Tuesday, 7 April 2009

CFO's and Shareholders are Killing Luxury Brands During this "Economic Re-Boot"!

Comment to an Ad Age article: Don't Damage Your Brand for Short-Term Gains in a Recession

While you are 100% right, Al, I'm just not sure that the 'free market' mentality of the average American shareholder allows them to care whether their demands for short-term gains kills the brands of the firms they 'invest' in (mediablogdotcom's comment about the "shelf life" of the average CMO is directly related to this -- CEO's use CMO's as scapegoats to hold onto their own positions).

In a recent CNN panel discussion the guy who advocated buying gold to protect your savings from vanishing in the crap shoot that stock and real estate investments have always been, immediately got shot down by an analyst who pointed out that anyone who bought gold over the past 40 years hasn't made decent profits. The only reaction to this astoundingly stupid retort was mild nodding from the panel.

You see, owning gold would have made every person in the world immune to this downturn as they WOULD NOT HAVE LOST ANY EQUITY. Yet most people nod along with to the notion that we must always be looking for profit at all costs, after all, that's the tenet at the root of capitalism.

With this mindset, shareholders are going to push for the firing of any C-suite employee who does not deliver short-term profits, so luxury brands are doomed -- UNLESS they employ very clever strategically creative thinkers to develop solid marketing tactics to avoid undermining their brands. As IQ is a relatively rare commodity (look at a bell curve) and the only reliable indicator of executive performance ( http://hbswk.hbs.edu/archive/5124.html ), most firms will very likely need to look outside their organization for the type of thinker they'll need to avoid making grave short-term mistakes.

Just listen to Starbuck's CEO a few weeks ago: "We've become the poster child for excess. … We are going to dispel this myth about a $4 cup of coffee," Schultz said in his presentation to shareholders. Out the other side of this 'economic re-boot' we're going through, he's going to rue the day he decided to steer his brand away from an enviable, hard-won luxury positioning -- but his shareholders want double-digit growth, globalization and marketing to the masses, not retention of brand equity, sadly. Most marketing folks are just going to hunker down and follow the prevailing wind, not innovate or strategize for the long term.

We need a few more Ries & Ries out there, but even more critically, we need CEOs who 'get' that sometimes you need to listen to really insightful, smart people, even if this thinking has to be outsourced in, horror of horrors, a period when shareholders are demanding they 'DO MORE WITH LESS!".

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