COVID-19: Implications for CMOs
The coronavirus crisis is a humanitarian and economic catastrophe. At Good Rebels, we are collecting and analysing information in real time to understand how this economic crisis will affect a very specific corporate role: that of the CMO. As the crisis evolves, some recommendations may quickly become obsolete. This article provides our perspective as of April 21st.
COVID-19: a note for CMOs – June, 23rd
In just a few weeks, marketing has gone from business as usual to shock, teleworking and readjustment generated by COVID-19. We have prepared this document to help Good Rebels’ clients understand what has happened to the consumer during the lockdown, how to deal with the exit from it and to think about the super-digitalization that is coming:
- The “new normal” will drag on. The de-escalation has already begun but too many unknowns mean a slowed down economy is predicted.
- New habits that are more digital. Some behaviours will pass but others will not and the use of Internet, mobiles and new devices will greatly increase.
- An advertising investment revolution. Consumers are happy with advertising, but budgets are shrinking and the mix is turning to digital.
- Winners and losers. Almost all quarantined campaigns look alike. It’s time to stand out. The crisis brings opportunity on a platter.
- Re-Invent: experience over advertising. A trend that started 15 years ago and is now accelerating.
COVID-19: a note for CMOs – April, 21st
The eyes of the citizens, tired of being inside, are fixed on the tentative plans to leave the lockdowns. Some schools will open in Germany on 4th May and the smaller non-essential shops opened yesterday. While in the United Kingdom, Boris Johnson denies that schools will open on May 9, and Spain allows children under 12 to leave for walks next Monday, everything points to the fact that teleworking will continue to be recommended for two more months. We are increasingly aware that it will take time to hang up the mask, get back on a plane, cross borders or give each other hugs.
Consumption and business communication will be directly affected by the rate at which governments are dismantling quarantine. Economic forecasts are worsening to reflect a slower than expected exit. We may soon see institutional campaigns to encourage consumption for citizens who fear contagion or overspending in the face of an uncertain future.
In last week’s note, we talked about the levers of superdigitalization and grouped the sectors affected by COVID-19 into 5 industries. In this update, we analyse how digital consumption is evolving in quarantine and present a matrix to situate the positions adopted by the different brands in their communication strategy in social and digital media.
Consumption evolves during phase 2 of Re-Engage
Without a doubt, what brands publish and do on social networks in the coming days will have a great impact in terms of consideration and notoriety. 27% of respondents in the latest Global Web Index consumer panel say they are discovering new brands on social networks, and exactly the same percentage say they are doing so on TV.
The progress of the quarantine is beginning to bring about changes in consumption. Food delivery is now the most frequent expenditure, even ahead of online food shopping, as the emergency supply phase is over. Spending is also growing beyond entertainment: 16% say they have spent on Beauty and 15% on Fashion, although entertainment continues to grow with 18%, in video on-demand services such as Netflix, Prime Video, HBO or Disney+ and 15% in books or audiobooks.
Consumption in fashion and home decoration has increased between 13 and 16 percentage points according to the comparison between the last two weeks of March (data from Spain, according to Netrica), pointing to an upward trend in non-essential categories. Also, the number of online shoppers who have added products from new categories to their shopping cart seems to have increased by more than 10%, 39% compared to 28%, according to Zinklair.
It is also interesting to note the evolution in the perception of the role that brands should play. In mid-March, only 37% of respondents agreed or strongly agreed that brands should invest in advertising and promotion according to Global Web Index data. In contrast, in April, 92% of users said they were in favour of brands keeping their campaigns active according to Kantar. Although, as we commented in past notes, the expectations of the messages are different to times without COVID-19.
The confidence about the battle with COVID-19 reflects, according to the Global Web Index, that most countries are more optimistic about their own country than about the global situation. In some countries (like Spain or Italy), however, there is a slight drop in optimism in April compared to March.
Brand communication beyond ‘virus-washing’
In the last few days, we have seen brands modifying their business behaviour and communication strategy to adapt to the demands of a new sensibility. Judging the consistency or coherence of brands will be increasingly difficult, as is the case with sustainability strategies. Terms such as ‘virus-washing‘ to describe creative fireworks (usually very emotional), logos that play at distancing themselves or #StayHome signs when people have not left the house for weeks are beginning to appear. What a brand builds as a singular exercise of empathy generates a déjà-vu effect, as users have already received those messages hundreds or thousands of times with few creative variations.
We observe two trends on the part of brands that continue to communicate on digital or social media:
- Brands that continue to work on their branding. Following our model of impact on sectors of the previous note, these are mainly integrated sectors in the Frozen economy and Shifting economy, which have seen their activity slow down but continue to work on brand awareness. Some companies have also taken the opportunity to completely reformulate their messages, as in the case of Toyota or Ford, which have launched large campaigns without projecting a single image of their vehicles.
- Brands that have already become commercially active. These are mainly sectors in the CPG and Homebound Economy, which base their strategy on activating their digital sales channels (ecommerce, pre-consumption or others) with the intention of taking advantage of changing consumer trends and the fact that their supply chains have not been as affected at a time like this.
Brand Communication Matrix: where each brand is located
We wanted to classify the position and degree of communication which brands are developing in digital/social media, which range from a branding approach to a commercial activation approach, and in turn, from a certain communication inconsistency to a strong consistency led from the business.
|Ineffective content||Not driven||Without an obvious strategy at brand level. They have developed content in an unconnected way and with the aim of maintaining notoriety or a certain visibility on social media|
|Survival advertising||Only content-driven||Supported only by an editorial line that works the brand. Although they have not aligned that strategy with marketing or communication.|
|Sensitive Advertising||Only marketing-driven||Supported by a great marketing campaign that works the brand. Although they have not yet included the business in what they are trying to communicate.|
|360º Communication||Completely business-driven||Supported by a transversal business positioning that seeks to reinforce its corporate image.|
|Insensitive content||Not driven||Without an obvious strategy at the commercial level. They have developed content in an unconnected way and with the aim of obtaining commercial activity.|
|Survival marketing||Only content-driven||Sustained only by an editorial line that seeks to sell. Although they have not aligned that strategy with marketing or management.|
|Sensitive marketing||Only marketing-driven||Supported by a great marketing campaign that seeks to reactivate sales. Although not necessarily accompanied by a business shift yet.|
|Effective marketing||Completely business-driven||Supported by a transformation and adaptation of the organisation towards its existing sales and customer channels.|
Brands that are disconnecting or unaffected
These are predominantly linked to sectors hit hard by the closure of physical stores and furloughs. There are also ‘unaffected’ cases, which have found no reason to change their strategy.
- Tourism and travel: many brands have stopped communications. Others, such as Room Mate, continue to share communications highlighting their contributions, such as rooms for health workers and spaces to hospitalise patients. For their part, airlines continue to focus on solving their customer service needs and have stopped publishing in most cases.
- Streaming / VOD: they have benefited greatly from the situation, thanks to an increase in registrations and consumption time and have not been affected in their supply chain. They have not made any major changes to their branded messages.
- Leisure and physical entertainment: no activity and no communication efforts beyond the mobilisations led by the artists or sportsmen themselves in the social networks and unlinked to specific brands.
Brands that are surviving
These brands are affected, but survive by creating a brand through their content, even without making great efforts at the communication, structural or business positioning level.
- Fashion: they combine two types of communications: one focused on further developing and giving visibility to their catalogue and another more focused on working on brand values, promoting ambassadors and UGC. There’s investment in live content for classes and workshops
- Beauty: they have benefited from content mobilised by influencers or ‘homefluencers’, focused mainly on giving health and wellness advice from home.
- Fitness: they bet on virtual classes or online training for their communities, as is the case with Decathlon. The gyms have also turned to the creation of live sessions and with the intention of ‘normalising’ their activity, although it is very difficult to monetise it. Other smaller retailers have developed content that is more product-focused.
