Brand Loyalty in Economic Turmoil

What's up? Welcome to STOKE Sessions. We're kicking off season three with a banger of an episode. I'm joined today by Brad Hendrickson and Etienne Bruwer, and we're talking all about risk versus reward in a downed or sketchy market. Hope you enjoy the show. Let's get into it.

Yeah. I mean, I think from our position, sitting as an agency, it's been interesting to have the opportunity to interact with so many different parties, given the economic turmoil we've kind of been sitting in, both from a brand side, manufacturer side and retail side. We kind of get all the opinions, insights and all of that trickled up to us that allows us to have this vantage point that I don't think a lot of people have an opportunity to see.

I think some of the big factors that a lot of the brands that we've spoken to from whether they're our clients or other brands and other councils and conversations is in this era kind of marked by this global tariff shift, inflationary pressures, I think consumer confidence is at an all time low both from do we know how we're spending our money, what

kind of money am I going to need to be able to afford my groceries in six months. I think all brands are facing this defining moment.

The main thing that I see a lot of is brands retreating, cutting budgets, raising prices, and in some circumstances that is absolutely unavoidable, but they're really bracing for downturns, but there are these bright shining lights of brands that are seeing what the moment truly means to them, which is an opportunity. It's an opportunity to gain market share, to deepen consumer loyalty, and really invest in building their brands and building momentum while others are pulling back, which is a really interesting opportunity for those that are willing to take that calculated risk.

Yeah. And it's interesting. We just had a a comment today where, like, that opportunity to build customer loyalty and kind of take advantage of the downturn kind of it can play out in a few different ways. Right?

It could be that you're doubling down on marketing efforts and trying to grab attention while people are kind of retracting, like you said. It can also mean that you do what it takes to keep your prices low and to keep the customer happy in that way where everyone else, you know, in in your industry or your category might be raising prices due to everything that's going on, which, like you said, in some cases is unavoidable. But it's interesting. There's a there's a few ways to play this.

And obviously, you know, the the other interesting take that we get is that we've got operations that are cross seas. Right? Like, we see what's going on in the US, but then ATN, we've got a really good vantage point from South Africa and from other parts of the world as well. I'm curious to see kind of what your take is getting to sit in both sides, both in the US and in rest of the world.

Yeah, look, what I always find interesting about this conversation is, A, that the amount of times I've been in a room where the conversation comes up. And, you know, yes, at the moment, the theme is tariffs and it's causing international uncertainty and it's causing, you know, brands and companies to look at costs and expenses because that's the natural reaction, right? It happens globally. But, you know, whenever there's a little bit of market uncertainty and there's, you know, downturn consumer spend, you know, tightens up a little bit, the same thing happens.

There's data and that's the nice thing, that's the position we're in is we've got access to so much clear data on what's happened in the big recession in the 1980s, the recession in two thousand and eight, two thousand and nine, like sort of that period where, you know, globally there was, let's call it tough times for the sake of the conversation. I don't want to call it a recession. But this data that proves that the brands that did not let go of activity were the guys that won. Those were the guys that got back market share.

Those were the guys that actually ended up stronger on the other side. And the analogy that I like to use is I think about it like think about a buyer's market in property. When markets are down,

everyone knows it's the best time to invest. It's the best time to go and buy up property as an example.

Know, there's a lot of analogies we can Stock market, right? Yeah. Same with the stock market.

And it's no different if you're a CPG brand. It's no different in this time.

Yes, I understand it's a recession. I understand you've got budget. I understand, you know, you've got a business to run and you've, you know, there's cash flow constraints and there's all sorts of stuff. But the thing that in my opinion is completely factual.

In other words, it shouldn't be a conversation or a debate. Is it an opportunity? And for that, the data is clear. Downmarket is an opportunity for brands.

It's the best opportunity that you'll probably ever find to take market share.

You know, if you just think about it, because what happens is everyone is in the same position. Spend is less for everyone.

You know, more opportunities are available. Spend in marketing decreases across the board globally. Like a lot of brands aren't in the position to say, look, I can actually fund this process. I can fund this period.

