This presentation was given at The Economist Conference, March 17th, 2009. It discusses the reality of the Brand Bubble and how to build brand value in these challenging economic times.

1. CALAMITY presented at the 7th Americas Marketing Forum The Economist and Young & Rubicam Brands 17-18 March 2009 St Regis Hotel, San Francisco, California please use with permission only, just ask, we’re happy to grant John Gerzema

2. CALAMITY: MARKETING YOUR WAY OUT OF THIS RECESSION SOURCE: CONDE NASTE PORTFOLIO, JANUARY 2009 Copyright John Gerzema/Young & Rubicam

3. Copyright John Gerzema/Young & Rubicam RESULTS 1–10 OF ABOUT 22,200,000 FOR RECESSION AND MARKETING 2

4. FUNDAMENTAL SOCIETAL SHIFT FROM A CREDIT TO A CONFIDENCE CRISIS SEA CHANGES IN CONSUMER BEHAVIORS COMPANIES MUST CHANGE HOW THEY CONNECT WITH CONSUMER Copyright John Gerzema/Young & Rubicam

6. HALF OF ALL GLOBAL WEALTH HAS EVAPORATED $36 TRILLION DOLLAR LOSS WORLDWIDE S&P 500 DECLINED 64.4% FROM 2000 45% OF AMERICAN WEALTH FROM LOSS OF EQUITY AND HOUSING VALUES AVERAGE RECESSION IS 6-12 MONTHS. THIS IS A MARATHON 5 Source: Bloomberg, Iconoculture March 2009 Copyright John Gerzema/Young & Rubicam

8. THE LARGEST U.S. BUDGET DEFICIT POST WWII 8 Source: Board of Governors of the Federal Reserve System Copyright John Gerzema/Young & Rubicam

9. VISUALIZING THE BAILOUT 9 Source: The Atlantic Copyright John Gerzema/Young & Rubicam

10. HOUSING VALUES CONTINUE TO DECLINE ACROSS THE U.S. http://www.nytimes.com/interactive/2008/11/25/business/20080624_HOUSING_GRAPHIC.html 10 Source: “Irrational Exuberance”, 2 nd edition, 2006, by Robert J. Schiller Copyright John Gerzema/Young & Rubicam

11. A GROWING REALITY: 19 A MORTGAGE IS FOREVER Source: Copyright John Gerzema/Young & Rubicam

12. AMERICAN’S HOMES NO LONGER PERSONAL LINES OF CREDIT 11 Source:Us Department of Housing and Labor, 2009 Copyright John Gerzema/Young & Rubicam

13. WHILE THE CREDIT CRISIS HAS HALTED HOUSING STARTS 12 Source: www.calculatedriskblog.com Copyright John Gerzema/Young & Rubicam

14. INTO THE GREAT WIDE OPEN UNEMPLOYMENT 8.1%; HIGHEST IN TWENTY-FIVE YEARS THIRD STRAIGHT MONTH OF 600,000 JOBS LOST 4 Copyright John Gerzema/Young & Rubicam

15. THIS PERIOD MARKED BY MOST JOB LOSSES, WEAKEST RECOVERY 13 Source: Change in Nonfarm Pay rolls, Reported Monthly, Bureau of Labor Statistics, U.S Dept of Labor Copyright John Gerzema/Young & Rubicam

16. (Bottom of pyramid)14,000 Americans losing health insurance every day. http://www.americanprogress.org/ 15 MILLIONAIRES HAVE LOST ONE-THIRD OF THEIR NET WORTH. Source: AN EQUAL OPPORTUNITY RECESSION Copyright John Gerzema/Young & Rubicam

17. AFFLUENT MORTGAGE RATE DEFAULTS 16 Source: LPS Applied Analytics Copyright John Gerzema/Young & Rubicam

18. THE ONLY CERTAINTY IS UNCERTAINTY 22 Source: Copyright John Gerzema/Young & Rubicam

19. THE AMERICAN NIGHTMARE THEHTTP://WWW.NYTIMES.COM/2009/03/01/US/01SURVIVAL.HTML?PAGEWANTED=ALL 18 Source:New York Times ONE STORY IN THE AMERICAN NIGHTMARE Copyright John Gerzema/Young & Rubicam