Brands that are communicating
Brands that have decided to adapt their campaign message to accompany their communication strategies.
- Beverages: Coca-Cola, under the slogan ‘Distancing ourselves is the best way to be united’ has changed its communications and has given its space to experts and associations to share information about COVID-19. The Colombian brand ‘Cervezas Aguila’ has developed the campaign #EstePartidoSeJuegoEnCasa (#ThisMatchIsPlayedAtHome) and has adapted its content to typical football situations in the face of quarantine.
- Telecommunications: some brands have taken the opportunity to give away more gigabytes, content and minutes to their customers, but they have not generated or adapted the company’s current campaign to position and communicate during the quarantine. On the other hand, Orange has adapted its ‘LOVE’ campaign concept to deal with this situation.
- Fast Food: Burger King is a brand that is focused on encouraging new habits among Generation Z in the face of their academic disconnection. In this case by creating different challenges – in maths or literature – to obtain free Whoppers through redeemable coupons.
Brands that are taking action
Brands that are seizing the opportunity for change and combining communication and business transformation efforts to strengthen or modify their customer experience.
- Banking: this is the sector that has been most transformed in order to continue providing a service for its customers. They are offering all their services online and are also making business decisions such as postponing payments, advancing payroll, etc. Bankinter has also wanted to show closeness and understanding of the situation with its campaign ‘The bank that sees money like you do”.
- Pure Digital Players: brands that were already 100% native in the digital ecosystem are now emphasising this with ‘branding’ campaigns and at the same time changing business models to adapt to the current situation. Airbnb and BlaBlaCar will probably be able to survive because of the inherent flexibility of their businesses to be able to reconvert their business model, while betting on their CSR messages and support to citizens.
The next few days will be critical for the Marketing areas and they must be attentive to new signs of change in consumer confidence in this phase of Re-Engage. We are already seeing data that invites optimism when it comes to predicting consumption beyond the essential, and which will have an impact on those sectors that are ready to capitalise on it. There will be no respite for those who do not understand that this cannot be a path only between brand and consumer, and that achieving ‘360º Communication’ or ‘Effective Marketing’ will depend exclusively on having put all the business assets and stakeholders into the equation.
This note has been prepared with the coordination of Joel Calafell and the contributions of Roger Riera and Fernando Polo.
COVID-19: a note for CMOs – April, 15th
Preparing for super-digitalization
As we see the end of the strictest period of European quarantines approaching, the economic forecasts are getting worse and worse. The International Monetary Fund talks this week of the worst global recession since the Great Depression of 1929, projecting an average drop in GDP for 2020 in the Eurozone of 7.5% (in 2009 it fell by 4.2%). Italy, which is extending the quarantine until May 3rd, has appointed a group of experts to help the country’s economic reconstruction, led by Vittorio Colao, former CEO of Vodafone. Everything points to the fact that he will pay special attention to the technological progress of the country and he is also an advocate for the state health systems to be able to geolocate those infected through the use of mobile phones.
In last week’s note (below) we focused on giving recommendations to marketing and communication managers on brand messages and media mix for what we have called phase 2, Re-Engage, which we are currently in. We also introduced the concept of home-driven marketing to create and publicise products and services especially designed to be consumed at home. In this new update (as of April 15th), we are focusing on the levers that will drive an accelerated digital transformation, which will run parallel to a subsistence economy and mark business development in the coming years.
Three levers will trigger the process of digitalisation after COVID-19: the new consumption habits at home that are emerging, spreading from some population segments to others and consolidating during quarantine; the new state regulation on data privacy, security and health issues; and a series of investment strategies that go through the search for efficiency in the short term, the deployment of public funds and private investment (venture capital and investment funds).
Winners and losers of the pandemic
The impact of this crisis will vary by sector. Based on different studies, we have categorised the sectors into five groups according to: a) the economic impact of quarantine due to legislation derived from states of emergency and the decrease in consumption; b) the speed of recovery, according to the forecast of progressive exit from lockdown and disruptions in global supply chains; c) the expected impact of digitalisation on these sectors.
The five major economies that we have grouped together, and on which developments from 2020 onwards can be studied are:
- Frozen economy. Tourism, transportation, hospitality and entertainment in public spaces will be the main areas affected by the crisis and may have to deal with local and global restrictions until beyond mid 2021. The automotive sector may be affected by mobility restrictions, but we anticipate that the recession and low consumer confidence will have a greater impact. Consumption for this set of sectors is expected to be lower than usual after the crisis, partly due to legal restrictions and/or user distrust. In this case, we believe that there are opportunities to be developed at this time linked to pre-consumer promotions and pre-loyalty strategies.
- Primary economy. Primary and secondary sector industries may quickly return to their usual ‘modus operandi’, although the recovery will not be the same for a factory in the automotive or aviation supply chain as for a pharmaceutical company. There will be an evolution in workplace health and safety and a greater requirement for product traceability from origin. On the other hand, construction will face the reality of a new economic crisis that will undoubtedly affect market conditions.
- Shifting economy. Sectors such as health, education, and financial services had different degrees of digital advancement and now they will accelerate these channels and build a more omnichannel customer experience. In the case of the education sector, the urgency and emergency of the crisis has been key to boosting a quicker response. In turn, we believe that in these circumstances, citizen service or eGovernment could be a catalyst and driver of digital identity that leads by example, especially on the European continent.
- CPG economy. Retail and consumer products have been the protagonists of the lockdowns: either due to store closures, the boost of supermarkets and food as essential businesses or the sudden prominence of eCommerce. In the coming weeks, it is expected that categories such as fashion or electronics can recover some of the lost ground thanks to the rebound effect (revenge spending), the boost of online consumer habits and the digital expectations of the consumer. We will also see a multiplication of direct-to-consumer efforts by brands, online-to-offline initiatives and the digitalisation of physical stores.
- Homebound economy. The winners of the coronavirus will capitalise on their positioning in a more digital economy. These sectors, which already used to market their entertainment, communication or information services assets, have grown enormously in the last few weeks and will continue to do so due to the increase in screen time of existing users and the increase in share with new audiences.
Lever 1: New habits in quarantine
Lockdown has consolidated some digital behaviours, introduced new habits and extended some to other population segments. Evidence of this is that 43% of people over 65 in the UK have used supermarket home delivery services during the first weeks of confinement. From video games to online training, from teleworking to ‘quarantinis’ with friends, there’s higher usage of new tools such as Zoom or House Party, or many different eCommerce sites on mobile phones. According to App Annie, the use of mobile apps in the United States has grown by 20% compared to the same weeks in 2019. And although online clothing sales may have decreased, the use of fashion apps to try on clothes from the phone or design our own clothes is booming.
While some of these behaviours will be circumstantial, others will become structural. There is no doubt that the recession that will follow the quarantine will not affect everyone equally. A family might decide that they cannot afford Netflix, Prime Video or Disney+ on a monthly basis, while they decide to invest more in online training. Or go out to restaurants less frequently and instead meet up with their friends and family via video call more often. We wanted to describe some of these (more or less novel) habits and estimate their degree of permanence in time.
