Learning from the past. How Mars thrived during the Russian financial crisis of 1998.
With an immediate drop in brand engagement brought on by a global crisis, it's entirely natural for brand managers around the globe to be looking at their quickly depleting marketing budgets and considering dropping the lot into fast, cheap, short-term promotions. But that would be a huge mistake.
'No amount of hot deals and clever sales activation can stimulate a market that is currently terrified, locked inside their homes and unsure of their future.' Mark Ritson
However, with the sudden, steep budget cuts that are on the table for a lot of marketing professionals worldwide, it's more important than ever to learn lessons from brand experts in the past who've navigated similar challenges. There is one inescapable lesson that keeps coming forward; it's more economical to keep your brand fires stoked throughout a crisis than it is to retry to reignite them after snuffing them out.
August 1998. Just as Aerosmith's 'I Don't Want To Miss A Thing' crested the peak of its popularity and the aptly named film 'Armageddon' opened to international audiences, the Kremlin announced that it would default on all domestic and foreign debt. The value of the rouble crashed right through the floor. Inflation reached 84%, people lost their savings, credit dried up. Large, foreign-owned companies quickly scaled back or abandoned their operations in Russia, and small stores, with money tied up in products on shelves, were left in a precarious financial position.
Mars Incorporated, the mammoth private company with a history of decentralised organisational freedom, faced a big choice. Their sales revenue projections told a story of depreciating financial returns, and there was little hope of a rapid economic recovery. However, the decision was to take a long-term approach and invest in establishing a concrete position in consumers lives by looking at solving two core issues in their marketing approach: their physical availability and mental availability.
With no orders, Mars produced millions of dollars worth of products, which they handed over to distributors on consignment, who passed the products on to thousands of small Russian retailers. There was an immediate effect – the arrangement allowed small retailers to fill their shelves with Mars products risk-free and with no upfront costs, which allowed consumers access to buy the products. With the physical availability problem solved, Mars scaled back new product development and packaging changes, which in combination with running a small number of brand-led ads more often strengthened their brands' mental availability.
By the time Russia's economy had begun to bounce back, and consumers returned to large stores in significant numbers, Mars had secured an enviable market position. With over 500,000 secure distribution points and long-term, consistent branding leading to greater mental availability, Russia was well on it's way to becoming one of Mars most financially valuable markets worldwide.
Considering the current crisis, the issues facing brands today look different but can be boiled down to fractures in these same two core pillars. Physical availability – due to the need for social distancing – and mental availability – again due to the limited amount of exposure brands have in consumer’s lives at home. All this compounded by weaker purchasing power caused by a jump in unemployment. These are issues that won’t be solved overnight for a lot of brands, but with care and an eye on history, it’s worth remembering that the brands who manage to improve their fundamental physical and mental availability, don't just survive crises, they build better businesses.