Brand equity

How strong is your brand? Is it a brand with many loyal buyers that people know and trust and are willing to pay a price premium for? Or is it a weak brand, commanding little loyalty and esteem? In sum, is your brand equity high or low? Strong brands enter the recession in a much more favorable position than weak brands. They are on the shelves of more retailers, have more shelf space and have a larger and more committed customer base. Marketing budgets for stronger brands also tend to be higher.

In recessions, retailers across the world devote more shelf space to their own brands (especially since they also command a higher margin). For example, to cater to the increased price sensitivity of UK consumers in the wake of the economic downturn, Tesco launched on September 17 2008, its fourth line of private labels, called “Discount Brands at Tesco.” Sales of Tesco’s discount and value ranges are up 65 per cent on last year, and one in four shoppers now purchases these ranges. This puts a pressure on the number of national brands the retailer still carries. Retailers are less likely to kill brands with a strong and loyal customer base.

High-equity brands are also better insulated against the switching to private labels behavior that is ubiquitous in recessions, if only because loyal customers incur higher switching costs when buying non-preferred items. High-equity brands are known to suffer less, and to recover faster, following a product-harm crisis. The same holds true when faced with an economic 

crisis.