|HABIT||DESCRIPTION / EVOLUTION||
|Online training||Webinars, face-to-face courses that will become hybrids when the quarantine is over, or native online courses. Online training tools are here to stay.||High|
|Online sales||Nielsen estimated that there is an opportunity in countries where the percentage of online purchase of fresh produce and food was lower, such as Italy, Spain or Australia. McKinsey doubts that this is a sustainable habit. Beyond the impact by category, eCommerce will not cease to be the great beneficiary of this pandemic. And we estimate an increase in click and collect as a logistical option.||High|
|Home delivery||A habit already on the rise amongst young people and one that could gain followers in other segments by entering a wide variety of eCommerce categories beyond catering.||Medium|
|Telemedicine||From psychological care to video calls or Whatsapps with our family doctor.||Medium|
|Remote work||In some Nordic countries, telework has increased from 5% to 20% between 2008 and 2018. In others, such as Spain, Italy and Germany, it was still below 10%. A large proportion of knowledge workers have been able to continue teleworking. But after COVID-19, telework is here to stay. Corporate travel will be challenged, pollution in cities will be reduced, and time and money will be saved on daily transport.||High|
|Online Events||Sports matches, concerts, exhibitions or trade fairs. Public spaces are expected to be closed for a long time. Microsoft has announced that its conferences will be Digital First until July 2021. Even so, it is difficult to replicate the feeling of a concert in a stadium. We will be back, but the digital option will have gained positions.||Medium|
|Quarantinis & Videocalls||House party or Zoom. A form of socialising that was marginal has become fashionable. Devices like Facebook’s Portal, exclusively dedicated to video calls, will be extended. Can we save the bars and pubs? Yes, but here’s a habit to watch.||Medium|
|Video Streaming||There are more and more options after the perfect launch of Disney+ and Apple TV+. Although penetration will continue to grow, the less advantageous effects of the screen war could be delayed in time.||High|
|Financial Services||The branches are closed. Banking was already online, and now it may be the same for some of our seniors as well. The increased use of video conferencing could replace face-to-face interviews at the bank office.||Medium|
|Digital exercise||The home gym and connected machines. Remote yoga classes. Gyms may lose some users, but motivation at home is harder to maintain for many people. What is clear is that mobiles and wearables will be increasingly integrated into our daily lives.||Low-Medium|
|Mobile payment / contactless||Not linked to the home. Although it is not proven that cash can transmit COVID-19, progressive cash abandonment may experience a push back after the coronavirus.||Low-Medium|
|Videogames||Augmented or virtual reality, 5G in the making (with minimal lag) and more choice on the market. It will continue to be strong and growing.||High|
|eSports||We will spend more time connected at home and sporting events are suspended indefinitely, which could open doors to new spectators.||Medium|
|eBooks||In the US and the UK, eBooks sales volumes exceeded those of paper in 2018, but almost all other markets are lagging behind. Just as online grocery shopping has grown in quarantine, it is not clear that the same has happened with digital book readers.||Low|
|Entertainment and/or hobbies||We’ve had a lot of time, and home entertainment goes beyond Netflix. Family cooking has skyrocketed and in turn, online recipes and video conferences to cook with friends or our elders remotely are on the rise. DIY, art (with or without apps), fashion applications for amateur designers, beauty “homefluencers”… opens a real opportunity to develop services and products in the context of home-driven marketing.||Medium|
Lever 2: State regulation wave
It is still too early to anticipate the waves of regulation that a global pandemic of this magnitude will generate. It is clear that the world will be different and governments may overreact in the aftermath to silence critical voices of lack of government anticipation and management in the previous phases of the epidemic.
Mobile applications are being urgently designed and developed to geolocate infected people, and are seen as a key initiative to be able to recover normality as soon as possible. They are controversial due to fear of loss of privacy, the transfer of data to the state or the associated security risks. The European Union is in a good position to define a common approach in times of urgency and accelerate initiatives such as those launched by Google and Apple, based on proximity control via Bluetooth, to ensure that their operating systems allow rapid deployment while protecting privacy.
Digital identity, which in Europe is called eIDAS regulation, is seen in light of the coronavirus as an e-government solution to facilitate procedures with public administrations without leaving home, both for individuals and companies. The adoption of these systems particularly helps SMEs to sign contracts and send documents without having to travel. Countries such as Estonia are world examples of productivity in services to companies and citizens due to the degree of progress of their e-government solutions.
On the other hand, although the European Union claims that current regulations on food safety are sufficient to prevent the spread of COVID-19, it would be foreseeable to expect new regulations and technologies associated with food preparation chains.
On the other hand, the sectors we have seen above, which are more impacted by the blocking of movements such as passenger transport (trains, planes, airports or stations) will require health and safety measures and social distancing in order to resume activity, with the possibility that they may become more permanent regulations. In this line, construction areas, factories and warehouses or shops and supermarkets could see how new regulations require gradual technological measures to ensure a lower risk of contagion.
Lever 3: Investment in search of efficiency and return
As a third lever of acceleration we identify private and public investment, in turn reinforced by low interest rates. If we pay attention to other crises such as that of 2008, we can expect different reactions in the four phases of the road map that we shared two weeks ago:
- Phase 1, Re-Adjust. The priority in this scenario is to facilitate teleworking. There is a rethinking of investments in general.
- Phase 2 and 3, Re-Engage and Re-Launch. The driver will be efficiency: obtaining better results with less money. The declining operating budgets of companies will seek better returns with digital tools. On the other hand, unemployment will lead many people to take shelter in the company, as has happened in other economic crises. Public aid is beginning to encourage technological progress by governments, institutions and companies.
- Phase 4, Re-Invent. In this phase, which may take some time, we will see venture capital investments and private funds increase to accelerate the growth phases of digital startups that may have been conceived during the initial stages. Companies will put more effort into R&D and into driving corporate accelerators to look for new business models and general digitalisation.
The 5 actors that will channel the investment that will drive super-digitalization are:
- Public investment in the first instance. A European Council document dated 1 April leaked to the press reveals the intention to coordinate EU efforts in areas such as e-Health, digital education, e-Government, data sharing and broadband and 5G connectivity. Not surprisingly, these are areas that were already on the new digital agenda pushed by European Commission President Ursula Van Der Leyen. EU coordination is important above all to encourage national governments to share data and be able to compete in Artificial Intelligence with China and the US. On the other hand, funds will be channelled to help companies in their digitalisation efforts, mainly small and medium enterprises which have been receiving European development funds in many countries for years.
- Corporate investment: efficiency for the Re-Launch phase efficiency and innovation in the 4, Re-Invent. In the first few months after the shock, we will see broader teleworking programs as a mechanism for cost savings, corporate travel control, small investments in operations and logistics that can bring savings and a shift of marketing budgets from more traditional to digital environments. In a second phase, corporate venture capital will be reactivated and investment will continue in corporate accelerators and incubators, and in increased purchases and acquisitions of technology and e-commerce companies (such as Pernod Ricard’s pre-crisis purchase of e-commerce portals).
- Venture capital: phase 1, focus on eHealth and remote, phase 2, increased investment. As in the crisis of 2009, venture capital and investment funds start to stop their investments in the early stages to startups due to excess risk. As the survey of 500 Silicon Valley startups reveals, investors plan to reduce investment until 2021 and relocate some in areas such as logistics, remote working, productivity software and eHealth.
- Big Tech always wins. Inka Mero, a Nordic private equity fund manager, warns that many of today’s unicorns were founded during recessions. But by 2020, the top ten positions in the world’s largest market capitalisation are already occupied by technology companies. There has been much emphasis in recent years on the fact that creating new business models outside the ecosystems of Google, Microsoft, Uber or similar is becoming increasingly complex. These companies are the ones that will redouble their investment efforts, because they are undoubtedly the ones that will benefit most in the next decade of super-digitalization.
- Creativity and effort is the entrepreneur’s investment. Even when the lobby and power of Big Tech make innovation difficult, every crisis produces a “creative destruction” of jobs. New entrepreneurs will emerge and they’ll be able to find money from family and friends to create new startups and find their way around minimum viable products.
The rise of Digital Commerce and its impact on the digital transformation
In 2003, the confinement of SARS in China catapulted digital habits: the adoption of eCommerce, broadband and mobile telephony. Today in China, 33% of retail transactions are online according to eMarketer (not counting travel or restaurant delivery). The UK and South Korea follow with 20% (and in Spain, the figure barely reaches 10%).
