calamity: marketing your way out of this recession

CALAMITYpresented at the 7th Americas Marketing ForumThe Economist and Young & Rubicam Brands17-18 March 2009St Regis Hotel, San Francisco, California

please use with permission only, just ask, we’re happy to grant

John Gerzema

CALAMITY:MARKETING YOUR WAY OUT OF THIS RECESSION

SOURCE: CONDE NASTE PORTFOLIO, JANUARY 2009Copyright John Gerzema/Young & Rubicam

Copyright John Gerzema/Young & Rubicam

RESULTS 1–10 OF ABOUT22,200,000 FOR RECESSIONAND MARKETING

FUNDAMENTAL SOCIETAL SHIFTFROM A CREDIT TO A CONFIDENCE CRISIS

SEA CHANGES IN CONSUMER BEHAVIORS

COMPANIES MUST CHANGE HOW THEY CONNECT WITH CONSUMER

MANAGING FOR AN UPTURN

SUPERIOR CASH FLOW AND SUSTAINABLE GROWTHALIGN BRAND AND BUSINESS STRATEGYACQUIRE TALENT AND QUALITYDO MORE WITH LESSSHARPEN MESSAGING AND ROI

RETURN TO YOUR CORE

FACE YOUR CUSTOMER

3 Source: Y&R Strategy, HBR: Anthony T Jan, John Quelch Copyright John Gerzema/Young & Rubicam

HALF OF ALL GLOBAL WEALTHHAS EVAPORATED

$36 TRILLION DOLLAR LOSS WORLDWIDES&P 500 DECLINED 64.4% FROM 200045% OF AMERICAN WEALTH FROM LOSS OF EQUITY AND HOUSING VALUESAVERAGE RECESSION IS 6-12 MONTHS. THIS IS A MARATHON

5 Source: Bloomberg, Iconoculture March 2009 Copyright John Gerzema/Young & Rubicam

UNEMPLOYMENT

HOUSING VALUES

EQUITY MARKETS

INTEREST RATES ?

COMMODITY PRICES

IN(STAG)FLATION ?

BAILOUT ?

THE NEW FEAR ECONOMY

NATIONAL DEBT

DETROIT

CURRENCY VALUATION ?

PROTECTIONISM ?

BANK LENDING

FACTORY & HOUSING STARTS

CREDIT CARD EXPOSURE

CONSUMER CONFIDENCE}

THE LARGEST U.S. BUDGET DEFICIT POST WWII

8 Source: Board of Governors of the Federal Reserve System Copyright John Gerzema/Young & Rubicam

VISUALIZING THE BAILOUT

9 Source: The Atlantic Copyright John Gerzema/Young & Rubicam

HOUSING VALUES CONTINUE TO DECLINE ACROSS THE U.S.

10 Source: “Irrational Exuberance”, 2nd edition, 2006, by Robert J. Schiller Copyright John Gerzema/Young & Rubicam

A GROWING REALITY:

A MORTGAGE IS FOREVER

Source: Copyright John Gerzema/Young & Rubicam

AMERICAN’S HOMES NO LONGER PERSONAL LINES OF CREDIT

11 Source:Us Department of Housing and Labor, 2009 Copyright John Gerzema/Young & Rubicam

WHILE THE CREDIT CRISIS HAS HALTED HOUSING STARTS

12 Source: www.calculatedriskblog.com Copyright John Gerzema/Young & Rubicam

INTO THE GREAT WIDE OPEN

UNEMPLOYMENT 8.1%; HIGHEST IN TWENTY-FIVE YEARSTHIRD STRAIGHT MONTH OF 600,000 JOBS LOST

4 Copyright John Gerzema/Young & Rubicam

THIS PERIOD MARKED BY MOST JOB LOSSES, WEAKEST RECOVERY

13 Source: Change in Nonfarm Pay rolls, Reported Monthly, Bureau of Labor Statistics, U.S Dept of Labor Copyright John Gerzema/Young & Rubicam

MILLIONAIRES HAVE LOST ONE-THIRD OF THEIR NET WORTH.

