Protecting Brand Value And Image: How Retailers Can Survive The Perfect Economic Storm

By Thomas Safford, Director of Product Marketing Solutions Management – Retail, QL2

Today, many retailers are reacting to the initial, immediate impacts of the economic turmoil with panic. During a recession consumers stay home and spend less, prompting retailers to make cuts. The fallout of tactical decisions like cutting jobs and slashing prices in an effort to minimize cost to the consumer has quickly flooded media outlets creating even tighter consumer pockets and outlook. The truth is, consumers are still spending, maybe less and maybe differently, but they are still spending. In order to capture these dollars a focus on total value and not simply price is crucial. It is key that retailers get to the root of the changes in consumer behavior and understanding what consumers value most.

In the face of the recession, the biggest consumer shift is towards the consolidation of purchasing destinations. Consumers are now favoring a handful of companies that they trust and that offer them the best value and experience in addition to low cost products. The fact that consumers are spending less today isn't necessarily a temporary change, but rather a storm that has been on the horizon as consumers have become more educated, better understand their purchasing power and have access to more options and channels. This is a fundamental shift -- consumers now demand the lowest prices regardless of the economy or their specific income level. Every indicator points to this trend continuing even after the economy stabilizes. These factors are shifting the power dynamic and impacting the already contentious relationship between retailers and manufactures. This shift of dominance has important implications concerning retailing's forecast beyond getting through a recession.

Retailers must protect customer allegiance, brand integrity, and maintain their competitive position in the marketplace. When economic indicators suggest pulling back on investments and battening down the hatches, companies often erroneously start with a focus on short term tactics, like reducing costs, but these tactics lack strategy. Short term tactics that diminish brand value in the heart and mind of the consumer result in customers lost forever instead of customers who are temporarily cutting back.