In the medium term, and within a broader context of digitalisation, we see digital commerce in all its variants as the first recipient of investment, for its efficiency and for the habits acquired in quarantine. It’s something that goes beyond simply selling through a website, and impacts on the entire process prior to the sale, the transaction and the post-sale, both online and in a physical store. It ranges from strategies for attracting attention on social networks to digital platforms that direct traffic to physical stores (O2O – online to offline), the digitalisation and automation of physical spaces, the use of software to capture and analyse data and optimisation through artificial intelligence or even the proliferation of social networks that are born already sales-oriented rather than simply for mere connection between people.
The phenomenon of social commerce is not new, but it will play a determining role. For years, Facebook has sought with greater or lesser success to introduce transactional sales functionalities into its platforms. From the Instagram checkout, so that the user can buy without leaving the app, to the payment system already announced for Whatsapp in Spain (encouraged by the growing use of Bizum). But the reality is that the way is marked by China. Social shopping is led by applications such as WeChat, which has gone from being a messaging application to a mini-Internet in which companies such as Nike deploy their direct-to-consumer channels and loyalty programs. Or XiaoHongShu, a mix of Pinterest, Instagram and Amazon, which passed the 200 million users mark a year ago.
The digital trade forecasts place China as the winner, with more heterogeneous forecasts for the Eurozone. But COVID-19 will change the pace for all of us. The need to make marketing and sales investments more efficient will give e-commerce the opportunity it was looking for in other countries as well. And with it, we will see a more authentic and people-centred digital transformation as a mechanism to accelerate the exit from the crisis.
COVID-19: a note for CMOs – April, 7th
Quarantine will boost home-driven marketing
As the most affected countries in Europe (led by Italy and Spain) see the curve of new cases and new deaths from COVID-19 begin to flatten or decrease thanks to the lockdown, the expectation of a very controlled exit from quarantine (or even intermittent quarantines in the future) becomes more tangible and predictions of economic impact worsen. The lack of control of the epidemic in the US has led to some forecasts of its GDP with setbacks in the second quarter of up to 38%.
As we enter Phase 2 of the roadmap defined by Good Rebels, which is explained below, more marketing departments are already working with a new media mix, in a scenario of reduced advertising investment and with a greater focus on the brand than on the product and digital channels.
Countries such as the United Kingdom, Spain, the Philippines and Germany are planning to extend the duration of the lockdowns. Consumers in their homes are setting a trend that we have called home-driven marketing and which we explain below. It will be important to discern between short-term changes in consumption (will people still be making bread at home?) and trends that are here to stay.
This note, updated April 7th, gathers the latest data on the impact of COVID-19 on marketing strategies and focuses on recommendations for the marketing director in phase 2 of this crisis. The note is updated weekly.
At home, in front of our screens: social networks, coronavirus and brands
We consume more social media than ever before, but the line between proven information and fake news is very fine. According to the latest research from Global Web Index (Wave 4), the World Health Organization and official government sources in different countries are the most reliable sources of information for obtaining information about COVID-19 from the consumer’s perspective. Regarding the platforms we use to inform ourselves about the coronavirus, Facebook and Youtube are the first place for the North American market, while in countries like the United Kingdom, Facebook and Twitter are in the lead. If we analyse it by generations, Gen Z prefers to inform itself through Youtube.
Global Web Index | Wave 4 | Media Consumption
According to WARC, there is enough data and evidence to assume that consumers are following brands more closely than ever before. How companies react to the current crisis, whether they prioritize people or profits, will directly impact how consumers perceive their products or services during and after the crisis. The following data helps us to weigh up the current sensitivity at a time when brands must not disconnect:
- One in three consumers admit that they have stopped consuming brands that they believe are not doing the right thing during the crisis (this figure rises to 76% in Brazil).
- One third of consumers say they have started consuming a new brand because of the capacity for innovation or sensitivity it has shown in its content or advertising (and this figure rises to 82% in China, where we are already seeing the end of the crisis).
- Also, a third of consumers declare that they have already convinced other people to stop using a brand that was not acting correctly or has not shown enough empathy.
- 71% admit that a brand would lose its credibility completely if a profit-first attitude is observed in a situation like this.
Most affected consumer sectors
It is estimated that half the world’s population is suffering from some form of lockdown. Sales in many sectors have 100% stopped. Some categories maintain a share of their income from eCommerce, but many that depend on physical retailing don’t even reach 10% of their pre-crisis volume. Other sectors of GDP, such as essential retailing, certain consumer categories, and B2B services are less affected, at least in the short term.
In this vein, Stackline has reviewed the categories of eCommerce that are increasing and decreasing the most in the USA. Among the winners are fitness products (although outdoor sports products are declining) and consumer electronics and technology for working at home. Among the losers are the categories of travel accessories, clothing items associated with the beach or vacation, cameras or men’s wedding suits.
On the other hand, we can also observe certain behaviours with optimism, even in completely unemployed sectors such as tourism. According to data from Izea in the USA, 55% of frequent travellers declared that they would possibly or very probably book their holidays during the quarantine. However, the same study anticipates that between a quarter and a fifth of buyers will do so depending on majority discounts or services such as free cancellation even beyond 9 months.
Brands do not disconnect
Although brands should not be the protagonists, as we enter the phase that we’ve called Re-Engage, they go from fighting the start of the crisis (health and safety messages, support for the elderly, support for health personnel) to beginning to think about themselves. There are movements of citizen support for consumption, especially in the most affected sectors, as we see in this campaign by Budweiser that supports bars in Italy and other European countries, or that of Coca Cola and El Tenedor supporting small restaurants in Spain.
Brands are cautiously recovering their communication plans, especially on social (digital) platforms, and find themselves with a consumer who has assimilated to the quarantine, the loss of the Easter holidays and the fact that their life is now entirely at home. In this new reality, an opportunity is generated for brands to connect with their audiences based on the new habits of the homebody economy.
Likewise, credibility is at stake more than ever in the field of “owned media”: what the main company spokespersons communicate will be critical in these weeks. According to a comparison between before and after COVID-19, and analysing the sources of the Edelman Trust Barometer 2019, it is reflected that confidence in the figure of the CEO grows relatively against the fall of spokespersons as employees or prescribers, who lose about 17 percentage points in credibility.
But the voice previously gained is not lost and employees will play an important role in the reputation of their companies by speaking on social platforms. In this context, companies that already have solid communication strategies in place and have worked with employee advocacy programs or internal brand ambassadors will play with a huge competitive advantage at such a sensitive time.
Digital media predict a decline in revenue, but it’s more optimistic
Facebook will see its revenues affected by the decline in advertising investment in these first two quarters, but Mark Zuckerberg is already making moves in order to not reduce advertising space or content. He recently announced that he would invest 100 million dollars through the Facebook Journalism Program by making economic concessions to different local media in the face of COVID-19 and, in turn, supporting media investment to other global information organizations.
In the US, according to the latest IAB report on that market, a quarter of advertisers have already stated that they will pause all their campaigns during Q1 and Q2. Half are adjusting some of the investment. But as in Europe, a more immediate rebound effect – even in Q2 – is expected for digital investment.
What will happen in the second half of the year is still difficult to predict as it is also difficult to compare the current situation with that of the previous economic crisis. In 2008, the average digital ad budget barely reached 12% and now exceeds 50% in many cases.
Despite the optimism of the recovery in global digital advertising spending, between a third and half of Facebook’s revenue depends on small businesses. Several scenarios suggest that in the event that the lockdown lasts more than two months, the rate of business cessation in these businesses could reach almost 30%. Moreover, sectors that have been badly affected by the crisis and are highly uncertain about recovery, such as travel and tourism, account for a large proportion of their customers and advertising investment.
In Spain, the second wave of the Marketing and COVID-19 Barometer that we’ve just launched shows that in just two weeks the percentage of marketing professionals who believe that media investment in the next 3 months will be reduced by more than 20% has gone from 48% to 68%:
The advent of home-driven marketing
Observing the data and the behaviour of the last few weeks, it seems evident that one of the drivers of the super-digitalization that we expect in the next few years will be the concept that we have called Home-driven marketing. A second factor, which is also very relevant, will be the waves of state regulation on health and safety that may affect directly impacted sectors such as physical retailing, travel or entertainment, recreation and culture in public spaces. And the third will be investment funds and corporate investment, which will drive a wave of new business models and accelerate the digital business transformation that is today in a different state of progress depending on each industry.
