These past few years we live one of the strongest economic recessions that still lives up for today , and has greatly affected the industry of fast -moving consumer goods, industry that I have devoted the time that I have been in the labor market.
Like the last recessions, during these periods consumers see their purchasing power diminished, and as a consequence private brands gain market weight and brand managers working at companies such as L’Oreal, Nestlé, Unilever and so on, are faced with a complicated but challenging scenario, where the immediate profit is not often aligned with maintaining brand equity.
Data shows that consumers return to their favorite brands after the recession , partially because they recognize its quality, but it’s the recognition the brand has by the time recession comes, as well as the decisions taken during the following days that will decide the extent to which the brand will come out healthy after the storm.
This price-sensitivity by consumers leads to the exchange of the usual brands for private brands, and retailers take advantage by dedicating them more shelf-space, since they own those brands they usually offer higher margins.
As a response, Brands can either reduce the price , or offer a larger number of reasons unrelated to price that can strengthen brand loyalty between brand and consumer
In reality what happens is brands opt for temporary reductions in price. Consequently, this reduces margins for the company that than reduces their advertising and innovation activities. The low purchase elasticity to media investment favours this sort of strategy. Other tools such as consumer studies , and concept and use are put into secondary plan.
At the end of the day , what distinguishes the brand from other brands is its brand equity, and times like this represent a long-term threat to this equity because companies that manage these brands decide by several cuts in subjects that form the basis of building that same equity , such as advertising , marketing research, innovation or even actions/events that bring the brand and consumer together.
The pressure from shareholders for immediate profit is usually behind that short-term management , profit-oriented , putting a side brand equity due to its intangibility.
This management, works based on the fact that recessions are temporary and better days will come , but what if the bad weather stays for longer?