Building Brands in Turbulent Times

Listening in…….

What Excites Me? What Concerns Me?

What I want to understand more Ideas for my business…..
about?

©XPotential 2010 3

The Crisis – Global Economic Downturn

• We are facing unprecedented times

• Most economies are in recession or with
significantly reduced growth

• Unemployment rate in the UK at 7.8% in
March 2010, highest in 12 years

• US government implemented a $700bn
bailout package to help businesses

• UK government implemented a £500bn
bailout package to help the banks

• Export-led economic recover will take until
2011 (Growth <1% predicted in 2010)
(Ernst & Young)

• Asian Markets are forced to revise their
economic models from export to domestic
consumption
©XPotential 2010 4

The Consumer in the Economic Crisis:

• Most people have lost value
(homes, jobs, savings)

• Dramatically reducing spending

• Huge uncertainty and less
confident of the future

• Trading down in many categories
(food, personal care, fashion)

• Stopping spending in others
(housing, cars, white goods)

• Putting put more of their salary
into savings or repaying debt

©XPotential 2010 5

The Consumer in the Economic Crisis:

• Has higher affinity to Brands they
trust and have bought over a period
of time

• Is not open to ‘risk’ in new
innovations (products or services)

• Is not open to make expensive
commitments for the long term

• Is open to low risk ‘promotions’ or
added value offers but mainly with
Brands they trust

©XPotential 2010 6

The Retailers in the Economic Crisis:

• Prioritising cash and working capital

• De-stocking to free up cash and reduce risk

• Asking for longer credit terms and more flexible
supply

• Asking for added value and lower prices from
suppliers

• Running more promotions and offers (av. +9.6%
since last year)

• Average saving offered to shoppers
• Branded products 29.0% - 35.4%
• Own label 23.3% - 30.4%

Source: Compiled for The Grocer 10 April 2010 issue by Assosia.
Note: Typical £ saving are calculated on a per-item basis c
©XPotential 2010 7

The Company in the Economic Crisis:

• Seeing a dramatic reduction on Top Line Sales

Consequent impact on the bottom line
results

• Unrelenting and consistent pressure to
drastically reduce costs and minimise risk:

Typically brand/media communication,
innovation and training will suffer first

More dramatic cost cutting will then follow

Many suppliers are under risk

©XPotential 2010 8

Implication

• The Global Economic Crisis threatens all companies. No matter what
country, no matter what sector they operate in.

• Brands are a Company’s most important asset

• In turbulent times, customers and consumers will prioritise their
business with Brands that they trust to deliver value

• Companies that focus on building brands will have the best
opportunity to emerge as winners

©XPotential 2010 9

What can Brands do to weather the storm?

©XPotential 2010 10

9 Key Success Factors


Key Success Factors

1. The importance of a Clear Vision and Strategy


1. The importance of a Clear Vision and Strategy –
review and align to the year ahead

• Crises will come and go

• Successful companies will always have a
clear long term Vision and Strategy (3-5
years)

• Their Vision and Strategy will always be
built around Building Brand Value not just
the financial measures of Sales and Profit

• Successful companies live their Vision,
Strategy and Brands through their people,
process and products to deliver performance


Importance of a clear Vision and Strategy

Example: Reckitt Benckiser

• Global company with 17 “Powerbrands” (62% total
business), all either top or number 2 in their
market
• Constant Innovation to provide better products for
consumers
Maverick innovations are given a chance to trial (e.g.
AirWick FreshMatic – most successful launch in RB
history)
An RB product formulation is revised every 8 hours
Products launched in the past 3 years account for
35% to 40% net revenue

• Net revenue has more than doubled in the past 10
years
• RB Sells 15 million consumer units a day across
180 countries
• “Global citizen” attitude of managers is essential in
open-minded and competitive globalization

Sources: Harvard Business Review, April 2010
The Grocer February 6th 2010

• Review the Vision and Strategy with the team. Understand the latest
trends / data on the economic forecast and align the activities and
measures for the coming year

• Do not lose sight of the long term – review activities and objectives of
your long term strategy to take into account the crisis but ensure that
you are still building towards your Vision



• Communicate: Make sure that your teams are fully aware of the
Vision and Strategy, any changes and understand the
consequences within the crisis

• Individuals need to Know and Understand before they will Believe
and Act


Key Success Factors

2. Put the Brand at the heart of the organisation



• The Brand is the most important asset of your
company

• Your Brand is the sum of your ‘emotional’
relationship with your customers or consumers

• Brands that are invested in in a constant way will
deliver value to the company over many years



• Every individual in the company has the power to
add value to the brand or to take value away