Can, you know, hammer down and make sure my spend stays the same. What very select few companies do. And those are the guys who win is that actually say, I'm going to increase spend for this period because they see the opportunity. But, you know, the few who can do that and the few who have the insight and the understanding that that's what works, do it and they end up winning.

All I'm trying to say is that it shouldn't really be a conversation whether what's the right thing to do. The right thing to do is use the opportunity. Seize the moment if you're a brand because downtime is an opportunity.

I am however mature and realistic enough to know that everyone's not in the position where they can. A lot of companies just don't have the ability to say, look, I'm going to float this for the next twenty four months and wait for the turn and then benefit on this growth later on. But to the ones who can, you don't have a choice. Just you need to be very smart about the channels because that's gonna be different. You're gonna have to be very, very strategic about how you approach it because the same tactics don't necessarily work in these types of market conditions. But whether you should double down if you can, to me, that's just a no brainer, if I can use that overused term.

Yeah. It's it's so tough. I mean, it like, you look at the stock market and you look at the volatility in the stock market, especially over the last couple months since the tariff conversations have really, like, taken shape or at least started to take shape. I don't know exactly what shape they're in right now, but, you know, you watch the start stock market, and we've had, like, some of the highest, like, peaks and valleys, craziest ups and downs that we've seen.

Yeah.

I guess what I'm curious of is like, you know, this time feels different. And when you're trying to run a business and do risk analysis and think about actually doubling down on opportunity, it's pretty tough from, you know, a a board level or, you know, an executive level to say, is this time different, or is it the same as as every other time in the past, like the nineteen eighties and and two thousand eights and and all of that.

Curious to get your guys' take on, like, just overall risk analysis. Like, how do you look at this market right now and say, this is a risk I'm willing to take. How do you put parameters on that risk and say, you know, from a healthy level, we can we can take advantage of the opportunity, but by how much? Right?

I think there's there's obviously I think it's a there's a standout companies.

Like, Brad, I know you have a couple examples of companies that have done this in the past and done this recently, which is which is really cool to see. But some of those companies are like, they're playing with just, you know, years and years and years worth of, you know, cash flow that that that doesn't it's not as big of an issue for them. And those are standout companies. Right? But for, you know, your more everyday, you know, mid to mid to large sized businesses, how do you mitigate the risk? What's like a responsible take on on how to go about that?

Yeah. I mean, think responsibility is a pretty broad term for how to approach something like this. I mean, every business manages their economics and margins in a very specific way.

And so let's even just use the statement he made of doubling down. That doesn't mean that you have to increase your budget or double down on your risk. I think what it also means is coming to market with a really cohesive message to your customers.

Everybody is sitting at home concerned about what's going on and a brand's ability to communicate humanely and to actually try and spark some of that emotional connection with a customer is a whole other way of doing it. And so I think some brands as they dial back but continue to run through the same marketing motions, activities, narrative to their customers are also missing an opportunity because you have a time now to create a cohesive message even if it's at a smaller scale of how you're standing with customers that are struggling.

If you are increasing your prices, the reasons, the rationale, how you're still trying to maintain quality of your product or maintain some type of customer service aspect to it that without that income, you would be unable to continue providing the same value as a brand.

But there's lots of channels that are relatively inexpensive to relay this message. You have your social channels, and I think things like that brands overlook is a message from your CEO. Talk to your customers about what's going on. Let them know that you are seeing it, living it, breathing it. And it's not something that you're just sitting back and hoping gets better. You're actively making your product and the opportunity for a customer to purchase it a lot more accessible.

I think you nailed it on the head with the big brands. You look at like what Ford has done by coming out and saying, we're offering employee pricing for everybody. And they're in a far different position than

a smaller brand. Even a brand that's doing nine figures in the market doesn't have that opportunity to say, we're gonna eat a ton of margin for the next period of time in the hopes that we're gonna grow because they could be out of business.

