In our last Insights article we talked about the unforeseeable impact of Covid-19 and the potential implications and recovery scenarios. In this article, we explore the actions taken by businesses as we come to terms with the pandemic, as well as strategies for how to succeed during times of uncertainty.
The events of the last year have led to what could be termed a global revolution in how businesses are run and how they market themselves. These changes were fast and sometimes brutal, but two factors remained constant: consumer demand for products that meet a need, and motivation to build associations with brands to which they can relate.
The foundations of consumer demand and motivation therefore remain unchanged. But habits, behaviors and paths to purchase have become increasingly complex and fragmented – and continue to evolve.
As with the 2008-2009 recession, the clear winners of the lockdown ‘battle’ are (and will continue to be) those brands that maintain focus on innovating and communicating with their customers when the economic chips are down – even during times of enforced store closures.
Take the gaming industry as an example. As could be predicted during a lockdown, 2020 saw a massive rise in the purchase and use of video games and consoles. The major players recognized the investment opportunity and spent $45M on advertising in the last two weeks of November 2020 alone, an 80% year on year increase, and released new consoles and video game titles.
Agility was also critical – and best demonstrated among the many traditional brick and mortar stores that successfully ‘pivoted to digital’ and delivered gains of c.90% growth, as explored in our last Insights article. And, of course, many pure ecommerce enterprises were well-positioned to thrive during lockdown, with an uptick of 41%.
The boarded-up windows on nearly every shopping district, mall and retail park tell their own stories. Of course, many companies were already having problems and the pandemic was simply the catalyst that pushed them over the edge. But for others, viewing lockdown as an opportunity instead of a challenge – and investing accordingly – could have maintained brand loyalty and ensured survival.
In September 2020, Byron Sharp, Professor of Marketing Science and Director at Australia’s Ehrenberg-Bass Institute, stated that the best approach to Covid-19 was to stop advertising. This contradicts the accepted wisdom from a 2010 Harvard Business Review research project, which concluded that, in times of recession, ‘The most successful companies balanced [selective] cost-cutting and investing in their future growth’.
Yet many businesses switched off their advertising and marketing activities during the 2020 lockdown, including some well-known mega-brands and household names.
“The 2008-2009 recession should have taught these brands that simply calling a halt to advertising wasn’t the right answer,” says Spencer Ng, GfK’s Marketing Analytics Lead, APAC. “As our POS insights tell us, consumer demand doesn’t just evaporate in times of economic challenge; in fact, for many categories demand increases.
“So, instead of reducing decisions around marketing or advertising to ‘Yes we do it’ or ‘No we don’t’, a better approach would be to continually re-evaluate the landscape, pivot towards where your customers are right now and keep analyzing what works and what doesn’t.”
Last December, the global marketing intelligence service WARC reported that global advertising spend was on course to fall by 10.2% or $63.4 Billion in 2020. The sharp investment cuts were led by the automotive, retail and travel and tourism sectors.
According to PwC Australia, brands that reduced media spend in 2020 by $50 Million will, on average, have lost $130M in sales in 2020.
For those businesses that continued to market themselves during the pandemic, adopting Covid-related advertising messages soon became commonplace. But did these approaches and associated messaging work?
Opinions as to whether this strategy worked remain divided. Some viewed it as an opportunity to rebuild trust; however, with so many similar messages being conveyed, it proved difficult to cut through the noise and remain relevant.
Overall, it was a stark reminder that brands need to stay true to their core values and those of their key consumers.
WARC predicts a 6.7% increase in spend in 2021 which, while not back to pre-Covid levels, represents a strong recovery – and there are already signs of bouncing back faster than expected. Indeed, data released by Mediaocean shows that ad spend across key digital platforms rose by 31% in March 2021, the biggest increase since January 2020.
Overall leading ad agencies are expecting global investment to reach over $600 Billion in 2021, with digital media seeing the biggest increase in spend. This will be driven by uplifts in investment in key countries such as India (10.8%), the United Kingdom (10.4%) and France (8.9%).
Says Spencer: “While we’re still living in these lean times, the need for sectors that didn’t thrive during lockdown to market themselves effectively is even more critical than for those that benefited. The hardest-hit categories need to make sure every unit of marketing budget spent drives revenue and ROI.
“To do this effectively means identifying the best channels to reach your audience and optimizing spending levels for each platform and sales driver. Digital was hugely important during lockdown and will continue to play a big part, but the time has come for marketers to shift at least some of their focus back to traditional channels.
“Staying ‘front of mind’ is essential to maintaining and growing brand loyalty – and marketers need the ability to measure, predict and understand the impact of their marketing activities on sales. The key to success here is to equip yourself with the right tools and knowledge to enable you to make sound, data-driven business decisions, and pivot quickly when needed.”
The role played by marketing mix modelling (MMM) technologies such as GfK’s Marketing Mix Optimizer (MMO) in understanding post-Covid recovery shouldn’t be underestimated.
MMO uses a blend of store-level transactional data and machine learning to explain the drivers of your brand’s sales (including the impact of Covid), so you can measure your marketing ROI effectively. What’s more, MMO offers the advantages of scenario-based planning and optimization to help you deliver best performance against your sales and budget goals.
Look out for our next Insights article, where we’ll explore some of the trends we might see as we eventually move out of lockdown, and the tactics and approaches marketers will need to adopt to move successfully within an ever-changing landscape.