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March 26, 2009

Morning Keynote: The Brand Bubble by John Gerzema

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Good morning and welcome to day three of SES New York. To launch this final day of a whirlwind conference, we’ll be hearing from John Gerzema, our keynote speaker, Chief Insights Officer of Young & Rubicam Group and author of The Brand Bubble: The Looming Crisis in Brand Value and How to Avoid It.

SES NY Keynote with John Gerzema

There’s a slide on the screen that says you can download the presentation by visiting thebrandbubble.com/blog. You can also follow John on Twitter, @johngerzema.

I’m sitting next to Lisa Barone, who is also liveblogging this one. Check out the Outspoken Media blog for additional coverage. Kevin Ryan is up here to introduce John, but he mentions that there was a lot of interesting feedback about Guy Kawasaki’s keynote. He calls out Lisa and says that there’s a chance that in a few years we could be calling what Guy does spam. Lisa needs five more followers to get to 3,000, by the way. [3011 at the time of posting. Nice going, @LisaBarone –Susan]

John comes up to the stage and says today he’ll be talking about brand building in the context of the recession. He wants to cut through the two words “brand” and “recession” and see the fundamental societal shift that is exhibited in the crisis of confidence. Cultural trends have made it so companies have to change the way they relate to the consumer.

Managing for an Upturn

  • Superior cash flow and sustainable growth: Every household in America is auditing their budgets to spend less. Some people are also reappraising what they’re doing. There’s a short term and long term emphasis.
  • Align brand and business strategy: What can you do to reevaluate your market?
  • Acquire talent and quality.
  • Do more with less.
  • Sharpen messaging and ROI.
  • Return to your core.
  • Face your customer.

Half of All Global Wealth has Evaporated

  • $36 trillion dollar loss worldwide.
  • S&P 500 declined 64.4 percent from 2000.
  • 45 percent of American wealth was lost.

Consumer confidence is at its lowest point since 1967, when they started the study. There is a fractured faith in the American dream. Housing values have eroded around all 50 states. Now the average price of a home in Detroit is $18,000 and people used to rely on their house as their keylock. The credit crisis has also halted housing starts.

The consumer psyche has been hardest hit by unemployment. Unemployment is at 8.1 percent — the highest in 25 years. It’s the third straight month of a 600,000 job loss. This period is marked by the most job losses and the weakest recovery.

It’s an equal opportunity recession. Millionaires have lost one-third of their net worth.

Maslow’s hierarchy of needs has been upended. Individual pursuits, self-actualization were the highest order until 2007. Now there’s an understanding that the consumer doesn’t feel this way. They are looking for safety and belonging — more basics needs. Marketing must move from passion to compassion.

Consumers can’t trust politicians. They don’t know who to trust.

  • Lack of leadership and responsibility
  • Selfishness and collusion
  • Prolonged conflicts and partisanship
  • Egregious and criminal behavior
  • Failure of regulators
  • Decaying infrastructure (emotional and physical)
  • Lack of permanence
  • The new cultural fault line between Main Street and Wall Street

Consumers are taking a complete reappraisal of who they trust and who they should rely on. He studied data over 12 years and found that brands now represent a third of a company’s value. The 250 most valuable global brands were worth more than the GDP of France a couple years ago. But now:

  • Brand esteem and regard is down 12 percent.
  • Brand awareness has declined by 20 percent.
  • Perceptions of brand quality has eroded 24 percent.
  • Trust in brands has declined by 50 percent.

This study was done in 2008 and trust in brands has gone down since. The second most important thing for a brand is trust. The most important is quality. In the past quarter, a trust virus has infected many categories. Apparel and accessories, auto and foods top the list for the highest change of trust.

Consumers are beginning to own their problems. They realize there’s a long, hard slog ahead so their realizing their behaviors and changing. It takes 5 to 10 years to come out of the kinds of challenges we’re facing. Savings has reason in the last five months. Q4 consumer spending fell the steepest in 62 years. They have retreated to rethink their spending strategies.

Create Competitive Advantage Now

Every recession ends eventually so how you act now will affect your future performance.

Post-Crisis Consumerism Rule 1

Cultural Value = Indestructible Spirit
Consumer Strategy = Durable Living
Management Principle = Brands that Last

Durable Living:

There’s a rise in shoe repair and clothing. Spice sales are going up as consumers focus on comfort foods in the home. Americans are holding on to their cars longer (9.4 years — the highest in American history). Couponing is up 300 percent. There’s a trend toward nesting, spending money on things for the home. 68 percent of Americans carry a library card — the highest ever. Recipes are stretched out and there’s a trend toward casseroles. Craigslist shopping is up. There’s an idea of “settling in”. There is a resurgence in layaway programs.