• It is critical for everyone in the organisation to
understand their role in building brands


Ensure the Brand is at the Heart of the Organization

Example: Tesco Lotus
• The mission of Tesco is to earn a lifetime
of loyalty from its customers

• Challenge is to align the individuals in
the company to understand and believe
in the Tesco Lotus Brand

• Clarified the Brand and what it means
for Thailand and began to cascade it
through all of the 36,000 employees

• Includes People, Processes, Design,
Advertising, Products



• The crisis is the most important time
to ensure that everyone understands
the Brand

• Ensure that you can explain your
Brand clearly to everyone in the
company

• Help them to understand the brand and to
understand how they and their department
contribute to the value of the Brand

• Align the departmental objectives with
strategic objectives for the Brands


Key Success Factors

3. Focus on your Core offerings but continue to
invest in innovation


3. Focus on your Core offerings but continue to invest
in innovation

• Every successful company has a core set of
products or services that will deliver 80% of the
value to the company

• In time of growth the major investment is
focussed on growth drivers while core products
will attract less investment


in innovation

• In times of crisis – investments will be
reduced so the core becomes more
important in sustaining the critical mass of
the company


in innovation

Example: Pizza Express

• During the economic slowdown, less
people are dining out. To keep attracting
their loyal customers – families, young
urbanites who enjoy going out and having
a good time, Pizza Express launched a
series of promotions.

• The most successful is the Classic
Favourite Menu – 10 favourite mains + a
drink for £10.


Focus on the core offering and invest in innovation

Example: Hyundai Assurance Program

• Hyundai has been selling more cars when everyone is selling less.

• In January of 2009, while nearly every other car manufacturer reported
double-digit sales declines, Hyundai sales were up 14.3% compared to
the same period last year. How did they do it?*

• Hyundai Assurance program, allows consumers to return their new
Hyundai without hurting their credit if they lose their jobs.

* Source: Automotive News, www.allcarsreview.com, “Hyundai says Assurance program is effective”, Feb 2009


in innovation

• In these times of crisis – review your
portfolio strategy.

• Continuing high levels of investment in
new products may not be a good short
term decision

• Look for opportunities for incremental
innovation on your core ranges

• Look for ways of keeping new news but at
little or no incremental cost to the
customer or consumer

• Look for ways of increasing the confidence
level of consumers


Key Success Factors

4. Focus on your loyal and high potential
customers


4. Focus on your loyal and high potential customers

• No company will ever have enough resources to meet the
needs of every customer or consumer

• Every Brand has it’s loyal consumers / customers. These
are also called the heavy users

• Always ensure that your loyal customers will appreciate
and benefit from your activities

• High potential customers are your loyal customers of the
future. Successful companies identify them and
understand their needs


Focus on loyal and high potential customers

Example: Essential Waitrose

• In March 2009, Waitrose launched Essential
Waitrose -- its first value range to counter
perceptions that it was more expensive than its
rivals on everyday items with the pledge:
'Quality you'd expect at prices you wouldn't'.

• Due to the economic downturn, Waitrose was
losing a lot of its core customers to other
supermarkets. Essential Waitrose is part of the
work Waitrose is doing to on improve
customers' value perception.

“In the week to June 12, sales of the re-priced and repackaged lines were
up between 20 and 60 per cent. The range has also lifted the grocer’s
overall sales, with sales increasing 10 per cent year on year each week in
the last month.“*

* Source: Retail Week,”Waitrose value range lifts sales” , 22 June 2009



• Ensure that you have a clear segmentation of your
VIP customers (that you know the core and loyal users,
the high potentials and the low priority)

• Ensure that the attention of your sales force,
commercial teams, marketing teams are focussed
mainly on those loyal and high potential customers

• Ensure that your teams understand their needs
(from the perspectives of your customers) and build
these into their plans

• Use this understanding as a way of adding value to
your customer or consumer


Key Success Factors

5. Ensure that your business processes and
teams are efficient and effective


5. Ensure that your business processes and teams are
efficient and effective

• The Brand of your business is your most
important asset

• Your people are the most important way that
you will invest in the brands

• For many organisations efficiency is a major
issue – people resources are being wasted



• Great organisations ensure that they are able
to focus their resources efficiently and
effectively through:

fewer priority business processes that drive
the organisation
clear and simply described steps /
frameworks for action
training and coaching staff in making
process part of their everyday work


