You Can’t Pause Your Brand. Is It Ready for a Downturn?

As we face the perfect storm of war, rising energy prices, plummeting valuations, stagflation and consumer belt-tightening, it’s clear there are few safe havens from the turbulence. Business leaders are under pressure to act decisively. “Brand investment” is rightly being scrutinized, but the majority of the conversation is focused on heated debates about cutting advertising expenditure. This is a valid question but the wrong starting point. The key variable here isn’t media investment in brand, it’s investment of leadership focus and operational excellence in brand. The lessons from the past three decades show that the companies that thrive in economic downturns are those that first ensure their brand fundamentals are ready to address the evolved commercial and cultural context. For these companies, brand becomes a critical leadership tool to help navigate the inevitable financial, consumer, employee and cultural challenges. It’s helpful to unpack how the uncertainty is impacting different stakeholders in the future of commerce. We first saw the impact on investors, with a slew of statements, notably Sequoia’s Crucible keynote, all ringing the bell for the end of blitzscaling in favor of a focus on unit economics and the postponement of multiple initial public offerings. In Uncertain Times, a ‘Play It Safe’ Strategy for Brands Will Be Anything But We saw immediate category casualties, notably the heralding of a sustained "crypto winter" of low prices and meager returns, with bitcoin and ethereum halving in value and the much hyped Celsius actually blocking customer withdrawals. Signals from other categories were more mixed: SaaS gave us bright spots like Oracle shares leaping double digits based on strong cloud performance and Salesforce delivering incredible Q1 results. At the same time, we saw whiplash scenarios like automation software startup Hyperscience laying off 25% of its staff just three months after a $100 million funding round. In media, we saw increased pressure on traditional players, notably Warner Bros. Discovery's plans to cut up to 30% of its advertising sales force, eliminating nearly 1,000 jobs. But we’ve also seen decisive, positive actions: Zalando continuing their mission of reimagining a more fulfilling mainstream fashion, taking a majority stake in hipster media platform HighSnobiety and Pinterest doubling down on its role as the world’s inspiration company with a groundbreaking deal with Tastemade. We’re seeing many startup founders experiencing the first economic crisis of their professional careers, learning to live with the double investor double whammy of increased skepticism and decreased capital. Hyperscience’s CEO Peter Brodsky stepped down, attracting a lot of heat for engaging in a hiring blitz even as product-market fit was under question. Meanwhile Coinbase’s Brian Armstrong has endured a torrid time, reporting Q1 declines, dealing with public employee rebellions and announcing an 18% cut of staff after tripling headcount in 2021. So what lessons will help brand leaders navigate this new uncertainty? Clarity matters more than category The first lesson is that the decisive variable in leaders’ ability to meet the moment is less about category and more about clarity of vision and purpose. Without the latter, we’re seeing tech leaders struggle to adapt with confidence. It’s no coincidence that Salesforce and Oracle have strong brand narratives and visible mission-driven leaders, with the latter recently announcing a grand vision to become more of a medical information company than a technology company. Turning to Pinterest and Zalando, while both stocks have taken a recent pummeling, both have come out swinging in June with decisive mission-driven moves, balancing the need for short-term action and long-term brand building. Brand helps you cut with a scalpel, not a cleaver As Sequoia’s Crucible keynote noted, “This is not a time to panic. It is a time to pause and reassess.” Cost-cutting is an important tactic—not a strategy, which requires reprioritization and long-term vision. Leaders need to make difficult decisions relatively quickly or risk hemorrhaging value and morale. Harvard Business Review convincingly argued that previous recessions have demonstrated brand strategy fundamentals are a proven tool to ensure leaders are cutting with scalpel-like precision rather than flailing with a cleaver and cursing long-term damage. For example, in 2014, when Airbnb landed on “creating a world where everyone can belong anywhere” as the overall brand mission and driver of the company experience, Brian Chesky was able to quickly cut 25% of all projects because they were not furthering the mission, freeing up resources and capital in the process. Nurture missionaries over mercenaries As the Coinbase example shows, declining capital leads to declining confidence, so keeping your best talent motivated and loyal will be harder in the context of plummeting stock options and delayed IPOs. There is no silver bullet here, but leaning authentically into purpose and values is a proven way for leaders to build a more convicted, missionary mindset and help quell inevitable employee unrest about the direction of the business. Bolstering your employee brand will also help you attract the best unsettled external talent, equipping you to win in the longer-term battle for top talent—something the venture capitalists are continually advocating for portfolio leaders to prioritize, downturn notwithstanding. Purposeful adaptation The “double down on your current brand and spend your way out of the recession” line of advice is too dangerous for most. Yes, some brands are born recession-ready, but most will need to evolve to meet the moment. But if these pivots are playing both strategic offense as well as tactical defense, then the results can be spectacular. A common theme across the companies that most successfully navigated previous downturns is decisive moves guided by clarity on purpose and evolved value proposition—from Google and Paypal in the early ’00s to Airbnb and Doordash in 2020. 3 questions to prepare for the storm ahead Brand strategy ultimately boils down to answering these big questions: Product-market fit: Is your value proposition reflecting the evolution of category drivers?Purpose-culture fit: Is your purpose still relevant to the most urgent universal tensions?Positioning-community fit: Is your brand justifying its place in people's wallets when every penny is being scrutinized? Is it helping position you as a functional or emotional necessity? If the answer is no, it’s time to take action. You can pause your IPO until things calm down, but you can’t pause your brand. As brand leaders, we’re effectively asking customers and employees to invest their time and money with us every day. So the least we can do is invest our own time to make sure our brands are ready to meet this moment. Marketing Is Never More Vital Than in a Bad Economy

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You Can’t Pause Your Brand. Is It Ready for an Economic Downturn?

Making your company a beacon in the dark storms ahead

Neil Barrie

Jonathan Mildenhall

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Neil Barrie

Jonathan Mildenhall