Will we see ‘revenge spending’ in Europe after the COVID-19 crisis?

Joel Calafell

19 March 2020

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Why brands should not abandon their 2020 strategies 

We have already written about how brands should begin to respond to a crisis that’s already affecting more than half the world. 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…

What short-term horizon are we looking at?

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?

It’s ‘Revenge spending’, stupid

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”.

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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.

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Taking all this into account, a boom in advertising and media exploitation is to be expected in this second phase. Brands will have to communicate again in order to remain relevant and to redirect the consumption that was not made during the first part of the year.

Now, more than ever, brands will have to be prepared. When the time comes, and it will come, they will have the opportunity to reposition themselves, to regain lost confidence and, above all, to start transforming themselves in the face of a new era of customer experience. Without a doubt, they will need to become more digital, more connected and more willing to put creativity, innovation and customer experience at the service of a society that had lost faith in brands long ago.

Now it will only be a matter of time before we see this ‘revenge’ being fulfilled.