Ideas Made Well

When you read the headlines from the Deloitte report into post-recession US, you would think the right solution for brands would be to adopt aggressive pricing strategies. 79% of US shoppers believe that they have become “smarter shoppers” in the last 2 years, and 60% claim to have become more price conscious, utilising vouchers and coupons to a greater extent than previously.

However, there is a more interesting statistic from the same report – 75% believe that the financial crisis had caused them to realise which brands were important to them and which brands are less important to them.

This explains why the discounters have been doing well but also why the robust brands are doing well at the same time. The brands in the middle – the ones without a distinctive set of values – are the ones getting squeezed. Let’s hope that the natural instinct of consolidation in times of uncertainty doesn’t cause those brands to wither and die. This is a time for putting your best foot forward.

What do jokes, food recipes, perfume smells and fashion all have in common?

Well, it’s true that there are all thriving at the moment but the answer is that they have no copyright protection. So, it is totally legal for anyone to buy a designer dress and rip it off exactly and then sell it under a different brand name. In fact, many designers are now actively collaborating with the “fast fashion retailers”, who take their £500 T-shirt and do the £4.99 version of it literally days later. That designer makes zero money out of the £4.99 T-shirts.

This may seem rather perverse, but the reality is that everyone ends up better off. The designer sells more of their designs, because they have the kudos of being worthy of copying, hence increasing the appeal of an original. The target market for the £500 version is very different to the £4.99 version. Lots more people get access to the design itself. The fast fashion houses don’t have to use so many designers churning out unproven designs, and the fashion industry ends up making more money in total.

This is only possible because of the desirability of brands, which of course, are protected by copyright laws.

Conclusive proof, if it were still needed, that brands make the world go round.

Martin Sorrell has apparently admitted last week that growth prospects in the West are weak for the foreseeable future.

Governments all over the place are finding creative and not so creative ways of reducing spending and extracting more money into their coffers. Companies are cutting back wherever they can. Borrowing money for consumers is becoming harder and harder, with mortgages being particularly difficult to obtain.

Meanwhile Apple goes from strength to strength and many companies, like GroupOn, the shopping voucher company, continue to expand into different countries, seemingly untouched by the purveyors of doom and gloom. Indeed Start itself has expanded its geographical footprint in recent months with some really impressive results.

If economists are to be believed, then the key to success is to keep on innovating and expanding when everyone else is retrenching – a sure fire way of gaining a competitive advantage.

Yet why is this so hard for companies to take on board?

The depth of evidence in history is extraordinarily in support of the case for investment behind innovation. It’s a bit like someone being shown all the evidence that 2+2=4, yet deciding that in fact they are going to go down the strategy equivalent of 2+2=3. You could understand it if there simply was no access to money, but for most large corporations, this isn’t an issue. It is, instead, a mindset; an aversion to any form of perceived risk, that drives this illogical behaviour.

The ultimate irony is that the bigger risk will be faced by those companies who ignore growth opportunities at this time.