Due to the pressure to recover sales in the short term, we understand that digital commerce – from online retailing to the digitalisation and automation of physical stores and on- and off- integration – will be the cornerstone that will accelerate the digital conversion in three areas: the customer experience, business models and revenue channels, and business organisation and methods.
After the partial or total lifting of the lockdowns, we will spend more time at home – whether it be out of obligation or conviction. Enough time to acquire new habits that will be supported by a series of social macro trends and technical solutions that were already with us. This convergence is what will produce a real hatching/acceleration of what we can call Home-driven marketing: creating and making known products and services specially designed to be consumed at home.
Consumption habits that had already made their appearance in different measures according to the population segment such as streaming at home, the massive use of home services (food, any kind of domestic service) will join others that will be reinforced such as teleworking, telemedicine or much more regulated online training.
If we put the focus on technological devices, beyond the TV, the PC, the game console, the smartphone, the smart TV and the tablets, which have been historical catalysts, we have among others:
- Voice assistants. An agent of HDM acceleration (Home-driven Marketing) will be the voice assistants. Designed to be used mainly in the home, they represent the destruction of the final line between what is connected and what is not.
- Video-conferences with artificial intelligence. In 2019, Facebook launched its commitment to the world of videoconferencing: Portal. This type of device represents an additional on-off connector and builds towards a science fiction movie experience within the home.
- Virtual or augmented reality. After following the hype and disillusionment curve, it is beginning to offer solid experiences to many consumers.
These devices and other incipient developments will join two macro social trends forecast for the coming decades:
- Concentration of life in cities. According to the UN, 68% of the population will live in cities in 2050. This will make most of the business models towards which home-driven marketing (HDM) is building more efficient.
- The individual as an autonomous producer of services. 30% of the U.S. workforce are self-employed or dependent on a self-employed person for employment. Much of this work is done at home, which, coupled with the trend toward full or partial teleworking for employees, will make HDM-driven business models more effective.
Re-Engage: the ‘shock curve’ has flattened out
In the new phase of the crisis, which we have called Re-Engage, brands understand that they can contribute by supporting governments and society by avoiding disconnection. According to this study from Kantar, with more than 25,000 participants, the main expectation of consumers is that companies prioritize concern for their employees, favour flexible work and develop plans to guarantee the supply chain. Strengthening customer service or making long-term donations is no longer a priority once the shock phase (Re-Adjust) is over. Less than 10% of respondents said that stopping their media investment was a good idea.
In this second phase, brands must keep their service lines active and find a way to talk about their product with sensitivity and according to the brand strategy. Citizens and consumers continue to watch closely as they see the COVID-19 death curve diminish and as they wait for the end of the quarantine they are more sympathetic to the need to normalize the situation and defend jobs and the economy. The brand strategy must be intelligent and subtle, relying on empathy and engagement strategies, leaving product consideration in the background.
But “normalising this situation” does not mean returning to normal communication. Consumers have empowered brands to start playing a role beyond their advertising efforts. Citizens expect brands to start selling, but also to raise their criticism, be more transparent, guide, care, encourage, educate and entertain. In the end, to be a little more humane. And we don’t know if we’ll ever go back to this new vision of ‘utility branding’.
Recommendations from a business perspective
Although the shock is still recent, the most advanced companies are beginning to look to the future, thinking about capitalising on the anticipated super-digitalization scenarios. During this phase, they must continue to review their own and the sector’s economic scenarios and determine the innovation efforts that can be made in view of the “reopening”.
Brands will focus on digital sales channels and will certainly delay digital customer experience initiatives for later on, but we must not forget that the expectation of these will not stop growing for two reasons: the digital acceleration made by other brands in the same industry; and the insecurity of consumption in which a part of the population will be involved during and after the crisis.
The integration between areas that impact this experience becomes more important than ever. It will be of little use to launch messages that are not aligned with the commercial vision or promotional messages that clash with budding human resource policies. CRM or sales teams will need to understand how disruption affects product assortment due to supply chain disruption. And general management should forge a strong vision that builds trust in the teams and brings them together. The Marketing area must act as an integrator and watch over the brand at a time of potential commercial paralysis, but at a huge reputational cost if the right messages are not activated.
Recommendations for branding and media mix
Below are some specific recommendations for working on communication, brand and product messages in phase 2 of the reconnection:
- Communication must be committed and intelligent. These are the first steps after the “shock”, and hypersensitivity is still in place in most of Europe.
- Brand recognition can be capitalised on, using what they have done and demonstrated in the ‘Re-Adjust’ phase.
- The strategy should be based on empathy, transparency, honesty and reacting with agility, sometimes giving voice to others, although communication continues to be coordinated.
- Be present and respond to concerns (including those of institutions or governments): disappearing and ‘switching off communication’ is not an option.
- It is important to involve the consumer and make them feel that they are part of something bigger.
- Brands are still not protagonists and should not be at the centre of the storytelling, except when talking about the organisation and measures taken, even if creativity allows you to move from ‘Branded Content’ to ‘Branded Support’.
At a time of high media consumption, it is time to communicate on all channels (out of home and print remain in quarantine) with consistency, proportionality, sensitivity and maintaining an always-on in media such as digital. Notoriety and conversion campaigns can be reactivated if the service is considered to provide something useful, even in non-essential sectors. Some industries will be able to accelerate commercial messages (those most affected will follow: travel, tourism, restaurant and leisure, automotive) but without neglecting the brand.
This unprecedented crisis will change our perspective and consumer behaviour as never before. In these notes, we hope to provide managers with an integrated vision for the coming weeks and months, from a business, marketing and customer experience perspective.
This note has been prepared with the coordination of Fernando Polo and Joel Calafell, and the contributions of Taru Makkinen, Judith Esquivel, Pedro González and Mar Castaño.
COVID-19: a note for CMOs – April, 2nd
The disruption of the marketing and communication department
The initial shock of the crisis has passed and while in Europe and parts of the USA quarantine is the new normal, there is a growing awareness of the disastrous human and economic consequences on the horizon. At the time of publication, New York has reached 1,200 deaths from COVID-19 and is expected to surpass Madrid soon. Italy has not yet reached the peak of new deaths per day (although it is expected to in a week) and countries such as Spain have followed Italy’s path in tightening the lockdown by banning non-essential work activities carried out in physical jobs. Meanwhile, other countries such as England are already threatening to increase measures if they see the collapse of their ICUs approaching.
(Dashboard new cases and deceased, Good Rebels)
From a business perspective, all areas (especially operations and finance) are affected, and marketing and communication is no exception. After an initial phase of message and channel adjustment and management of crisis messages (internal and external), all professionals at home are preparing for the second phase, while the quarantine lasts, and some are already preparing for a return to normality, which we know will not be normal.
The forced collapse of services such as travel, hospitality, restaurant and public entertainment, and the closure of non-essential retail, is making all sectors more or less ready for a long-promised recession. Average estimates of the fall in GDP in European countries exceed 5% in some predictions for 2020 (some countries will be more affected by the weight of the tourism or service sectors).
Marketing budgets are being tightened, with a great impact on advertising investment which will be subject to a whip-round effect and won’t recover after quarantine. In the Covid-19 and Marketing Barometer that we launched in Spain last week, which we will update every 2 weeks, 54% of the professionals surveyed expect a slow recovery and another 60% estimate that media buying will be reduced by more than 20%.
In addition to our own data, every day we collect the most relevant published data which we filter afterwards to inform our recommendations to clients. This March 31st note analyses the impact from a consumer, brand, media and business perspective and will be updated weekly.