Source:

AN EQUAL OPPORTUNITY RECESSION

AFFLUENT MORTGAGE RATE DEFAULTS

16 Source: LPS Applied Analytics Copyright John Gerzema/Young & Rubicam

THE ONLY CERTAINTY IS UNCERTAINTY

22 Source: Copyright John Gerzema/Young & Rubicam

18 Source:New York Times

ONE STORY IN THE AMERICAN NIGHTMARE

MASLOW UPENDED: MARKETING MUST MOVE FROM PASSION TO COMPASSION

17 Source: American Progress.org February 2009

TECTONIC SHIFTS IN CONSUMERISM FROM THE CULTURAL LOSS OF TRUST

SELFISHNESS AND COLLUSION

EGREGIOUS AND CRIMINAL BEHAVIOR

FAILURE OF REGULATORS

TAXPAYERS ARE NOW SHAREHOLDERS

30Copyright John Gerzema/Young & Rubicam

DECAYING INFRASTRUCTURE

LACK OF PERMANENCE

Source: Millward Brown Optimor 2007

THE 250 MOST VALUABLEGLOBAL BRANDS ARE$2.197 TRILLION DOLLARSWHICH EXCEEDS THE GDPOF FRANCE

BRAND ESTEEM ANDREGARD IS DOWN 12%

BRAND AWARENESS HASDECLINED BY 20%

PERCEPTIONS OF BRANDQUALITY HAS ERODED 24%

TRUST IN BRANDS HAS DECLINED BY 50%

TRUST IS DESIRABLE, BUT IT HASN’TDIFFERENTIATED

35 Source:BrandAsset Valuator 1993-2007 Copyright John Gerzema/Young & Rubicam

Base: BAV USA Q4 2007, Q4 2008; All Adults

IN THE PAST QUARTER, A ‘TRUST VIRUS’ INFECTED MANY CATEGORIES

“I SCREWED UP”37 Source: Barack Obama Press Conference, February 2009 Copyright John Gerzema/Young & Rubicam

CONSUMERS ARE BEGINNINGTO OWN THEIR PROBLEMS

38 Source: Time Magazine Copyright John Gerzema/Young & Rubicam

SAVINGS RATE HAS RISEN IN PAST FIVE CONSECUTIVE MONTHS

40 Source: U.S. Department of Commerce: Bureau of Economic Analysis Copyright John Gerzema/Young & Rubicam

Q4 SPENDING FELL 3.7% FROM Q3 - STEEPEST DECLINE IN 62 YEARS. $3 TRILLION IN SPENDING STOPPED IN Q4, WAS SUSTAINING US GDP

41 Source: www.calculatedriskblog.com Copyright John Gerzema/Young & Rubicam

CREATE COMPETITIVE ADVANTAGE NOW

EVERY RECESSION ENDS...EVENTUALLY

CONSUMERS MOVING FROM ANXIETY TO ACTION

HOW YOU ACT NOW WILL SHAPE YOUR FUTURE PERFORMANCE

THE NEW RULES OF ‘POST-CRISIS CONSUMERISM’

NEWCONSUMER BEHAVIORS

NEW CULTURAL VALUES

NEWMANAGEMENT PRINCIPLES

POST-CRISIS CONSUMERISM RULE #1

CULTURAL VALUE = INDESTRUCTIBLE SPIRIT

CONSUMER STRATEGY = DURABLE LIVING

MANAGEMENT = BRAND THAT PRINCIPLE LASTS

DURABLE LIVING

•CONSUMERS ARE DRIVING AND DINING OUT LESS

•USE OF COUPONS IS UP 300%

•PRIVATE LABEL UP 12%

•“SWISHING” PARTIES TO EXCHANGE CLOTHING

•REPAIR FOR SHOES, CLOTHES AND CARS IS UP 22%

•AMERICANS SPENDING IN ‘RETURN TO HOME’