But what they do is they have an opportunity to let you know how they're working with retailers, how they're continuing to service you as their end user and do it in a way that feels like they actually have care and concern for the customer rather than just moving through things like everything is okay and running campaigns throughout the summer like everything is all rosy when in reality, sales are gonna decline, prices at the retail level have increased, it's an opportunity to talk to the customer and I think that's really important.

Matt, if I can weigh in on your question there, which is, is this the same or is it different? Right? And I think it's honestly too soon to tell because at the moment what's causing the budget strings to be tightened is uncertainty, not fact. At the moment, there's you know, there's hints towards, yes, consumer spend is going to slow down. There's doom and gloom around the fact that there might be a recession coming.

This is not new. This is stuff that's been happening for years and years. It's always the one side of the argument, which is this is the end of everything. There's no way that we're gonna get through this.

We always do get through it. And the thing that again, back to my original point, the thing that never changes is the brands that seize the opportunity and the companies that seize the opportunity in downtimes are the ones who win long term afterwards. There's thousands and thousands of case studies on that principle. Now, that doesn't mean that now necessarily is the right time during uncertainty.

But the strings are still tightening up. Saturation is still less now than what it was two or three months ago. Right. So that does remain true as well. So I do think that it's uncertainty causes, think about private equity investment isn't happening at the rate that it was happening six months ago, just after the election basically in the US. You know, those rates have come down quite substantially with this uncertainty that's in the market.

If this leads to a full on recession, which in my opinion is worst case scenario, right, even that's temporary.

It'll be a temporary downturn. And if you're a business that is at all capable of, you know, sustaining until you get to that point, then do. Again, on Brad's point, I want to fully agree that doesn't necessarily mean go and double your marketing budget. I'm not unrealistic. I know most companies don't have the ability to go and do that.

Some do, but there's smart ways to go and look at it. Like I think if I can use the example of Ford and their employee cost, they're just being really, really tactical and smart

because they know that what this does is it shows loyalty to our customer base. Retention is five times cheaper than acquiring new customers. So let's play into that cost model a little bit. So there's some reduction in value saves that's happening over there. And what they're doing is they're focusing on in tough times that matters the most, that has the ability to contribute the most towards brand loyalty is customer experience, right? So that's just another example of smart tactical application of marketing spend.

That's kind of what I'm saying is that if I can give any advice to any CEO sitting in the position today, asking himself the question, what do I have to do with my marketing communication spend? Is be very strategic. This is an opportunity more than what it is a threat. And if you're gonna be smart about the next few months, you're gonna end up stronger at the end of the period.

And that needs to be the principal decision.

If that's your core, if that's how you apply your logic, if that's gonna be how you unpack what you're gonna do, work within your means. Don't overextend. It's not necessary.

Depending on your industry, I mean, do believe that there's gonna be some industries at the moment who's gonna, you know, who can really benefit from what's about to happen and their opportunity and scale is bigger. They might considering doubling down and actually investing additional capital into the process. But in most instances, just be responsible, but don't miss the opportunity because don't sit back and wait. Because that's what ninety percent of ninety five percent, if not more of the world's going to do is they're going to sit back and wait.

And all of those guys are gonna lose, lose, lose, lose, lose during the downtime. And they're gonna have to, they're gonna get at the end of the down period. They're gonna have to rebuild, rebuild, rebuild, rebuild again. The guys who are saying, look, I'm seizing this opportunity, I'm seeing it as an opportunity.

That principal decision has been made. Those guys are gonna grind during this period. They're gonna be innovative. They're gonna look for ways to take market share from their competitors.

They're gonna look for ways to stay relevant.

Ford's example, again, awesome example of how they're connecting that to brand loyalty, showing their care in a really meaningful way. But actually, it's quite smart as well from a tactical point of view. Those guys are going to end up stronger at the end of the downturn period immediately. They're not going to have to rebuild for two or three years to get back to where they were. They're going to be stronger the day that it turns. And that's what you want.

Yeah. Think that's the that's the big point is that, you know, through through the other side of this is they don't have to climb a hill now. They're already at the, you know, they're already at the peak of it and they can start using that momentum that they've already built.

