No Time for Cutbacks

In the winter of 2008, Starbucks saw the early days of the
recession as an opportunity for innovation. Several weeks previously, the
company announced that it would close stores for the first time in its history,
and its stock price began to fall. While in these conditions most brands sink
into retrenchment, Starbucks implemented a plan to reinforce its brand identity
and take advantage of the looming recession.

At the height of a Tuesday evening commute, the coffee chain
closed nationwide for a three-hour barista training session. Many recognized
the event as a stunthow much training can three hours provide?but Starbucks
reminded consumers about the commitment to excellence that built its
popularity.

Having moved to restore its reputation, Starbucks looked for
ways to compete in the recession. Instead of showing indifference to its
customers, the stores now feature affordable options such as instant coffee,
refillable $1 cups, and value menus pairing coffee and breakfast sandwiches.

Critics say that the coffee chain has abandoned its brand
identity for the fast food model, but, in fact, its response to challenging
economic times has proven Starbucks capable of innovation, relevance and
impact. A middle manager who usually grabs a seasonal cappuccino before work
can purchase a $1 caffeine boost when times are tight. With a new product,
Starbucks maintains its customers, and the customers maintain their routine.

Return on Innovation

During economic uncertainty, consumers tend to reconsider
brands based on their attendant value. That behavior means businesses need to
look at their product portfolios and consumer shopping habits; they also should
think about the different ways their product can add real value to peoples
lives and experiences. This proactive review can reveal opportunities such as
new pricing models, portfolio strategies and services, all of which can help
people justify their buying. Unfortunately, brands typically retrench while
consumers are rethinking their relationships with those brands, giving
consumers less reason to make purchases.

During the last recession, Walgreens focused on expanding
its generic pharmaceuticals business and increased its market share nearly 10
percent. Conversely, Eastman Kodak ignored digital photography in favor of
traditional print processing because the new technology had a low return on
investment (ROI). The decision cost Kodak 75 percent of its stock market value.

Top marketers care about their works impact on their
business. However, the desire to improve the ROI of a marketing program often
drives retrenchment. ROI in this case is merely a justified cost containment
strategy. In contrast, smart marketers dont fall prey to reaction. They
redefine ROI as a return on innovation. The impact of innovationespecially
in a recessionwill always outweigh the impact of cost containment. Just look
at some of the industries currently in the most trouble, such as newspapers.
They cannot dig out of their holes with cost cutting alone.

Instead, they could use the internet to converse with their
audience, taking advantage of social media, digital marketing and blogging to
learn what their customers want. Its a real-time form of research that can
provide insight into marketing and product development. And if businesses offer
a unique online experience, the research itself becomes a marketing program.

Remember that smart marketing has goals beyond people liking
you, your product or your company. During scary times, people seek comfort. If
you arent always there for your consumer, your competition will be.

Mike Doherty is president of Cole & Weber United, an
advertising agency recognized for its award-winning, interactive brand
experiences. He has worked for clients including McDonalds, Nike, Virgin
Interactive, Subaru and Microsoft.