In the April 6 2009 issue of Ad Age, Al Ries wrote an interesting article on the cost of damaging your brand for short term gain during a recession. His position, with which I agree is stated in the first sentence of the article: A company can get in trouble if it changes its marketing strategy to cope with a short-term problem.
He goes on to discuss Packard vs. Cadillac. He notes that Packard was the premier luxury car of its day outselling Cadillac by almost 2-1 from 1925-1934. However in 1934, even though Packard still outsold Cadillac its sales had dropped by 85% from its boom year of 1929. Responding to the downturn (which had been going on for several years by then), Packard decided to enter the middle market. For the next 10 years sales boomed and from 1935-1941 Packard outsold Cadillac by 3-1.
However, Packard was losing its position as the premium brand. By 1950 Cadillac had surpassed Packard in sales and by 1957 Packard was out of business. Soon thereafter it was not uncommon to hear the high end product in any category being referred to as the “Cadillac of its class.” Many of my readers have never heard that phrase. Cadillac followed the Packard strategy (albeit 50 years later) with the Cimarron and today Cadillac is at best the #4 luxury car brand in sales behind Lexus, BMW and Mercedes.
The CEOs of public companies are often focused on keeping their jobs for the next 5-10 years. If you only need to have that time horizon, then you can follow their short-term strategies, as long as you get out before the ax falls. If you are trying to build a long-term valuable company, you need to pick a position that you can win with and hold it.