#StayHome: new consumer habits
Although it varies by country, consumer sentiment is related to the evolution of the contagion curve (more optimistic at the beginning and the end). In Spain, even without having reached the peak of contagion, only 19% of the population believes that the economy will recover in less than 3 months (McKinsey), compared to 60% in China, already in the final phase.
Below we list some of the changes in behaviour in Europe (especially Spain, UK, Italy) and Latin America (especially Brazil) observed in March:
- There is an increase in connectivity across all media and channels (+71% in overall Internet usage).
- 66% claim they read more news than before (and half of these do it much more than before).
- Up to 70% declare that they are using their smartphones more (80% in the case of Gen Z). This increase is even more intense in countries like Brazil.
- The use of messaging platforms is increasing for half of the population (in Spain there’s been a 76% increase in the use of WhatsApp in the last weeks).
- Almost half of the users (45%) report they are using social networks more than before.
- 40% claim to have increased their use of gaming platforms (and 50% are using streaming platforms more).
- Gen Z is creating 10 times more videos and using music streaming platforms 7 times more than Boomers. Boomers have increased their TV use considerably.
- Responsible consumption is not yet a priority (only 20% say they are concerned about the long-term personal economic implications), but more than half of users expect to delay their mass consumption purchases until the crisis begins to abate.
Impact on sales and marketing function
Airlines, hotels, tourism, restaurants, public shows … such a dry spell has never been experienced in the history of our modern society. Consumer goods industries, to varying degrees, expect a dramatic drop in sales during the quarantine, affected by the closure of non-essential retail. Other sectors such as banking, automotive or B2B services and software are expected to be affected in the medium term. Disruptions in the supply chain may hamper stock availability on reopening. The exit from the lockdown is expected to be progressive.
While some categories of consumer products have experienced an initial push, giants such as Unilever (food and hygiene) foresee a drop in sales for as long as supermarkets operate with maximum security during quarantine.
Although eCommerce is being maintained, its capacity is limited and it cannot cope. Amazon announced on 21 March that it would limit the delivery of some essential categories in Italy and France. Even food delivery faces different scenarios, with peaks of increased activity that could decrease in other phases and with different demand by type of population nucleus.
Brands are not the protagonists
Brands are facing a startled and expectant society, with constant exposure to media and news about coronavirus. Brand messages are more honest and tangible. Campaigns that demonstrate ingenuity but contribute little are singled out and criticized.
Not much attention is paid to brands in this first shock phase, but what they convey, and above all, what the companies do, will be commented on later. The pressure of being “brands with purpose” forces many to act (some on their own initiative and others by dragging). Many companies have started by donating healthcare material, contributing to the welfare of hospital staff, but as time goes by, these actions may sound more opportunistic than honest to an audience used to advertising maneuvers.
In general, there has been an evolution throughout Europe towards messages of consumer support and emotional campaigns aimed at resonating with the different psychological states of the audience or generating sensitivity towards more vulnerable groups such as the elderly. The reduction of the commercial focus (among advertisements even from large advertisers in several European countries where advertising activity is stopped) has been remarkable in most sectors.
Although many brands plan to freeze their advertising activities, Kantar’s Covid-19 Consumer Barometer suggests that brands should not do so. It is not what the consumer expects and brand value and recall will be affected in the medium term.
After the initial shock of the start of the lockdown, over the last few days we have observed a greater connection between areas and departments (especially between the areas of Communication, Customer Service, Customer Strategy and Marketing), with more priority given to agility, speed and suitability of action and less to creativity or innovation of formats.
The redirection towards digital in all phases of the funnel has been evident, with an increase in Webinars, online events, video-streaming, content in social networks and campaigns that are either 100% digital or distributed between TV and digital.
Much media consumption and few advertisers
In general, it is still expected that the annual advertising investment forecasts in the markets most affected by the COVID-19 will be corrected downwards in April. Print and ‘out-of-home’ publications will be the most affected, no channel (not even digital) seems able to avoid a fall against the initial forecasts. It is interesting to note that in the case of China, where that annual forecast has already been redone, the growth slope remains unchanged.
In the television media, the advertising inventory is beginning to be renegotiated (to take it to digital platforms or streaming), although many advertisers decide to rethink their media mix when they see that the advertising match between audience interests and the content grid suffers, as is the case with the loss of the young audience when sports events are cancelled. Meanwhile, Facebook and Google, which derive more than a third of their income from sectors such as tourism and retail, could lose more than 44 billion in 2020.
According to our barometer (1st wave: Covid-19 and Marketing), in Spain 16% of marketing and communication professionals surveyed say they are transferring investment to digital media at this time, while 17% guarantee that they will maintain their investment in social media.
Digital campaigns have generally been reduced and in some cases are lowering their costs. According to SocialBakers, the CPM on Facebook has been reduced by more than 50% in a comparison between November 2019 and March 2020. Beyond the seasonality of costs in bidding systems, there seems to be more digital consumption but fewer advertisers than ever before.
How much of a digital transformation is there really?
In just 2 weeks, the progress of digital transformation in organizations has been put to the test. Consumer companies that had not deployed online sales strategies before the crisis (or had done so timidly) are now suffering. Work from home systems are being urgently implemented and remote workers are disconnected, leaders are wary or teams are having trouble collaborating as they were before. Even the video game industry, with a lot of digital sales in markets such as the USA, still has a high dependence on physical retail in others.
Habit changes underpinning the upcoming super-digitalization
Several of the habits we are adopting in this quarantine could be made permanent by cementing the five levers that support the digitisation of the marketing area.
|Pillar of Digitisation||Current and Future Habits that Sustain It|
|Non-presencial Relationship||For two decades, digitisation has based a large part of its value proposal on building a non-presential and non-synchronous relationship between client and brand during a large part of the decision, purchase and consumption process. It brings value to both parties.
How can the rapid change in habits we are experiencing affect this balance? Deborah Tannen, award-winning writer and Georgetown professor, puts it this way: “Instead of thinking “I can do this online” we will think “is there a reason to do this in person?”
For this reason, many positive habits (attending yoga classes, playing board games with friends…) that are being naturally brought into the digital environment in these weeks will, in many cases, form part of new, purely digital routines that will replace the face-to-face ones.
|Consumer’s expectation of personalisation||The willingness of users to enjoy personalised experiences (shopping, leisure, information) has been constant in recent years, driven by the cost efficiency in offering them which digitisation has brought. By 2017, 49% of consumers were demanding them.
Customization is efficient in terms of cost of sales, but is costly and complex for many companies and sometimes carries high environmental costs.
As Sonia Shah suggests, this expectation may be reduced for some time after the end of the lockdowns, giving many companies a boost to prepare for how they will adapt when the expectation of customisation resurfaces.
|Access to client/citizen data by organizations||Surprisingly, by March 2020, almost any company has more data about a person than their government does (in the Western world).
Perhaps this crisis will lead to a threefold change in behaviour. On the one hand, some public administrations may work in a more decisive way in generating data on relations with their citizens. On the other hand, they may change their perspective on privacy. And finally, company data should maybe be considered a public good, as some authors suggest.
|Perception of value received decreases (long tail models)||When trust is restored, many services that were surviving with inertia, corporatism or sectoral regulations will slowly but substantially change their very raison d’être.
As the American oncologist Ezekiel J. Emanuel points out when he talks about the deployment of telemedicine as a way of alleviating the burden of care in hospitals around the world, many of these services have gone through a point of diminishing perception of value, of no return.
Others, such as teleworking, online training or face-to-face political activity, will find themselves in similar circumstances, profoundly changing the marketing logic of these sectors.
|Symmetry of information available between consumer and business||It is precisely this increase in the digital aspect of services and activities with a great deal of face-to-face weight in their very logic of being that will mean that the user will have an even greater volume of information to make informed decisions about which to choose.