Ensure your business processes and teams are

Example: Unilever

• As one of the largest FMCG companies in the
world, business process efficiencies are needed to
maintain their place amongst global leaders
• In 2008, €1.1 b savings from supply chain and
operational efficiencies 1
• Improved transportation network and
carriers to save money and improve
services
• Rationalization of manufacturing base to
meet target of streamlining 50-60 sites by
2010
• Brought logistic and supply chain operation
in Europe together in one regional structure
based in Switzerland.
• Embarking on similar move to centralize
supply chain in Asia by moving regional hub
to Singapore
* Source: Unilever annual repor 2008 ©XPotential 2010 35


• Review your Business processes and
prioritise those that deliver the most
value to your Brands

• Review the priority processes in
teams to ensure that all the key steps
are clear

• Develop training of the teams that
ensures that they know and
understand the process and believe
and act in the best way

• Ensure that you have clear measures
(KPI’s) designed to measure efficiency
and effectiveness


Key Success Factors

6. Maximise your communication investment



• Communication in many organisations is one of the most
expensive investments of brand building

• With the huge fragmentation of media channels
communicating with customers and consumers has
never been more difficult

• Communication is also one of the most difficult
investments to measure in terms of a ROI

• Communication can take many forms from the
‘traditional media’ (radio, TV, Press) through to ‘new
media’ (sms, internet) through to ‘in-store
communication’ (Point of Sale, Promotions).



• Successful organisations have a clear focus of communication on their
target audience, a Single Minded Message and a deep understanding of
the ‘touch points’ with their consumer / customer

• Great communication ensures that the consistent message is received
through a variety of different and relevant media



• Understand the target audience and the
relevant ‘touch points’

• Review media channels relevant to your
touch points and each one’s role in
delivering the message

• Prioritise budget spending in media
channels where your message will be
heard.

• Address at least 2 objectives: creating
awareness and driving purchase

• Create a communication strategy that
ensures that you align the media channels
to deliver a synergistic impact on the
consumer


Key Success Factors

7. Manage your costs and cash in the best
interests of your Brands


7. Manage your costs and cash in the best interests of
your Brands

• The Day to Day management of costs and
cash is a core skill which is well controlled
by all organisations

• Successful Brand focussed organisations
will continually be challenging themselves
to review and reduce costs across their
entire value chain

• The economic crisis is forcing companies
to dramatically reduce costs

• Successful organisations will reduce cost
effectively but without harming their
brand


7. Manage your costs and cash in the best interests of
your Brands – review your entire cost structure

• Review your entire cost structure in a
transparent way (include all relevant
stakeholders / department heads)
Understand all the main cost drivers of your
Brands and Business

• Ensure that the real / medium – long term
implications on the Brand for reductions or
eradication is clear

• Set your self a stretching target for reduction
of costs and ensure that you continue to
deliver cost reduction as part of the long
term plan

• Communicate the importance of cost
reduction across the entire organisation


Manage your costs and cash in the best interest of
your brand

Example: Sainsbury’s
• Sainsbury’s like-for-like sales were up 5.5% in
2009. Accomplished by cost-cutting, price-
cutting and Jamie Oliver’s appeal1

• >75% total cost inflation offset by cost
efficiency programs.2

• Significant savings made on improved
distribution network

• Cost savings made without touching the "The fund-raising will
customer experience and without major provide us with the financial
changes to communication budget for the flexibility to take advantage
brand of current opportunities to
grow our business further
• Improved trade cash flow management, and faster."
supported by the growth of Sainsbury’s supply
chain financing platform has achieved a
working capital improvement of £167 million on
last year in cash generated from operations Justin King, Sainsbury’s Chief Executive
1 Source: www.guardian.co.uk, 17 June 2009, “Has Justin King rescued Sainsbury’s by design – or is he just lucky?”
2 Source: Sainsbury’s annual report 2009
3 Source: www.j-sainsbury.co.uk, press release 17 June, 2009

Key Success Factors

8. Focus on market share and profit


8. Focus on market share, working capital and profit

• The Crisis is putting pressure on organisations
especially their growth

• Successful organisations use a portfolio of
measures of Brand Value including the traditional
measures of financial accounting

• Market Share is a key measure for a financial
crisis where markets are falling

• Brands that focus on Market Share growth in a
financial crisis will be in a much stronger position
to benefit

• Profit and Working Capital measures are essential
to ensure that the fundamentals of the business
are healthy


Focus on market share and profit

Example: Virgin Atlantic

• Virgin Atlantic reported doubling of profit in
year ended Feb 2009 compared to British
Airways which reported a record £401m pre-
tax loss

