Coke CEO Muhtar Kent: What 1B Future Middle Class Consumers Can Teach Marketers

What can 1 billion future middle class consumers teach Marketers? Muhtar Kent, the Coca-Cola CEO, thinks he knows the answer. It’s about investing in your brand — in good times and bad.  

At the recent AdCouncil annual dinner, I had the privilege of hearing Mr. Kent accept the annual Public Service Award. You may know the AdCouncil as the organization behind such famous Public Service Announcement (PSA) campaigns as, Smokey the Bear and “Only You Can Prevent Forest Fires;” and  The United Negro College Fund’s “A Mind is a Terrible Thing to Waste;” etc.  

Muhtar Kent -- Marketing Investments in Tough Times Pay Big Dividends

Beyond imploring the audience to continue its support of the AdCouncil, which was the obvious topic, Mr. Kent devoted his speech to making an impassioned plea to those present — Marketers, Ad Agencies, and the Media — about what Marketers should do during a recession.  

Learning from the Great Recession

The key learning? Well, it’s not about value marketing, it’s not about more predictive models, and it’s not about being more price competitive. It’s something more basic, but also more challenging for Marketers to do — invest. In Marketing. In brand building. Even when the market is bad. Really bad.  

Mr. Kent’s point was more than a brand plea–it was an economic one:  globally, 1 billion consumers will move into the middle class in the next 10 years. Let me say it differently: these are your future consumers and your future revenue stream–and they can’t afford your brand today. But that’s going to change.  

Brand Choice: Yours or Someone Else’s?

And when it does, they’ll be making a choice: your brand or someone else’s. The critical point is this: today, these 1B consumers probably don’t know your brand, its benefits, and why they should consider buying it in the future. Advertising and Marketing have a critical role to play in engaging these future consumers with your brand now, so that when they have the wherewithal to buy your brand in the future, they will.  

Increasing marketing spend boosts long-term ROI, even during recessionary times.

Investing in Marketing during a recession is tough. Challenging economic times scare everyone — CMO’s included. So, what’s the standard CMO response? Cut spending. Invest less. Economize wherever possible. I know, I’ve been an unfortunate actor in these kinds of plays before.  

Why Invest When Times Are Tough?

There’s now a sizable body of research which empirically proves that companies which invest in Marketing during downturns tend to outperform their competitors coming out of the downturn. What’s the evidence?  

  1. Advertising in Downturns Yields Better Financial Performance — John Quelch, a professor at the Harvard Business School, conducted a study which compared companies which followed one of two strategies–investing in Marketing or cutting back. Results showed a consistent pattern of superior performance for the companies which invested during tough times. Guest blogger Susan Kanefield Lauinger highlighted Quelch’s research and the temptation to make quick cuts in marketing dollars.
  2. Advertising in Downturns Builds Confidence — Nielsen IAG reviewed financial companies which invested in advertising during the recent economic crisis versus those which didn’t (Disclosure: I work for The Nielsen Company). The key learning? Firms which invested had higher confidence in them than those which didn’t.

It is more important than ever for financial institutions to build confidence among consumers.

But How To Do It ?

Fine you may say, but how do you continue investing in Marketing when sales are falling, revenue is down, and Wall Street continues to have high expectations for your quarterly profit? What’s a CMO to do?  

  • Educate Senior Management — The CMO has to educate the CEO and CFO so they understand and really believe that Marketing is an investment and not just another cost item. Show them the research cited above, walk them through case studies, and even find examples within your own company of where downturn Marketing has made a difference. Educating your C-Suite about the proper role and impact of Marketing is an on-going responsibility (read more in my post “What Do CEO’s Really Want From Marketing?”)
  • Drive Financial Accountability in Marketing — CMO’s must be committed to being accountable for the money they spend. The more the Marketing function can demonstrate that it spends money wisely and generates positive return of Marketing investment, the more likely CEO’s and CFO’s will support investments during a downturn. The CMO’s job is to demand financial and brand building accountability of the Marketing organization.