This will force these service providers to accelerate their digital transformation in the area of service delivery.
eCommerce: point of no return
Mandatory lockdown has led to large volumes of consumers turning to eCommerce for the first time and is changing the relative percentages of sectors contributing to total global ecommerce. The SARS crisis was a turning point for China’s eCommerce and digital giants, and although it is no longer 2003, the volume of online transactions compared to total retail in China exceeds 30%, while in the UK and South Korea it reaches 20%, well ahead of the fourth and remaining markets.
By selecting different sources and making a simple analysis we can estimate some scenarios, also taking into account data from markets at different times of the epidemic.
- Ecommerce purchases that are postponed. According to GWI, between 20% and 40% of purchase transactions are postponed for tickets, travel and flights (the younger the buyer – the more they postpone the purchase, in all sectors). It is interesting to note that all three sectors have a huge percentage, in many markets, of ecommerce sales compared to the total.
- Support from stakeholders. At the same time, we are trying to accelerate the adoption of ecommerce solutions and online recruitment for businesses that do not yet have them, with the help of different companies. Facebook has created a $100M project, the crowdfunding platform Wefunder is launching a private support program on its platform and Google is launching a $340M credit line for small businesses to use its solutions.
- The categories and stores that are growing during the lockdowns in some cases maintain those levels. Ecommerce data for products that can be purchased increases dramatically, in Italy and other markets. Particularly interesting is that in China, online sales of food products have increased x3 and Alibaba is already at pre-boom levels. While JD – its main competitor – expects to have the best month in a year and a half in March.
What happens next?
Looking at the described scenario it seems that we may witness an acceleration of ecommerce when consumption returns. More than 50% globally say they will reactivate their purchases as soon as their country overcomes the outbreak, another 40% don’t know when they will, only 10% won’t.
The sectors with the highest share of ecommerce have been the most damaged by factors external to the use of ecommerce and those sectors mostly sell services, which have not been affected by the cessation of production but by state regulation. So it will be easy for them to recover their customers’ spending. In addition, all sectors in which products are sold can benefit from the fact that factories in China are the first to reopen.
To complete this virtuous circle, we’ll see that the segments of the population that use ecommerce the most are those that previously stopped it, and are those that show the fastest willingness to resume consumption. This will also benefit from an increase in the supply of these new actors that are receiving aid and/or creating new projects, which could increase the share of ecommerce compared to conventional retail.
The challenges of CMO in the era of coronavirus
The need to overcome organisational silos, particular visions and interests and focus on the customer increases in the face of a crisis like the coronavirus. In the early stages, corporate communication must take control and focus on security and customer service messages. The leadership of the CEO is obvious and the marketing director must reduce the prominence of the brand and be the voice of the customer, putting themself at the service of corporate communication, customer service, logistics and supply chain partners.
It is time to listen to the customer through all channels: call centres, social network monitoring, online panels, personal calls. Organisations must establish coherence at all points of contact, in the face of the disruption imposed by the states of emergency, transmitting brand values that now must be more organization and people and less logos and creativity. They need to maintain constant and consistent communication in digital and social media, bringing together and giving voice to the firm’s employees.
Remote working, digital leadership and people-centrism
It is the responsibility of the communication and marketing manager to maintain from the start and then increase the productivity of teams (internal and external) that may be temporarily diminished by illness or budget revisions. Using the right tools, leading by example, communicating (and over-communicating) with transparency and lowering the sense of urgency as soon as possible.
In addition, the three journeys with which we characterize people-centered organizations: customer, employee and citizen are more intertwined than ever. And although the CMO is not the only one involved, they have an opportunity to elevate this discourse to the steering committee. In the face of COVID-19, consumers do not feel like consumers, and brands should be less ‘brands’ and more organisations.
The roadmap for brands in the face of COVID-19
Marketing and communication managers in organizations face one of the greatest challenges in our recent history. How this crisis is handled will set the most solvent organizations apart from the rest. The right tone and combination of means, the balance between budget cuts, the opportunity to reinforce the brand when the new normality is recovered, and the capacity to reinforce the experience and our connection with the client and create new business models in the face of the predictable super-digitization, will determine the winners and losers when the crisis passes.
In the following roadmap, we include some of the conclusions and recommendations that we will be looking at in greater depth over the next few weeks as we gather new data and delve deeper into the reflections and phases of this pandemic.
Covid-19: a note for CMOs – March, 23rd
Why brands should not abandon their 2020 strategies
The coronavirus situation is devastating the economies of most countries in Europe and locking thousands of people in their homes, and it’s only a matter of time before it continues to evolve and, worse, steepen its curve in the main areas affected: Italy, Spain, Germany…
Brands have entered a period of austerity and isolation. For most, it’s not the time to sell products or work on commercial strategies, regardless of the sector in which they operate. The data shows that both brands and public figures face a hyperconnected audience with high expectations of commitment and sensitivity, a significant communications challenge. We have not experienced this situation since the beginning of the century, except perhaps for September 11, 2001. This is undoubtedly the first change in the economic and global paradigm that Generation Z will experience.
Now more than ever, brands must make an effort not to ‘disconnect’ or ‘shut down’ across social media. Silence and digital disappearance is not a valid strategy when it comes to holding each organisation accountable. This would be almost as damaging as badly judged messaging in these times of enormous social, political and economic tension.
The advertising industry, waiting for the ‘comeback’
According to data from eMarketer, advertising investment will hardly be affected in global terms, and the final result will depend, in the main, on what happens in the last two quarters of this year. Markets will adjust and, furthermore, it is common for advertisers to increase media investments in the final stretch of the year. On the other hand, with major events such as the Tokyo Olympics likely to be postponed but not cancelled, the industry may resume investment paused earlier in the year.
In fact, again according to eMarketer, global advertising investment is expected to grow this year to $691 billion, only slightly below initial estimates of $712 billion. A difference of $20 billion that could easily be balanced out, depending on the evolution of events.
And in the digital realm?
One of the main affected parties is Google, with projected reductions in its annual advertising revenue of between 15 and 20%. For its part, Facebook has estimated that reductions in spend across industries such as tourism, retail and CPG, which account for up to 40% of its total advertising revenue, will cause a substantially lower result compared to their 2020 forecast.
Conversely, and less concerned about advertising revenue, Amazon will continue to hire distributors to respond to the huge peaks in online commerce that are already taking place on its platform.
In Spain, at this time of uncertainty, it is inevitable that we observe the daily collapse of the stock market throughout the IBEX-35, and are forced to draw up contingency plans; indeed it is possible we will experience a media paralysis in the coming weeks.
So the question we are all asking ourselves is, what next?
Will there be ‘Revenge spending’?
Several sources are beginning to recall the concept of revenge spending as a pretext for the economic acceleration expected in the second half of 2020, in light of the first signs of recovery that are beginning to appear in China. It is precisely in industries such as luxury and fashion, relegated to second place at a time of confinement and uncertainty, that this rebound is expected to be one of the most significant.
On the other hand, the brands that best formulate their value proposal to society during this first phase of economic hibernation and commercial disconnection will be the best positioned to generate income when they climb the advertising investment curve. And, even more so, the real key to success will be those that manage to prepare themselves in advance for the arrival of this ‘revenge spending’.
In a context like this, there are numerous opportunities for brands that know how to anticipate and begin preparing coherent strategies that can be launched at the right time.
What will brands be able to do when that time comes?
- Re-encourage an active lifestyle, leading a new social era
- Revitalize the brand through the product, especially after a break in consumption of more than 60 days
- Develop campaigns and activations that celebrate the enthusiasm, optimism and milestones of the second part of 2020
- Give voice to new experiences through strategies of Employee Advocacy, Brand Advocacy or Influencer Marketing
- Give continuity to the value proposals developed during the crisis: planning actions related to the social links, commitment and closeness that go beyond the commercial calendar
- Bet again on trust and loyalty by generating new communities, ambassador programs or by promoting Loyalty Marketing
- Create links with other brands and territories that can add more to their corporate discourse and mission
The three phases that lead to ‘Revenge Spending’
At Good Rebels, we wanted to define three phases of preparation and activation for brands in the media, both at a commercial and communication level, depending on what is yet to come. It is definitely not the time to disconnect, but instead we should clearly understand which strategic phase we will be in as the next weeks go by.
