When it comes to maintaining a premium corporate identity, Martha Stewart Living Omnimedia has shown us how not to do it. The primary lesson from MSLO: It is easy to lower the value of a brand and much more difficult to raise the value of a brand.

Last week CEO Susan Lyne resigned from the company, having taken over MSLO in 2005 while Martha was preparing to try on the latest in ankle bracelets. During Lyne’s tenure, the stock price lost over 70% of its value. Lyne had had some previous successful ventures at ABC television, as well as launching Premiere Magazine. So what went wrong?

Many would blame Martha Stewart herself. How can you sustain a company brand around one personality, particularly when that personality is convicted on four felony counts of obstructing a feeral securities investigation? And she is a bit passe, no? Today it’s Rachel Ray and iron chefs. Still, Martha had many loyal fans.

A much deeper issue was in the comapny’s merchandising. Much like Harley-Davidson did in the ’80’s, Martha Stewart went for cash gain and cheap marketshare in 1997. They struck a deal with Kmart, who was in bankruptcy at that time. Why, many colleagues have asked me, would someone like Martha Stewart sell her merchandise in Kmart? According to Slate’s James Ledbetter, Kmart agreed to pay a minimum of $40M a year in royalties to MSLO through January 2003. For a while the cash cow concept worked in MSLO’s favor. But the struggling Kmart never got on its feet, merging with Sears in 2005. From 2003-2007, Kmart did not sell enough of Martha merchandise to pay anywhere near that original royalty. So the cash flow dries up and the Martha merchandise is selling next to the end-cap of cheap motor oil. And today, here’s Martha trying to pitch her brand as a premium buy at Macy’s. So which is it? Upscale premium or mass commodity? The market doesn’t like to view a brand with double vision. Hard on the yes, you know? And to make matters worse, MSLO has also cut a merchandising deal with Costco!

The simple rule of thumb is that you cannot extend a brand that far and expect it to retain its value. At best, MSLO should have created a low-end subbrand that could have stood for a price-value without trashing the entire brand (even GAP got that one right!). You need to manage your brand as a portfolio. You need to think long-term and not chase the easy dollars into commodity land.

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OK, we are in a recession. The question is what do you do about it? How should you adapt your marketing strategy? How can you retain the value of your brand during the downturn?

Rule # 1. Don’t panic. If you have a game plan, don’t jettison it. This is not the time to start a price war with your competitors. This period will end. It is always easier for a brand’s value to go down than to build it back up. If you do need to respond to a competitor’s pricing moves, match them, but don’t undercut them. You may start a spiraling down of the entire product category.

Rule #2. Continue to think long-term. Your customers’ real needs are still there. Continue to build value in your offerings. Even if they need to go away for a bit, if they know you are investing in what’s important to them. They need to know that you are in it for the long haul, that you have resources to weather you through. This will motivate them to continue to want to associate with your brand. I may not be buying a new BMW this year, but I sure don’t want them churning out the next Yugo to match the current size of my wallet.

Rule #3. Now is a good time to turn on reverse positioning.  If you’ve been thinking long-term, then hopefully you have adopted reverse positioning as part of your long-term strategies. This is where you can strip out some features of your product so that you can afford to add in some sizzle to the next generation. Think Gen2 of the iPod.

Rule #4.  Stay in touch with, and reward, your loyal customers. You still need to reach out to your targeted customers. Use online promotions and communications to stay in contact. Don’t just try to gain new customers. Also reward the customers wo have been loyal to you.

Rule #5.  Use your portfolio to your advantage. If you have a portfolio of products, your brand strategy should assign each of them a role to play in the market. Your low-end products should be used to extend your share and protect you from attacks from below. Don’t over promote these products, but do make sure they are available on the shelf. Likewise, use your higher end products to maintain your brand value and premium positioning.  

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What makes someone choose your brand over another? How do your products reflect your brand identity? As your promise of what you stand for in the marketplace, your brand must be both relevant to consumers and different from your competition. When you design for your brand, you integrate marketing analysis and design instincts. What’s going to be relevant to your customers is based on where your products are in their market life cycle, and on the spoken and unspoken needs of your customers.

You may have a technology advantage over your competition, but is that what is important to your customers? Your brand design elements must show your customers that you get them. They must not only communicate the functional advantages, they must radiate the emotional cues that attract and retain your customers.

Do your brand elements engage senses other than sight? What does your brand sound like? Smell like? Taste like? What is its feel? Effective brand identity design considers multiple ways to express your brand persona and value proposition, all aimed at reinforcing customer preference.

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