Yeah. That's really cool insight. Brad, I know you had a couple other examples that you had pulled up. I think there was maybe another car brand in there.

Did you wanna walk through any of those?

I think they all share somewhat similar sentiments. And I look at and what I kinda did was analyze the last five or so years. Obviously, when COVID hit, it was a relatively similar feeling, maybe even more dramatic. And the start stop was something we had not dealt with ever in this type of climate.

So I tried to quant it into that specific timeframe, but looking at like some of the CPG brands, which I think is the bread and butter of what we always like to talk about.

I looked at a couple large brands like General Mills and Unilever and what they did in those timeframes. And there was a lot of cost absorption on their side and that was the message that they gave to their customers is in these downturns, we're here for you and we wanna make sure that you can still afford the products that we know that you need, that we're maintaining the same quality and a brand that you can trust.

But then you have other brands. You look at Olipop, for example, which is one of those brands a lot of the M and A conversations are very centered around.

After COVID, the beverage category skyrocketed. Inflation, cost of materials, supply chain, everything really hit at one time for those companies that need to source things multiple different areas.

And really what they did during that time was yes, they were impacted a little bit by the price increase which was across the entire category but really doubling down on those brand values and what they were bringing to their customers and reminding them what it means to be an Olipop customer is the health values, the exclusives that they were providing retailers and the educational content behind their product continue to reinforce that message at the customer level as to why when I'm still making decisions as to what to put in my cart, Olipops reminding me that they are a necessity that I need to be having rather than just switching to somebody because maybe they're ten cents cheaper or whatever it is.

I think just amplifying E's point when we're talking about private equity and M and A, there's lots of conversations. And right before this tariff thing hit, M and A and CPG was up and coming. There was brands getting acquired by large ventures at a pretty rapid rate. And you look at the revenue and the multiples and what a lot of the M and A looks like is they're paying for the story and the community.

They're paying for the brand and the brand equity not necessarily the sales velocity or the distribution. In some cases that is a value add but they're buying these brands that have large amounts of customer loyalty and communities on social networks and those that are diehards around it. And when you're looking at this type of downturn, brands need to continue amplifying that message because like E said, you come out of this, you're gonna have to dig out of that hole. At a worst case, you can help maintain and continue building that community and sustaining the community.

So when you come out of this, you're a step ahead of those that felt like they had to take a dive based on setting down the sandbags in case the hurricane hits the shore type of mentality.

So I think those types of things are really important to consider. And as E said, when CEOs are looking at what to do, being strategic in that manner of how do I at least maintain my customer affinity levels at the rate that they're at? So when we come out of this inevitably because we always do, then I can really put the pedal down and continue growing because those are the values that these private equity firms and those interested in rolling up these companies within CPG are really looking for.

Go ahead.

Sorry, Matt, you go. No, I'm thinking about something that's not necessarily directly in line with the conversation we're having right now, but it is top of mind for me that yes, the tariffs is causing everyone to have this, you know, resistance to a lot of people are saying, let's just hold back. Let's just wait and see what happens. And another very strong argument in my opinion is we're living in a time where change is more frequent and faster than what it's ever been before. If you're still worried about the implication of the tariffs, you should be more worried about the implication of the war that it's creating within these companies. If you look at what's happening on TikTok at the moment with all the Chinese factories going and saying, but wait, look, we're look at what we're actually creating for you.

You're paying for a made in Italy bag or you're paying for the stuff that's actually getting made over here for five bucks.

That loyalty that's broken. What changes that gonna bring? Think about AI. AI is, I don't know of an industry at the moment that's not directly affected by the use and application of AI. Change in the times we're living in is constant.

And I think that shouldn't be, the fact that this uncertainty is causing the problem is probably something that gets a bit under my skin because it shouldn't be that. It should just be a case of, look, it's yes, uncertainty, but that's not the opportunity. The holding of the purse strings is the opportunity because you're gonna have a period of time where there's desaturation within the market. Exploit it. Find a way.

Find a way to leverage that as a brand. And the ones who do like in any down market are gonna be the guys that win at the end of the day. I think I've made that same point about three times now.