Phase I. Shock and Adjustment. The moment we are in now: a phase of austerity and putting communication at the service of crisis management.
Phase II. Reactivate and Engage. The ideal moment to start anticipating what will come in the third phase. Brands will have to build credibility, commitment and links, especially from digital media.
Phase III. Revenge Spending. This will be the moment of departure and escape: in which the most prepared brands will revive communications and media to lead with intelligence and creativity a social movement that will be generated by a new “hunger for consumption”.
China, an example of recovery
Meanwhile, in China, the forecast of a decline in media investment by 2020 is only 1%. There is a readjustment of investments to a more digital terrain (apps, video production and social networks are on the rise; traditional advertising, mainly, is down) and the recovery period that will be experienced in the coming days opens the doors to optimism and a balance of investment in the not so distant future.
Covid-19: a note for CMOs, March 15th
Media consumption (including social media or Netflix) and eCommerce usage is expected to rise sharply as more and more people quarantine at home amid the worst health crisis the world has experienced at a global scale as of late. At the same time, the economic impact of this unprecedented crisis is uncertain and could be massive. As I write these lines, the IBEX 35 is experiencing the worst one day drop in history, while the Dow Jones is down by 10%. McKinsey’s worst case scenario depicts a long term recession.
However, economic turmoil together with idle time from people provides an opportunity for communication as well. At Good Rebels, we’ve been working with our clients to monitor, plan and take action on their communication strategies. Spain, the first of the markets in which we operate that has been shocked by the harshness of this situation, follows behind Italy, but ahead of the UK, US or Latin America, although yesterday’s New York Times editorial reflects that these countries might be awakening as fast as Spain did on Monday.
It is the first time in history that companies will face such a crisis on social media. They will have to respond to real-time inquiries, visible to everybody, and decide what to do with their continuous flow of brand and product digital content. And they will suffer. Here are some of the recommendations we are sharing with our clients.
1. Listen and monitor
Industry leaders in the monitoring software space, such as our partner Brandwatch, have already created dashboards for clients to follow the flow of conversations about CoronaVirus in real time, across different countries and languages. Combining these interactions with industry specifics is the best way to understand how brands, competitors and products are (or could be) affected by consumer perceptions. Traditional survey services are working hard to reflect people’s sentiment on brands, such as their preferences for delivery services shown in this YouGov survey.
As an example, we are creating dashboards related to this one, in order to closely review how conversations are linked in real time with open data shared by the EU, and how this could affect our clients’ products and brands.
2. Be a Human-Centred brand
We are obsessed with inspiring organisations to become more human-centric: focused on their customer journeys, but also on the journeys of their employees’ and the citizens (wider society). All three are intertwined and in unprecedented moments like the one we are living it is crucial to demonstrate that we don’t only care about profit, but also about people and purpose. Companies that publicly applauded the Business Roundtable statement or the Davos manifesto as recently as last January must now walk the talk. Yes, most businesses will struggle financially but … people are worried, firstly about health, and then about financial insecurity (consider freelancers and self-employed workers, temporary workers in the travel and hospitality industry, even permanent workers).
Some businesses are already offering true help, like Telefónica’s announcement to give free GB of data consumption to help families stay connected at home. Microsoft did something similar with their Teams tool. Difficult decisions will have to be faced by businesses with street presence like restaurants, fast food chains, big (or small) retailers. Should they close their premises and focus on eCommerce or home delivery before the Government forces them to do so? We think they should. Not only will society appreciate it, but economic recovery might be faster.
What else can your company do for our society apart from try to keep the economy going?
3. Act quickly, but according to your brand values
It’s been a hectic week at Good Rebels. Though accustomed to working remotely, we’ve been preparing to go 100% remote, as well as fine-tuning our monitoring queries, meeting with our clients to craft crisis guidelines and decide on specific messages. As we said above, this is not an awareness contest, but a true honest movement to help society. That said, brands are taking advantage of this opportunity by reacting quickly. Many of us have heard about the Microsoft offer, but we might have missed Google and Zoom doing something similar.
Cases like Uber Eats in Spain is an example of bad practice; of lack of context and greed. They are already expecting to be winners in this crisis, so why be pushy about it? Though Microsoft’s offer could be clearly perceived as a smart commercial move, the truth is that they are going to help many businesses to cope with the burden of 100% remote work.
Airlines (one of the most affected sectors) are offering changes in bookings for free, to fight a debacle in sales but also to reassure the people that are willing (needing) to travel (and not just for pleasure). And Kike Sarasola, the founder of a Spanish hotel chain, offered two hotels to be used as hospitals on Twitter, with the government of the city of Madrid announcing yesterday that they were thinking of using these kinds of facilities to alleviate the upcoming scarcity of hospital beds.
4. Keep calm and carry on
After the initial shock, people will go back to life. Watching movies, talking to friends on WhatsApp, playing online games. Screen time will rise everywhere, and digital channels will be more important than ever. Even if sales (affected by consumption, retail or manufacturing disruption) decline, brands must play now at the top end of the funnel. It is the time to focus on branding, awareness, and engagement. Digital content production and interactions matter more than ever. Advertising expenditure might take a hit, but it’s also about re-allocating along the funnel and across media channels.
Our customer experience (mostly digital nowadays) can be built or destroyed in these special times. Customer service online is crucial. Leadership, they say, is tested during crises, and our brands can be leaders, laggards or could even suffer unnecessarily from this situation.
For digital optimists like us, this might be an exceptional opportunity to raise awareness about the importance of eCommerce and the digital omnichannel experience. Direct to consumer is a huge opportunity for the CPG industry, yet, most companies stay focused on traditional trade relationships. Time (and data) will tell, but most probably new CPG digital brands will do better under these circumstances. The opportunity lies in front of us. Right now, and over the next few weeks. This is the positive message we are conveying to our clients; they are good rebels like us, trying to digitally transform their marketing and sales functions. And we’ll double our efforts to help them in these months.
Social (People) Media are helping, not misleading
We wrote a book on social media marketing in 2011 and called it Socialholic, to play with the incipient “addiction” to these platforms. But the title was pure clickbait. Our main thesis defended exactly the opposite, that social media provided individuals with superpowers to organise themselves in a decentralised, collective way, and to become better versions of themselves through better connections, access to knowledge and emotional support. Then came Cambridge Analytica and the tech backlash and now it is common to read about how social media is confusing people about the COVID-19 crisis. But we are here to challenge this assumption. Media and Governments might be the losers once the crisis fades out.
People are learning about this crisis through messages curated on WhatsApp, Twitter, Facebook, and Snapchat, mostly by data experts, virologists, independent journalists, and even some honest politicians. Influencers can have a role raising awareness or money, like Chiara Ferragni has done in Italy. Yes, disinformation is a risk, but the role of our relatives and close friends is also crucial right now to be conscious of the huge threat for vulnerable collectives as hospital capacity collapses. Grassroots movements like #StayTheFuckHome and others are pushing people to act independently from State measures and put pressure on indecisive public leaders (as we hit the publish button, Madrid’s government has announced the closing of bar terraces, thanks in part to social pressure) and misleading traditional media whose ties to political parties/ideologies and desperate search for traffic have stopped them from informing us about the true threat, instead writing empty alarmist headlines or articles trying to cover up the wrong decisions (or indecisions) of the Governments.
As quarantining goes on, we’ll miss our social contacts and will rely on digital channels more than ever. This is a good opportunity for brands to do it right and be human-centric. To truly care about people, offer help, stay calm and flatten the curve, while building brand awareness and fostering engagement thanks to digital channels and routines. Will they be up to it?