• Virgin Atlantic trades in the same markets as
British Airways but has less exposure to the We have increasing
financial services sector and is stronger in share in the more
long haul leisure1 profitable premium
sector1
• Premium air travel is a vital revenue source
for airlines Steve Ridgway: Virgin Atlantic chief
Virgin Atlantic prides itself on listening to
its customers to provide fun, class and
comfort

1 Source: Telegraph.co.uk, 26 May 2009 “Virgin Atlantic boss warns no airlines will make money this year”
NewYorkTimes 5 Feb 2010 “British Airways posts surprise quarterly profit”

8. Focus on market share, working capital and profit

• Review your key measures especially growth
and make realistic adjustments to the
objectives

• Focus your teams on building market share

• Look for opportunities in your key customers
to collaborate and build share

• Align the finance team / supply chain and
commercial teams to come up with activities
for working capital improvement to reduce
debt

• Make the measures the main topic of every
management team agenda


Key Success Factors

9. Manage the short term but prepare for the
longer term


9. Manage the short term but prepare for the longer
term
• Every company will go through periods of
growth and periods of decline

• Successful companies manage short term
decline to ensure that they emerge stronger
at the end

• Successful companies use the opportunity
of the economic crisis to review their plans
and business structure

• Successful companies will understand the
long term impact of the crisis on their
consumers, customers and markets


9. Manage the short term but prepare for the longer
term

• Use trend analysis to develop scenarios of the long term
impact / changes to the markets you operate in

• Ensure that as a management team you understand the
long term implications for your business, brands and
consumers and customers

• Review the foundations of your Vision and Strategy to
ensure that they are still strong and will be sustainable for
the long term

• If not then adapt or develop a new Vision and Strategy


Summary

• The Global Economic Crisis threatens all
companies. No matter what country no
matter what sector they operate in

• Brands are a Company’s most important
asset and in these turbulent times
customers will want to do business only
with Brands that they trust

• Those companies that focus on their
brands will have the best opportunity to
come out of this crisis as winners with
even stronger and more trusted brands


Key Success Factors


2. Put the Brand (s) at the heart of the organisation

3. Focus on your Core offerings but continue to invest in innovation


5. Ensure that your business processes and teams are efficient and
effective


7. Manage your costs and cash in the best interests of you Brands

8. Focus on market share and profit

9. Manage the short term but prepare for the longer term


Manage the short term and prepare
for the longer term
Example: Honda UK (Swindon Plant)
• Due to the economic slowdown, the
Honda Swindon Plant shut down for 4
months.

• Voluntary redundancy was taken by 1300
workers, the remaining 3400 workers
agreed to 3% pay cut for 10 months.

• The Honda Jazz – Honda’s best selling
small car, previously only built in Japan
and China will be built at the Swindon
later this year.

• To manage the short term, Honda shut
down temporarily while maintaining their
skilled and loyal workforce. To prepare
for the long term, Honda used the shut
down period to update, streamline and
modernise the production line in
preparation for production of the Jazz.

Our Credentials
XPotential is a brand focused strategy consultancy that
helps to align individuals, functions and organisations
throughout the world to create and deliver Brand Value.

We work with some of the world’s biggest brands to deliver
outstanding results. We orientate individuals and teams in the
organisations to focus their responsibilities to deliver value to
their most important asset - their brand. We are proud to have
worked with over 30 companies in over 50 countries and
touched tens of thousands of individuals, delivering some of
their most impressive business results.

We do this through working closely with the leadership of
organisations to develop Brand Centric Vision and Strategy
through a deep understand of the challenges and opportunities
for the Brands and the Company, the Brand Vision and the key
audience for change.

We then design and implement a programme of brand centric
change including communication, engagement, training and
follow up. We have worked both cross functionally and also
through specific areas including sales, supply chain,
innovation, marketing, R&D, finance and HR.


“We align individuals, functions and organisations,
throughout the world, to create and deliver brand equity”

XPotential (Brasil) XPotential Ltd (UK) XPotential (Thailand) Co. Ltd
Av. Divino Salvador, 716 4/5 Market Square Q House Lumpini
Moema – Marlow Level 27, 1 South Sathorn Rd
São Paulo- SP Bucks Tungmahamek, Bangkok
CEP – 04078-012 SL7 3HH
Thailand, 10120

Tel: (55) 11 5051 9194 Tel: +44 1628 485847 Tel: +66 (0) 2610 3706
Fax: (55) 11 5054 0421 Fax: +44 1628 478065 Fax: +66(0) 2610 3601
Mobile: (55)11 9939-0203

contato@xpotential.com.br info@xpotential.co.uk info@xpotential.co.uk

http://www.xpotential.co.uk/


Building Brands in Turbulent Times


Building Brands in Turbulent Times

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