20. MASLOW UPENDED: MARKETING MUST MOVE FROM PASSION TO COMPASSION (Bottom of pyramid)14,000 Americans losing health insurance every day. http://www.americanprogress.org/ 17 Source: American Progress.org February 2009 2007 2009 Copyright John Gerzema/Young & Rubicam

21. TECTONIC SHIFTS IN CONSUMERISM FROM THE CULTURAL LOSS OF TRUST 23 Copyright John Gerzema/Young & Rubicam

22. 24 Copyright John Gerzema/Young & Rubicam SELFISHNESS AND COLLUSION

23. http://www.theglobeandmail.com/servlet/story/RTGAM.20090218.WBwblogolitics20090218151500/WBStory/WBwblogolitics/ http://news.yahoo.com/s/ap/20090216/ap_on_fe_st/toy_fair_madoff_doll 25 BEHAVIOR Copyright John Gerzema/Young & Rubicam EGREGIOUS AND CRIMINAL

24. 33 Copyright John Gerzema/Young & Rubicam FAILURE OF REGULATORS

25. 30 Copyright John Gerzema/Young & Rubicam TAXPAYERS ARE NOW SHAREHOLDERS

26. 26 Copyright John Gerzema/Young & Rubicam DECAYING INFRASTRUCTURE

27. 28 Copyright John Gerzema/Young & Rubicam LACK OF PERMANENCE

28. Copyright John Gerzema/Young & Rubicam

29. Copyright John Gerzema/Young & Rubicam

30. Source: Millward Brown Optimor 2007 Copyright John Gerzema/Young & Rubicam

31. THE 250 MOST VALUABLE GLOBAL BRANDS ARE $2.197 TRILLION DOLLARS WHICH EXCEEDS THE GDP OF FRANCE Copyright John Gerzema/Young & Rubicam

32. BRAND ESTEEM AND REGARD IS DOWN 12% BRAND AWARENESS HAS DECLINED BY 20% PERCEPTIONS OF BRAND QUALITY HAS ERODED 24% TRUST IN BRANDS HAS DECLINED BY 50% Copyright John Gerzema/Young & Rubicam

33. TRUST IS DESIRABLE, BUT IT HASN’T DIFFERENTIATED 35 Source:BrandAsset Valuator 1993-2007 Copyright John Gerzema/Young & Rubicam

34. Base: BAV USA Q4 2007, Q4 2008; All Adults IN THE PAST QUARTER, A ‘TRUST VIRUS’ INFECTED MANY CATEGORIES 36 Copyright John Gerzema/Young & Rubicam

35. 37 Source: Barack Obama Press Conference, February 2009 Copyright John Gerzema/Young & Rubicam “ I SCREWED UP”

36. CONSUMERS ARE BEGINNING TO OWN THEIR PROBLEMS 38 Source: Time Magazine Copyright John Gerzema/Young & Rubicam

37. SAVINGS RATE HAS RISEN IN PAST FIVE CONSECUTIVE MONTHS 40 Source: U.S. Department of Commerce: Bureau of Economic Analysis Copyright John Gerzema/Young & Rubicam

38. Q4 SPENDING FELL 3.7% FROM Q3 - STEEPEST DECLINE IN 62 YEARS. $3 TRILLION IN SPENDING STOPPED IN Q4, WAS SUSTAINING US GDP 41 Source: www.calculatedriskblog.com Copyright John Gerzema/Young & Rubicam

39. CREATE COMPETITIVE ADVANTAGE NOW EVERY RECESSION ENDS...EVENTUALLY CONSUMERS MOVING FROM ANXIETY TO ACTION HOW YOU ACT NOW WILL SHAPE YOUR FUTURE PERFORMANCE Copyright John Gerzema/Young & Rubicam

40. THE NEW RULES OF ‘POST-CRISIS CONSUMERISM’ 44 Copyright John Gerzema/Young & Rubicam NEW CONSUMER BEHAVIORS NEW CULTURAL VALUES NEW MANAGEMENT PRINCIPLES