Brands that Last:

Inexpensive beauty products are doing well. Ziploc is leveraging this on their site. McDonalds has been pushing “unsnobby coffee”. LG is pushing their lifetime warranty. Campbell’s has a kitchen site that helps busy parents put meals together. Tide is positioning the brand with a like-new guarantee. Old fashioned benefits like a meal on a plane is coming out of Continental Airlines.

Post-Crisis Consumerism Rule 2

Cultural Value = Ethics and Fair Play
Consumer Strategy = Empathy and Respect
Management Value = Value and Values

Empathy and Respect:

Everything has to be transparent. There is starting to be an anti-green movement that questions marketers’ intentions. Consumers have all the tools to dissect brands and businesses. Empathy and respect comes in the form of honesty as well as “indulge me.” Candy sales are up — holding on to small indulgences. There’s been a rise in lingerie sales.

Value and Values:

Denny’s free super bowl breakfast was a huge success. American Express has been paying customers $300 to leave their franchise. Alpo is saying, “Enough with the doggie sweaters and day care. Let dogs be dogs again.” FedEx offered free resume Tuesdays giving away 25 free copies. Tropicana repackaged their orange juice and quickly changed back after the uproar. Hyundai’s assurance plus program was very successful.

Post-Crisis Consumerism Rule 3

Cultural Value = Liquid Life
Consumer Strategy = Declasse Consumption
Management Principle = Dollars and Sense

Declasse Consumption:

It’s no longer cool to flaunt your wealth. P. Diddy vowed to tone down his bling. Designer Ducky Brown gave models a coupon for McDonalds. Radiohead lets you set your own ticket price. 5th Avenue stores are giving shoppers ordinary brown bags. At Howie’s they are selling second-hand bags. Haggling on prices is coming into vogue.

Dollars and Sense:

Frito Lay is selling larger bags and smaller bags of chips depending on the time of month they find people have more and less money. Gillette Fusion Power has reframed razor blades with a promotion for $1 per week. Toll Brothers have been going straight to consumers to offer mortgages. Miller Lite’s one second super bowl ads struck a chord.

Post-Crisis Consumerism Rule 4

Cultural Value = Return to the Fold
Consumer Strategy = Cooperative Consumerism
Management Principle = Community Organizer

Cooperative Consumers:

Consumers are getting clever with understanding the media game and how they can brand and scale themselves.

Community Organizer:

Mommy bloggers are more visible. Walmart’s Elevenmoms act as evangelists for the company. Consumers don’t trust companies but rather the people from the company. Check Out blog is a blog from Walmart by employees. The idea of scaling employees is seeing employees allowed to speak for the company — everything doesn’t have to go through PR anymore. Lego lets consumers design their own models.

Big companies are starting to do great things in the social media space. The Chinese character for crisis also means opportunity. Look at it in an optimistic way.

The search engine isn’t you. It’s your consumer. The rise in search, the declining Maslow hierarchy is bringing consumers back down. Search is emotional. People are looking for value and offers. You have an obligation to own that consumer relationship and that brand.

Q&A

Kevin asks that since we have such a short memory, is the change going to last? John says that they are going to make decisions based on smaller groups of people that they can trust.

How sustainable is CEO bloggers when consumers get the idea that it’s a pitch and the message is not sincere?

Every CEO needs to evaluate their own blog strategy and what they’re comfortable with based on the values of the company. You have to look at your capacity for interacting with the public that way but there are some great examples of direct consumer communication out there. He thinks it’s sustainable because there is no other way.

There’s been a big push toward organic and health-conscious products, which are a little pricier. What will it take for them?

It’s about communicating the value behind the product, not just the brand itself. Marketers have to be careful with their green statements; they have to walk the talk or consumers will figure it out. We noticed that some marketers are doing a good job of marketing green as green ($) and savings to the consumer.

Is there a way to invest in the employee advocate but at the same time not let that become your company?

Zappos is great because you have to create a culture that allows your executives to rise up and not be solely dependent on one person. More employees have to speak on behalf of the company itself because they don’t want to talk to the PR people. Social media has made consumers part of the play, and with that comes the understanding that companies will make mistakes.

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One response to “Morning Keynote: The Brand Bubble by John Gerzema”

  1. Bles writes:

    This was great. A step back out of the trees to see the forest and refocus.



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