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The current backdrop for brands in the west

July 12, 2012

Ultimately brands and marketing are just a microcosm that co-exist and are influenced by much bigger scheme of things.

One individual looking at the very big picture is academic is Niall Ferguson, who is currently the Lawrence A. Tisch the Professor of History at Harvard and recently gave the prestigious BBC Reith Lecture series.

Ferguson’s main point in his first lecture in the Reith Series is that Western society and the institutions that inhabit it right now are being seriously called into question because he believes the current malaise isn’t about debt, but something much more systemic.

Most commentators who address that question tend to concern themselves with phenomena like excessive debt, mismanaged banks, widening inequality – that sort of thing. To my mind, however, these are nothing more than symptoms of an underlying institutional malaise – an Inglorious Revolution, if you like, which is undoing the achievements of half a millennium of Western institutional evolution.”

This is significant, because looking back over history as Ferguson has done, the ability for countries to grow and succeed is very dependent on the policies and actions employed by its institutions. He identifies the Glorious Revolution of 1688, as a key moment in Great Britain’s rise to power because it ushered in new laws, enabled the creation of the stock market and created financial instruments that allowed the country to borrow money at favorable rates.

Another significant issue Ferguson raises is the fact Western governments are mortgaging the future of younger generations to win the votes of the older generation; a concept that would not have been well received in late C18th France, where there was almost a moral obligation to think about the welfare of all generations; older, younger and those not even born.

“The heart of the matter is the way public debt allows the current generation of voters to live at the expense of those as yet too young to vote or as yet unborn. In this regard, the statistics commonly cited as government debt are themselves deeply misleading, for they encompass only the sums owed by governments in the form of bonds. The rapidly rising quantity of these bonds certainly implies a growing charge on those in employment, now and in the future, since – even if the current low rates of interest enjoyed by the biggest sovereign borrowers persist – the amount of money needed to service the debt must inexorably rise. But the official debts in the form of bonds do not include the often far larger unfunded liabilities of welfare schemes like – to give the biggest American programs – Medicare, Medicaid and Social Security.”

Ferguson’s suggestion is the root cause of all this is over-regulation and ability to burden individuals and business in layers of bureaucratic complexity, which ends up stifling progress.

In essence, what Ferguson is talking about is the New Normal, or the long-term low growth economy, a concept that is still extremely hard to grasp because we are so used to the notion of boom/bust, that flat lines make almost no sense to us. It’s a situation that our institutions seems ill equipped and ill prepared to deal with and somewhat constrained by short-term political goals.

While Ferguson may argue that institutional change is required, which makes for a great intellectual argument, but in reality this seems unlikely. Without the drastic change, it’s clear that standard of living and prosperity that many in the West enjoyed for decades is now so severely threatened by increased taxation to reduce debt and the rising cost of services that used to be provided by our public institutions.

All of this is compounded by the reality of an aging population who will re-prioritize their consumption and a younger generation, many who will have limited means, very little political voice and an uncertain future.

For brands operating in these conditions for long-periods of time, this extremely challenging and we are already well down the road of seeing this play out and manifest itself in markets; from the rise of private label, to the demise of brick and mortar retailers and through to the arrival of collaborative consumption.

Operating in such an environment needs radical discipline because there’s so little room for error- you really need to know who within your target audiences has both the inclination and the means to buy your brand and you need to be extremely clear about why your brand should be considered worthy of your target’s purchase and loyalty.

This backdrop is essential to consider because we are moment in marketing history where the world seems to be opening up to all kinds of possibilities and opportunities, just at a time when the guys controlling the purse strings are demanding ever more accountability for the reasons that have just been discussed.

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lowgrowth
newnormal
niall ferguon
reith