Protecting Your Brand
through a Slowdown
By Vistage member
and speaker Ron Strauss
The sub-prime
mortgage mess, the collapse of several hedge funds, the “fire sale” of
Bear Stearns to JP Morgan Chase, the weakened condition of bond
insurance firms--these all have implications for Vistage members.
Fundamentally, the mood on Wall Street has shifted. Greed has given way
to fear.
When this
happens, as it always does when a debt and leverage fueled expansion
invariably comes to a grinding end, the results are predictable. Due to
heightened perceptions of risk, lenders want to charge more for their
money, and for their lines of credit. The more you need to use borrowed
money, the more expensive it becomes. Cash, once again, is king.
For most Vistage
members this most likely means a slowdown in revenues due to the reduced
ability of their customers to finance their purchases, as well as an
increase in costs as vendors seek to recoup higher costs. Prudent
Vistage members should contingency plan for a slowdown by re-thinking
their budget projections and planning for a 10-15% drop in revenues and
a 5-10% increase in costs.
There are other,
non-financial, long-term implications to consider. For example, how will
a slowdown affect your brand reputation?
Your brand is a
defensible long-term asset. Competitors can quickly replicate product or
service performance; they can meet or beat prices; they can enter
channels and markets freely. But competitors cannot quickly build the
confidence of consumers and clients. If you are forced to make changes
because of a slowdown, here’s how to protect the integrity of your brand
as it relates to your stakeholders.
Employees
To cut costs you may have to freeze salaries, stop hiring, defer pay
increases, cut back on travel, training, etc. You can minimize the
impact of these actions if you act as soon as possible to share with
your employees the emerging situation, and the possible actions everyone
will have to take. By communicating early and often, employees will have
time to absorb the news, and factor it into their personal development
plans and family finances. Act early and engage employees throughout the
organization. Challenge them to come up with alternative action plans
that will enable the company to not only survive, but to come out of any
slowdown stronger than ever.
Vendors
Your vendors will experience the same pressures as you. One way to
create a “win-win” situation is to proactively find ways to get costs
out of your mutual business relationship and put greater value in. Look
at the activities and steps that both organizations engage in for each
piece of business, and ask “What value does this add?”
If there is no
clear-cut answer, you should see if some activities can be avoided or
modified, and resources shifted to higher “value-add” activities. The
threat of a looming slowdown adds a sense of urgency to this process.
When the climate improves, your vendors will remember how you worked
with them to get through tough times, and your brand and reputation will
be burnished as a result.
Customers
Be proactive in looking for win-win solutions for your customers. Tell
them what you’re doing to maintain service and quality levels, and what
you’d like to do to control or reduce costs while creating more value.
This is where your sales force needs to “carry the mail” by delivering
this message to your key accounts, and actively work to set up teams to
diagnose each situation, develop proposals and execute as agreed to.
Measure the results and share with all participants.
Also, step up
your marketing activities to add selected high-margin new customers
while your competitors are relatively less active. Keep in mind that
most customers leave their current suppliers due to perceived
indifference.
Investors
Keep the people who have an equity stake in your business fully
informed. Many of your equity investors may also be your employees,
vendors, and members of the community. Communicate early and often. By
sharing what the organization is doing to proactively meet the
challenges of a slowdown, you can manage expectations and protect the
company’s integrity.
Community
Community activities and contributions are often among the first victims
of budget cuts when times turn tough. This is where you have an
opportunity to shine. During a downturn, the media often looks for good
news, and by keeping programs in place (albeit at a reduced level) you
may to get some positive coverage, and have members of the community
think well of your brand long after any slowdown has run its course.
Again, the key here is to proactively communicate with your community
partners.
By now you’ve
noticed that a pattern has developed. The golden rule of any branding
program is to treat each stakeholder in your company as
you would want to be
treated. By communicating with each stakeholder group early, you shape
their expectations so that their experience with the brand more closely
matches the brand’s promise. This is the essence of brand integrity.
It turns out
that in a slowdown, financial implications and brand implications are
joined at the hip. Do what’s needed to protect your brand’s reputation,
and you’ll have done what’s necessary to get the best long-term
financial outcome.
Vistage
speaker Ron Strauss is a brand expert and co-author with Bill Neal of
the book
Value Creation: The
Power of Brand Equity, which
gives insight into how brand can be used as an organizing principle to
accelerate value creation.
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