So I'll stop making the point, but I'm No, it's a good point.

Yeah, and we're always going from what it seems like is a fear based buzzword. Yeah. Two thousand and eight, two thousand and nine recession, then the word COVID, then

the word AI, now the word tariff. And there's always something that's an inherent risk to every business and every category.

And risk mitigation should be a part of every businesses day to day. You're always looking at ways to mitigate risks, whether it's overspend, whether it's price fluctuation or price volatility in the market or from supply chain. There's always inherent risks to your business. And those that continue to learn from this and prepare a little bit better are the ones that have a really great opportunity.

I think a lot of brands that are kind of shunning back a little bit are potentially ones that weren't as prepared or thought we just came out of the last one, we can't possibly go into something else. And so when you talk about risk mitigation, I think the actual word is preparedness. And how are you actually managing your business on a day to day basis to avoid these types of ebbs and flows where we talk about tariffs today. What's gonna be the word we talk about in July and August?

What's the next risk that's gonna come and disrupt everything? So I think that's always an interesting thing to talk about.

Then I think social media has sped that up too. Right? Like, the Yeah. You're so right.

The the the fear that, like, the the temperature of of fear and the fear of, you know, kind of pushing that we see, anything that we can take advantage of, it seems like it's like, oh, here's another thing for people to be afraid of. And I think at a certain point, you have to just thicken your skin and and be weathered enough to say, I'm pushing through no matter what the thing is that hits me next. You know? It was it was funny yesterday because we're on a call.

I think, Brad, you were on the call with me, and, we're sitting here talking to one of the clients, all of a sudden, there's an earthquake in California, and everything starts rattling. And one of the first things that went through my mind was like, here we go again. Like, here's another thing to make a headline, you know? And like, we just need to smooth things out.

Just something to add to the chaos. Yeah. Yeah. Yeah. I wanna quick I want to just highlight again that that's really the crux of it is that people are treating it as risk mitigation and risk management where it shouldn't be that it should be change management because I don't think it's going away.

I think that for the foreseeable future, this is how CEOs need to think about their businesses. Change are gonna be frequent, regular.

You know, the ups and the downs are gonna be amplified. Market shifts are gonna happen at faster rates than what we've ever been used to in history.

So if your stance is going to be fear based, risk mitigation based, you're going to miss the opportunities. You're going to miss the time it takes to execute and you're going to just miss out on opportunities all the time. You need to take a stance of this is change management. This is not part of my job. This is part of how things work. Let's have that mind frame.

Let's have a positive view on it, not a risk fear based view on it.

And that's how you're actually going to capitalize on the stuff that's happening.

Easier said than done. I get it. It has to be the stance. It has to be the stance that people take because that's the guys who are going to win at the end of the day.

Yeah, agree.

Very good. Yeah. The only constant is change, right?

Yeah. Yeah, At a hell of a rate. At one hell of a Yeah.

That's what we have to get used to. Yeah.

Yeah. And I mean, prepare for it to get even faster. I just saw a headline yesterday saying that NVIDIA is investing, I think, half a trillion dollars on a new supercomputer manufacturing center here in the US. And I mean, the race to quantum computing and the next step that we take in AI when that happens.

I mean, I always kind of hear the comment that quantum computing is always like two years away, right? It's like, Oh man, we're within two years of hitting it. But I mean, when that when that becomes a reality, hold on to your shorts because it's gonna get gnarly real quick. And AI is gonna be something totally different than what we know of it today.

And the the pace at which things change is just gonna be exponentially crazy to go through. But it's exciting too. Right? And like same principle applies.

When AI first started making mainstream headlines, it was like, oh my gosh, this is crazy. It's gonna take my job. And I think, you know, as we've progressed through that over the last two or three years, it's been like, well, this is gonna take some people's jobs. And it's the people that sit back and don't do anything with it that are gonna lose out.

Right? People that kind of take the reins and say, I'm gonna use this to propel myself, my business, my workforce, my team.

Those are the people that will win. And and I forget who said it, but it's like AI is not gonna take your job, but somebody who knows how to use AI will.

