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This article originally appeared in Forbes Magazine.

When the affluent start hiding their Saks Fifth Avenue purchases in brown paper bags because they're worried they look too rich, we know it's time to rethink marketing strategies. Inventories and debt pile up, and chief marketing officers worry about their companies becoming the next Circuit City or Linens 'n Things.

They need to stretch their budgets further than ever before. Unfortunately, too many are making rash decisions to hit quarterly numbers and thereby destroying their companies' long-term brand value. Yes, this recession may last longer and be deeper than most of us have ever dealt with, but what you do now will determine whether your brand falls behind or emerges from the downturn stronger, as Procter & Gamble (PG) and DuPont (DD) did during the Great Depression.

The toymaker Mattel (MAT) is facing dwindling sales in the U.S., as little girls no longer aspire to look like Barbie, an embodiment of perfection that no longer fits our national consciousness. The edgier and less perfect Bratz dolls have become a popular alternative, and they've taken away Barbie's spotlight.

But Barbie has decided not to roll over and rely on beating Bratz in court. This past weekend, Mattel opened up a $30 million, six-story Barbie lifestyle store in Shanghai--complete with a spa where mothers can get their nails done with their daughters, a café and bar and racks of Barbie clothing.

Not only is Barbie moving into a new region where girls don't really know who she is, but Mattel is expanding its core market to include not only little girls but also club-age young women. Rather than rely wholly on children or mothers who grew up playing with the dolls, Mattel is also targeting twenty-somethings by offering a line of clothing by Patricia Fields, the Sex and the City designer.

The idea: Barbie is no longer just a doll. She's a lifestyle. That may be harder for Americans to accept since our image of her is so firmly ingrained. In China, she is a newcomer unburdened by generations of familiarity, and Mattel has a chance to create a new consumer perception of what she means.

It remains to be seen whether Chinese consumers will warm to the idea and whether Barbie can fit in there. What kind of food does Barbie eat in her cafe? What kind of food would she eat in China? But Mattel should be given credit for innovating and taking a calculated risk in a down market.

Marketers need to see how their brands can evolve in these difficult times and look to other markets, such as China, that so far have been relatively unharmed by the global slowdown.

Here are two more marketing lessons for 2009:

First, marketers have to figure out how to discount correctly. Whenever I walk into a mall I get dizzy looking at signs touting "sales of the century," "buy one get one free" and "everything on sale." Jos. A. Bank (JOSB) has even offered three suits for the price of one. Half-off is the new base price.

Discounting is a good way to draw in consumers and move inventory, but there are ways of doing it right and ways of doing it wrong. It is important not to discount every single item in a store or consumers will see a dying brand. No one wants to buy a dying brand.

Gucci, the luxury goods retailer, has adopted a much smarter strategy, discounting some items but leaving others at full price. Consumers who never buy on discount can still buy the most stylish and newest products, while those on a budget have the sense they are getting a real deal on what remains a premium brand.

Contrast this with Pal Zileri, clothier to movie stars and business titans. It recently ran a 50% off everything promotion in its stores. If you don't value your brand, your customers won't either. When the economy starts humming again, whose clothes do you think those movie stars will buy?

Consumers pay full price because of an emotional want to have that product now. Everyone knows that the fabric or the plastic or the leather costs nowhere near what they pay, but once the size of the mark-ups becomes apparent, consumers start to get upset.

Follow Gucci's strategy. Use selective discounting to move product but maintain long-term brand positioning.

And second, in this unprecedented time, focus on your VIP consumers. As layoffs mount and 401(k)s tumble into the abyss, consumers grow less likely to try new brands. Each purchase takes on a new level of importance as purchasers have less to spend and want to buy only what they trust.

More than ever before, brands need to understand what their top-tier and most loyal customers want and give it to them, because they buy more often and spend more per purchase.

My firm, the China Market Research Group, conducted research over the last three months that revealed previously loyal consumers frequently mentioned "feeling underappreciated" as a major reason they stopped buying their favorite brands. They had an emotional connection with those brands and felt spurned like a jilted lover if they felt the brands didn't embrace them, too.

Marketers need to understand their core markets better and focus on loyalty programs that fit their needs. For instance, the hotel chain Starwood (HOT) gets 20% more sales from its Starwood Preferred Guests than from nonmembers. In a time like this, retooling loyalty programs is a cheaper and more effective way to drive sales than launching splashy new brand awareness campaigns in search of new customers.

Being a marketer in a downturn is not easy. You need to base your decisions on rational thought rather than fear. Mattel realizes that to make up for plummeting sales in the U.S. and to be successful in China, a market that is still enjoying double-digit retail sales growth, it has to build up Barbie from a doll into a lifestyle brand.

The brands that can evolve during these difficult times, as Barbie is trying to do, will come out stronger when the markets get better again. The ones that don't will end up in Chapter 11.

Shaun Rein is the Founder and Managing Director of the China Market Research Group, www.cmrconsulting.com.cn, a strategic market intelligence firm focused on China.

Source: Barbie Goes to China