at lower prices, with one-to-one marketing and a user-friendly platform.
We will see a shift from rigid structures of a product distributed in one channel by one company to an on-demand model where the consumer is in command, where the business no longer solely benefits itself but also benefits the consumer, evolving the relationship between brand and consumer from a merely transactional one to a partnership. The brand no longer wants just your money but genuinely wants to make your life easier. In this landscape, clever brands will no longer be company-centric, but client-centric, refocusing their essential views and acting accordingly. They will no longer limit themselves to sell features/ benefits but instead stand for something deeper that reflects the values of their consumers.
Strong brands generate superior shareholder returns
BrandZ™ Strong Brands Portfolio vs. S&P 500 vs. MSCI World Index. April 2006 - April 2015
So, what should brands in Mexico do in uncertain times like these?
- Think and act long-term, maintaining marketing investment to outperform competitors.
- Explore alternative channels of communication and of distribution, being mindful that they transmit both ways. Don’t ignore the feedback.
- Be truthful to your brand’s purpose and improve people’s life through your product or service.