The Power of Context
I have the pleasure of living with a financial analyst who also happens to be my better half. So in our household cnbc and bbc are staples of the broadcast day despite my protestations and passion for a good battle star galactica episode! You can’t log on, tune in or open up any form of media over the past two months without hearing about the goldilocks economy, the raging bear, market realignment or the doom and gloom of potential recession. All of this forced exposure however has lead me to think about the following: how will the macro economy effect people’s expectations of brand?
Consider the pundits point of views on the American economy, and as the American economy goes…so goes the world:
o a rocky and unpredictable first and second quarter if not the year
o a weakening dollar
o oil at $100 a barrel
o a negative personal savings rate
o slowing housing starts and increasing foreclosures
o poor december job creation
o looming signals of recession
o two major banks in need of financial rescue
o a federal reserve stymied on direction for interest rates
o and the uncertainty of a presidential primary and election
And on the home front, the Canadian stock markets are equally in chaos - dropping over 600 points Monday in Toronto after a near 1,000-point plunge last week.
There’s no doubt that many of these factors are already trickling down and contributing to some already very prevalent emotions:
o 60% of Americans feel and 55% of Canadians feel very stressed about life
o 47% of Americans and 50% of Canadians feel they’re not doing a good job of staying in control of their life
o 50% of Americans and 50% of Canadians feel they’re under financial stress
Despite people’s very real perceptions and worries, the economic effect will likely lag that of the U.S. given the global demand for our resources and lack of the sub prime mortgage effect in Canada. In fact a full 41% of Canadian businesses report labour shortages, and 42% of Canadian business expect to hire not fire. Additionally the Conference Board said “that federal tax reductions, strong job growth and wage gains will maintain the economy's momentum in 2008.”
Its typical however, in unstable economic periods for two types of brands to prosper: ultra high end luxury and value brands – it’s mass luxury brands caught in the middle that tend to feel the pinch. “There’s no doubt the very wealthiest consumers are still spending” analysts said. And with approximately 600,000 plus millionaires in Canada and even more in the U.S., high-end luxury brands are likely to continue to prosper. But the merely affluent are a different story. While The Luxury Institute predicts luxury sales will increase at a rate of 5 percent to 9 percent in 2008, executives at luxury retailers ranging from Saks to Coach and Karl Lagerfeld, are already bemoaning the disappearance of free-spending shoppers. "You're seeing more pressure on that aspirational luxury consumer at our entry-price points," says Steve Sadove, chief executive officer at Saks. The New York luxury department store reported that sales at stores open for a year or more slowed to a miniscule 0.8% gain in December, compared with a 25.7% increase in the previous month. “They feel rich when their jobs are secure and their investments are growing, but can change their minds if the job market or stock market takes a plunge” executives said.
Despite this, the current climate seems to present real opportunities for brands - ideal windows in which to form inspiring and active brand ideas and povs that could provide people a vision forward in a sea of uncertainty. The pressing issue facing many brands is to figure out if they have a Brand Idea and POV inspiring enough to complete with the brands that sandwich them at the top and bottom. If exclusivity, value or price isn’t winning strategies for your brand, two essential questions you might start asking yourself are:
- what idea could we stand for in the hearts and minds or people that would inspire, entertain and attract?
- what’s our unique viewpoint that connects to people on the basis of shared values?
My only caution in answering the two above questions is to resist the urge to simply label or re-label current consumer trends and execute against them. With 67% of people holding the belief that “most companies are interested in selling me products and services that already exists vs. something that fits my lifestyle” consumers will demand that you stand for and hold a brand pov based on social insight - an empathetic understanding of their current state of mind.
Determining what role your brand could play within the current context is a question that’s all about strategy and the context is one ripe with potential opportunity.
Bank of Canada's quarterly survey s
Ipsos Reid poll fielded from May 18th to May 23rd, 2006
Bmo 2005 financial stress study