41. POST-CRISIS CONSUMERISM RULE #1 CULTURAL VALUE = INDESTRUCTIBLE SPIRIT CONSUMER STRATEGY = DURABLE LIVING MANAGEMENT = BRAND THAT PRINCIPLE LASTS Copyright John Gerzema/Young & Rubicam

43. BRAND THAT LASTS CULTURAL VALUE = INDESTRUCTIBLE SPIRIT CONSUMER BEHAVIOR = DURABLE LIVING MANAGEMENT PRINCIPLE = BRAND THAT LASTS Copyright John Gerzema/Young & Rubicam

44. POST-CRISIS CONSUMERISM RULE #2 CULTURAL VALUE = ETHICS AND FAIR PLAY CONSUMER STRATEGY = EMPATHY AND RESPECT MANAGEMENT = VALUE AND PRINCIPLE VALUES Copyright John Gerzema/Young & Rubicam

46. VALUE AND VALUES Copyright John Gerzema/Young & Rubicam CULTURAL VALUE = ETHICS AND FAIR PLAY CONSUMER BEHAVIOR EMPATHY AND RESPECT MANAGEMENT PRINCIPLE = VALUE AND VALUES

47. POST-CRISIS CONSUMERISM RULE #3 CULTURAL VALUE = LIQUID LIFE CONSUMER STRATEGY = DÉCLASSÉ CONSUMPTION MANAGEMENT = DOLLARS AND PRINCIPLE SENSE Copyright John Gerzema/Young & Rubicam

48. DÉCLASSÉ CONSUMPTION CULTURAL VALUE=LIQUID LIFE CONSUMER BEHAVIOR = DÉCLASSÉ CONSUMPTION MANAGEMENT PRINCIPLE= DOLLARS AND SENSE Copyright John Gerzema/Young & Rubicam

49. DOLLARS AND SENSE CULTURAL VALUE=LIQUID LIFE CONSUMER BEHAVIOR = DÉCLASSÉ CONSUMPTION MANAGEMENT PRINCIPLE= DOLLARS AND SENSE Copyright John Gerzema/Young & Rubicam

50. POST-CRISIS CONSUMERISM RULE #4 CULTURAL VALUE = RETURN TO THE FOLD CONSUMER STRATEGY = COOPERATIVE CONSUMERISM MANAGEMENT = COMMUNITY PRINCIPLE ORGANIZER Copyright John Gerzema/Young & Rubicam

51. COOPERATIVE CONSUMERISM CULTURAL VALUE = RETURN TO THE FOLD CONSUMER BEHAVIOR = COOPERATIVE CONSUMERISM MANAGEMENT PRINCIPLE= COMMUNITY ORGANIZER Copyright John Gerzema/Young & Rubicam

52. COMMUNITY ORGANIZER CULTURAL VALUE = RETURN TO THE FOLD CONSUMER BEHAVIOR = COOPERATIVE CONSUMERISM MANAGEMENT PRINCIPLE= COMMUNITY ORGANIZER

53. THE OPPORTUNISTIC CEO: BRAND MANAGER IN CHIEF Copyright John Gerzema/Young & Rubicam

54. MARKETING IS NOT A COST, BUT A FIDUCIARY RESPONSIBILITY TO SHAREHOLDERS Copyright John Gerzema/Young & Rubicam

55. THE CHINESE CHARACTER FOR CRISIS ALSO MEANS OPPORTUNITY 65 BAD COMPANIES ARE DESTROYED BY CRISIS. GOOD COMPANIES SURVIVE THEM. GREAT COMPANIES ARE IMPROVED BY THEM.” — ANDY GROVE Copyright John Gerzema/Young & Rubicam

56. Source: Gerzema, Jacobson, Lebar, Mizik, Stanford and Poor’s COMPUSTAT over 1988-2003, University of Chicago’s Center for Research in Security Prices from 1993-2003. BAV 1993-2004 CONSUMERS REWARD BRANDS WITH ENERGIZED DIFFERENTIATION Copyright John Gerzema/Young & Rubicam

57. Copyright John Gerzema/Young & Rubicam