Courage is never in more short supply than when a CMO proposes to invest more when times are tough. But investing in a recession is a proven way to gain advantage versus competition. Whether you can get the money you need in the next downturn depends entirely on educating the C-Suite and being accountable for good financial results behind your Marketing initiatives.  

It’s really that simple. So simple, in fact, that 1 billion emerging middle class consumers already know this:  invest in your brand in good times and bad–or risk having them buy your competitor instead.  

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11 Responses to Coke CEO Muhtar Kent: What 1B Future Middle Class Consumers Can Teach Marketers

  1. Peter Bray says:

    Excellent blog. I will add to the observation “Courage is never in more short supply than when a CMO proposes to invest more when times are tough.” That investment should exceed the previous status quo to get back on the target’s radar and get them to respond. Show the courage to ‘go big or go home.’

  2. Gail Nelson says:

    Very compelling arguments. Thanks for another valuable post, Randall!

  3. Jose Luis De La Vega says:

    Great article, already send to all my senior leaders…

    • beardrs says:

      Hi Jose — Thanks for reading and commenting. Muhtar was quite inspiring in his conviction for the importance of marketing spend during downturns. Wouldn’t it be great if all CEO’s felt the same way? Thanks for sharing this with your team–I welcome their comments as well.

  4. Randall, thanks for being our eyes and ears. Another wrinkle that too many US CxOs overlook: most of these new 1B customers are NOT going to be in the US. Another fact: 25% of the global population is on the Internet and it’s increasing geometrically. Firms need to get fluent with mobile and social networking to forge relationships. When people attain middle class, it’s an inflection point, and they talk a lot *and* are seen as leaders.. huge word of mouth multiplier. All these things require investment and learning ahead of the pack because people look up to leaders, and to lead to have to be willing to take the risk that people won’t follow. On your marks… ,^)

    • beardrs says:

      Hi Chris — Thanks for reading the blog and commenting. Your points are excellent. Most of the emerging middle class growth is in the developing world, and people’s fluency with the web, mobile and social networking is indeed increasing dramatically. I recall from my experience in China that many consumer there were moving from no phone at all directly to mobile. And anyone who’s spent time in Korea knows that it is arguably the most advanced web culture on earth. So, your points are well taken that web, mobile and social media should all be key investment areas to tap the 1B opportunity.

  5. Excellent post Randall. I can easily say that this applies globally, across the entire spectrum of industry segments.

    • beardrs says:

      Hi Alex — I wrote the post primarily from a consumer and CPG perspective, but it’s interesting to hear that you think it applies across industries. More purchasing power moves consumers into all kinds of new categories. The one thing that remains true regardless of categories is that consumers perceptions of brands they haven’t used will be critically important to consideration. And firms that don’t invest adequately will bear the consequences.

  6. Mark Stoler says:

    Thanks so much, great post with useful information.

  7. Lan Guo says:

    A Nielsen UK study has found that all things being equal, a brand whose share of voice (SOV) is greater than its share of market (SOM) is more likely to gain market share. Based on analysis of 123 brands across categories, it found that on average a 10 point difference between SOV and SOM leads to 0.5% of extra market share growth. There’s no shortage of evidence but it does take courage! Lan

    • beardrs says:

      Hi Lan — Thanks for reading the blog and commenting. Interesting research that you cite; I’ve seen other research on the topic that is less conclusive. I think the challenges with SOV analyses are: a) it’s difficult to compare similar weights — e.g. the analysis is often done in $ or Lbs and we all know that advertisers pay different rates depending on their scale, participation in the upfront, etc.; and b) it’s very hard to measure SOV across all media platforms–e.g. TV, prints, web, etc. Lastly, as “earned media” becomes more and more important, it will become increasingly important for Marketers to measure this as well. All of which makes SOV analyses challenging to say the least. Having said all of this, I agree with your basic premise which is advertising when others aren’t–especially in a downturn–is generally a good thing to do.

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