And I think that's kind of the same principle that we're talking about with the, you know, the market shifts and the volatility in the in the market right now.

And I think it's a good point to, you know, to CEOs. Be bold. Be be strong and and be confident.

Take risk when it's time and seize opportunity every chance you get. Do it in a strategic, impactful manner. And yeah, hold on because we're moving.

Yeah. Yeah. It's gonna be a roller coaster.

It's gonna be a roller coaster. Yeah. And be pragmatic.

Be assertive, be aggressive.

And again, you have to maintain the healthy levels within your business. But instead of sitting back, like you said, Matt, and waiting for something to happen, jump at the opportunity and view it as a way for you to get a little bit ahead and be a pragmatic problem solving CEO as opposed to one that's just sitting there kind of waiting for the tides to change.

Yeah, it's the worst stance to Is this principle of waiting it out is just the worst stance to take at this time. It is you have to figure out, know that change is coming and strategically apply yourself.

If I look at our industry, right, we're in marketing, advertising, communication, content creation.

What we've been doing day to day for the last decade is changing at a day to day rate at the moment.

But because we have the mindset that, guys, all that's changing is the actual approach is changing.

The need, our clients all still need the same thing. I to sell my product. I need to position my brand. I need to build consumer base.

I need to gain market share. Those requirements, no matter what happens with AI, no matter what happens in the world, those requirements are still going to be there. So if our mind frame was, Oh, shit, everything's changing. What are we going to do?

How are we going to handle this? You'll go into a state of panic and fear and wait for things to happen. But because we think about it differently, we think about it like, look, what we do is never going to go away. It's going to stay there.

So as long as we're on top of, all right, how does it work today? What are the channels that are effective in the times we are living on? How is things navigating and migrating? As long as you've got that positive viewpoint on it.

And again, you see every time something like this happens, if you're an early adopter, you're ahead of the curve, it's an opportunity.

Right? I know in MAG it's culture. So that's how we believe. That's why we call ourselves a growth company.

Because it doesn't matter what the tactic or the channel is. What matters is, are we growing? Are we heading in the right direction? Are we learning what we need to learn fast enough and adopting fast enough?

I wish for all of our clients and for everyone who's got a brand and a company out there to apply the same, just the principle, it's all. Just make the principle decision that it's not a, it's not necessarily a bad thing. See it as an opportunity. And then the rest you'll unpack and figure out as you go.

Yeah. Hope that made some sense at least.

Definitely does. Okay.

I'm positive about it. Yeah.

To go full circle, it's a it is a unique opportunity and and vantage point that we sit in because we get to work with so many different brands. Right? We get to see multiple industries, many concentrated in the c p CPG space, but it's a it's a cool vantage point because we get to take all of the inputs from all these companies and see the growth trajectory that everyone's on and what tactics are working, you know, here versus there, this industry versus that, and then get to apply that for the the betterment of all. So, yeah, it's cool.

I'm excited to see where things go in, you know, the next thirty to sixty days. I'm excited to see where things go in the next two years for sure. And we'll see where this whole quantum computing thing lands us. But I think the message being before we close this out is that like for the CEOs, the CMOs, and the people running businesses out there, be bold, take the opportunity, and go with it.

And we hope to see everybody grow. Hope to see everybody make good moves over the next few months. There's definitely gonna be a lot of, you know, a lot of risk. But if you can turn your mindset into seeing the opportunity and being comfortable in change, I think you're going to go far and long.

Said. Agreed. Yeah. Now is a time. Now is an opportunity. Seize it.

Do not take a backseat and wait.

To me, that's the message. Don't wait.

Don't wait because no matter, then your best possible outcome is you're gonna lose something, either market share or revenue or margin. If you just sit back and wait, there's no good that can come from that. So rather see it as an opportunity and take that approach to it. That would be my summary of it all.

Very cool. Gentlemen, I appreciate your time We'll go ahead and close this out and look forward to seeing everybody in the next episode. Cheers.

Cool. Thanks for the the Chat soon. Cheers. Bye bye.