According to our long-running Consumer Confidence Barometer published in April, consumer confidence in Germany has hit an all time low and the UK has plummeted to levels not seen since the last recession in 2008. This is corroborated by data from the Office for Budget Responsibility which predicts that the UK will see 35% wiped off GDP and an uplift in unemployment to 2 million by Q2. In Europe, both France and Italy have fallen into recession, and Eurozone GDP slumped 3.8% in Q1 2020. The US, China, and other parts of Asia have also seen falling GDP and rising unemployment. So it increasingly looks like the UK, Europe, and the rest of the world, is heading straight for a recession.
What does this mean for advertising spend? We refer to some of the comments from Joe Staton, our Client Strategy Director, based in the UK. He participated in a roundtable webinar session on 17th April 2020. Hosted by Marketing Week editor Russell Parsons, Joe spoke alongside economist Dr Grace Kite and marketing effectiveness expert Peter Field.
You can listen to the discussion published by Marketing Week here. What follows are some of our main take-outs.
Firstly, let’s put what we know about this moment in time into context, because it is different from previous recessionary periods. Peter Field describes it perfectly in his excellent ‘Advertising in a Recession’, published in April 2020 “…what we face is unlikely to be a ‘normal’ recession: it will be the first disease-driven recession of the modern era. Already it is playing out in very unusual ways. As in most recessions, the effects depend greatly on the sector: people still have to eat and take care of themselves but can delay discretionary purchases. Already the difference between essential and discretionary purchasing looks like it will be much more pronounced than in previous recessions. Thus far, many essential categories have been characterized by elevated or even panic buying, not the more usual deferral or down-trading…”
Indeed, GfK’s Point of Sales Tracking confirms Peter’s observations. As markets went into lockdown, and consumers realised what life confined in their homes would be like in the coming weeks and months, panic buying set in. From toilet roll to pasta to tinned soup, shoppers went into a frenzy of buying what was available for ‘survival’ – and at any price. The search for discounts and BOGOFs in the FMCG aisles were forgotten.
But these are short-term changes. How should brands respond? Peter Field says: “For most physical products and services, demand is exceeding the ability to supply, but scalable businesses delivering important needs to house-bound customers, such as TV stations and video conferencing platforms that are not dependent on workplace usage, are fortunate exceptions. They are enjoying – and meeting – bumper demand, so there is a strong case for these businesses to exploit short-term demand (by means of lead generation activity) to build long-term market share. Brand building and short-term sales activation both make perfect sense for these brands in the current crisis.”
However, for many brands, demand for their products has either dried up, or they have sold out completely and cannot restock because the supply chain is no longer operational. So should they give up marketing and brand building activity altogether and save the money? The answer based on evidence from previous recessions is a definite ‘no’.
This view is held by many academics and marketing commentators. As Mark Ritson said in his article in Marketing Week published on 6th April: “It may seem like a paradox, but recessionary periods actually provide fertile grounds for marketers to grow their brand’s market share if they’re prepared to think long-term.”
But let’s be realistic, this is hard to prove to the CFO looking to cut costs during this pandemic. Certainly, if your business or brand is focused purely on survival, and saving money is the only route to offer any hope of securing a future, no one would advocate investing in a long-term brand building campaign now.
In A Critical Review and Synthesis of Research on Advertising in a Recession by G & K Tellis, published in April 2009, two overriding factors come to the fore:
One important piece of evidence is on the growth in TV viewing in the UK. Data released by ThinkBox reveals three consecutive weeks of increased TV viewing, up 23% year-on-year to 19th April – and crucially it’s ABC1 adults delivering the highest audience growth. Between Monday 13th – Sunday 19th April, TV viewing saw a 18% increase year-on-year. So TV ad spend now is delivering a far better return on investment in terms of volume, and demographic.
ThinkBox has observed that: “Since the lockdown came into place, we’ve seen shifts in how viewers are accessing TV content. Live viewing has always been the most watched form of telly, but it's on the rise again. Due to more time at home, and a higher dependence on TV news coverage, live viewing increases have outpaced time-shifted viewing (recorded or watched via BVOD players on the TV set).”
It’s vital to continue measuring and analyzing media consumption patterns during a recession across all media. Media is often far cheaper as other players have cut advertising, but that is no excuse not to analyze effectiveness and plan in the most efficient way. Consumption of all media is on the rise, not just TV – but radio and reading too. By knowing who your audience is, what they are reading and on which device, you’ll make your budgets go further. This might also be the time to think about adding new audience that has previously been out of your price range, so be sure to look at channel consumption by demographics too.
Tools like GfK’s Campaign Performance Analysis and Marketing Mix Evaluation can help you run the right campaigns on the most efficient channels, simulate different media strategies and get recommendations on how to allocate your media budget to achieve you target sales and maximize ROI.