•68% OF AMERICANS NOW CARRY A LIBRARY CARD

•SPICES BEING USED IN LIEU OF EXPENSIVE FOODS

•VALUE RECIPES GROWING MORE POPULAR

•CRAIGSLIST POSTING 100% INCREASE IN TRAFFIC

CULTURAL VALUE = INDESTRUCTIBLE SPIRITCONSUMER BEHAVIOR = DURABLE LIVING

MANAGEMENT PRINCIPLE = BRAND THAT LASTS

BRAND THAT LASTSCULTURAL VALUE = INDESTRUCTIBLE SPIRIT

CONSUMER BEHAVIOR = DURABLE LIVINGMANAGEMENT PRINCIPLE = BRAND THAT LASTS

CULTURAL VALUE = ETHICS AND FAIR PLAY

CONSUMER STRATEGY = EMPATHY AND RESPECT

MANAGEMENT = VALUE AND PRINCIPLE VALUES

•SEEKING BRANDS THAT SUPPORT SIMILAR BELIEFS AND CAUSES

•BE TRANSPARENT (WHITEHOUSE.GOV)

•USER REVOLT AND RESPONSE (FACEBOOK)

•ENCOURAGE CONSUMER PROBLEM SOLVIN (LEGO)

•CONSUMERS EXPECT YOU TO Don’t stop believing

•GOING GRASS ROOTS AND GREEN (TRUE NORTH)

•CULTURAL SHIFT TOWARD SCORNING GREED

•CONSUMERS EXPECT TO BE REASSURED DURING A CRISIS

•ENRICH COMMUNITY TO CLOSE SALE

CULTURAL VALUE = ETHICS AND FAIR PLAYCONSUMER BEHAVIOR EMPATHY AND RESPECT

MANAGEMENT PRINCIPLE = VALUE AND VALUES

EMPATHY AND RESPECT

VALUE AND VALUES

CULTURAL VALUE = ETHICS AND FAIR PLAYCONSUMER BEHAVIOR EMPATHY AND RESPECT

MANAGEMENT PRINCIPLE = VALUE AND VALUES

CULTURAL VALUE = LIQUID LIFE

CONSUMER STRATEGY = DÉCLASSÉ CONSUMPTION

MANAGEMENT = DOLLARS AND PRINCIPLE SENSE

DÉCLASSÉ CONSUMPTIONCULTURAL VALUE=LIQUID LIFE

CONSUMER BEHAVIOR = DÉCLASSÉ CONSUMPTIONMANAGEMENT PRINCIPLE= DOLLARS AND SENSE

DOLLARS AND SENSECULTURAL VALUE=LIQUID LIFE

CONSUMER BEHAVIOR = DÉCLASSÉ CONSUMPTIONMANAGEMENT PRINCIPLE= DOLLARS AND SENSE

CULTURAL VALUE = RETURN TO THE FOLD

CONSUMER STRATEGY = COOPERATIVE CONSUMERISM

MANAGEMENT = COMMUNITY PRINCIPLE ORGANIZER

COOPERATIVE CONSUMERISM

CULTURAL VALUE = RETURN TO THE FOLDCONSUMER BEHAVIOR = COOPERATIVE CONSUMERISM

MANAGEMENT PRINCIPLE= COMMUNITY ORGANIZER

COMMUNITY ORGANIZERCULTURAL VALUE = RETURN TO THE FOLD

CONSUMER BEHAVIOR = COOPERATIVE CONSUMERISMMANAGEMENT PRINCIPLE= COMMUNITY ORGANIZER

THE OPPORTUNISTIC CEO: BRAND MANAGER IN CHIEF

MARKETING IS NOT A COST, BUT A FIDUCIARY RESPONSIBILITYTO SHAREHOLDERS

BAD COMPANIES ARE DESTROYED BY CRISIS. GOOD COMPANIES SURVIVE THEM. GREAT COMPANIES ARE IMPROVED BY THEM.” —ANDY GROVE

THE CHINESE CHARACTER FOR CRISIS ALSO MEANS OPPORTUNITY

Source: Gerzema, Jacobson, Lebar, Mizik, Stanford and Poor’s COMPUSTAT over 1988-2003, University of Chicago’s Center for Research in Security Prices from 1993-2003. BAV 1993-2004

CONSUMERS REWARDBRANDS WITH ENERGIZEDDIFFERENTIATION

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