Peter explained to the Marketing Week audience that: “Advertising is not about making sales now, it’s about helping you achieve 2021 targets. You do brand investment to capitalize on recovery, not to profit in a recession. It’s true that advertising can help you trade through a recession – but it gets you out stronger and more competitive.”
According to the UK Consumer Confidence Barometer results in April, one of the many business impacts of the COVID-19 outbreak is that major purchases have become less of a priority. Unfortunately, major purchases are not top of mind for consumers as they knuckle down to the rigours of social distancing. The score for April is -52, which is 51 points below the same time last year. Yes, households have been making substantial online purchases across a whole range of product categories, however the sudden peaks in demand for these items have done little to dent the wider decline in retail sales. Digital shopping is all well and good, but what the high street wants right now is the return of post-lockdown footfall. This is where the long-term brand building campaigns will come into their own.
In particular, there are many people who are in a safe job, being well paid and working at home. They aren’t spending money on anything except food, and we believe these consumers will be missing luxuries. When lockdown ends, there will be a release of pent-up demand from this audience. Conversely, there are many people being furloughed, being made redundant and losing their jobs. This creates a lot of uncertainty, and the longer lockdown continues without any clear exit strategy, the worse this becomes. So brands not only need to communicate, but they need to reassure too.
One thing we’ve seen in this pandemic is the growing importance of online as a sales channel – necessity means that more consumers will have trialled and experienced the benefits of shopping online. As you can see some online categories such as News, Public Services and Communication are performing very strongly compared with the pre-lockdown period. Many consumers won’t go back to high street shopping after the pandemic, and some will do it far less. Commentator Mark Ritson has pointed out that a lot of things in marketing will revert to how they were, but not everything. At GfK, we agree with many other commentators like Mark Ritson and Dr Grace Kite that many people simply won’t go back to high street store shopping. The same is true of online.
This is an opportunity for brands and businesses to reach more consumers than ever online. In our media measurement roundtable in 2019, experts gathered from across the media ecosystem challenged the common truism that broadcast TV advertising is best for long-term brand building, whereas non-linear video is all about activation. This is an argument made strongly by the TV industry. While our panel acknowledged that this has broadly been the case up to now, there is some optimism that non-linear video could offer brand building opportunities if handled properly.
Phil Smith from UK advertising trade body ISBA summarised the experts’ sentiment thus: “If you put a 30-second TV ad through a non-linear channel and people are prepared to watch it, then it can be as positive a brand building experience as if you experience it through broadcast TV. So, I think is more about the format of the advertising and people’s preparedness to watch it in a situation they find themselves in, than it is about non-linear versus broadcast.”
So longer brand building ads can work online, if the creative is engaging enough and the context appropriate to warrant that duration.
In GfK’s Consumer Life research, we see that over and over again, consumers rank
honesty as the most important value, and this means that from a brand perspective, authenticity and open-mindedness are key.
We know that when brand values are connected with personal ones, there’s a huge take up. The second most important value in the UK is ‘Protecting the Family’ and third, interestingly, is ‘Freedom’. ‘Authenticity’ comes in at fifth. Prioritizing social good over corporate good is always important – and in this pandemic, those companies that do this well will emerge with their reputations intact.
We know that the brands that will perform the best right now and in the future are the ones that communicate whose side they are on in an honest and authentic way. Consumers connect with those companies to have something to say about what they are doing to help. However, in some pandemic creative executions, this approach is starting to look samey and clichéd. It’s too late to be jumping on the bandwagon to launch undifferentiated campaigns. We’re already sick of those ads filmed at home telling us how company employees are staying home to support us, especially if those are the players who are refusing to lend us money, aren’t answering the customer service phone line, or won’t refund our holiday or flight. Brands must do more than pay lip service to their messages at the moment.
For me the brand leaders of tomorrow are exhibiting honesty, humility and authenticity today.
On the Marketing Week webinar, Russell asked us for our one piece of advice for brands right now. Peter’s was to “monitor your competitors like mad. Look for the opportunities to take advantage.”
“Necessity is the mother of all invention” goes the adage, and it’s true. There’s two kinds of innovation in the time of Coronavirus. There’s the innovation and invention that allows a restaurant to sell takeaway food to keep the kitchen – and business – going. Or the innovation that converts a gin distillery into a manufacturer of much- needed hand sanitiser. And there’s the 27 varieties of bleach. In FMCG, retailers have asked manufacturers to concentrate on the basics so that they can sell more of the products and brands consumers trust. So now is the time to invest in strengthening the brand, not extending it.
Hear the webinar: https://www.marketingweek.com/marketers-navigate-economic-downturn/