‘It’s the recession on steroids’: Why brands need to think long-term amid the coronavirus pandemic
The natural reaction to a crisis is to hunker down and protect short-term profitability, but with demand for most brands either through the roof or through the floor, marketers must look longer term if they possibly can.
Cadbury launched its annual Easter campaign on 9 March, a grandfather hiding Easter eggs for his grandchildren. No one at either the brand or its agency, VCCP, could have predicted that such a scenario would soon become a dangerous thing to do.
But the Covid-19 outbreak has changed that, with people aged over 70 ordered by the government to self-isolate for 12 weeks and the rest of the population to stay home wherever possible.
Within 10 days of launch, Cadbury pulled the ad from TV, calling it “no longer appropriate” and saying it was working to replace it with spots “more mindful of the current climate”.
The move highlights some of the challenges marketers are trying to navigate as the country, and the world at large, adapts to the limitations put on normal life by the coronavirus. There are other, greater, risks for many brands, but the question of how to advertise, what to advertise, or whether to advertise at all, are among the concerns.
Marketing Week and sister title Econsultancy surveyed almost 900 UK brand marketers to discover their initial reactions to the coronavirus outbreak. The results (which were collated before the UK went into lockdown) show that more than half (55%) are delaying or reviewing campaigns. Some 60% are also delaying or reviewing their budget commitments.
Just 8% of consumers think brands should stop advertising due to the coronavirus outbreak
The scale of the outbreak has forced many companies to issue profit warnings as demand dries up. Shops, pubs, gyms and theatres are among the businesses that have been ordered to close by the UK government, while airlines have cancelled the vast majority of flights and tour operators have effectively ceased trading.
Given the hit to both top and bottom lines, many brands have cut ‘discretionary’ spend, which often includes marketing.
Whitbread, which owns the Premier Inn hotel chain and restaurant brands Brewers Fayre and Beefeater, says it is “eliminating” marketing spend. John Lewis has paused its spring campaign and is reducing marketing spend across the board.
The impact can be seen across the media landscape. It should come as little surprise that outdoor and cinema have taken huge hits as people are ordered to stay indoors and cinemas are forced to close. But in-home media is also struggling. ITV says all categories of business are deferring ad spend during March and April, adding that it is not in a position to provide guidance on the extent of the downturn.
There are discussions about cutting budgets, either due to lack of funds or due to not wanting to prompt demand.
Matthew Chappell, Gain Theory
Digital advertising, too, is taking a hit, with Twitter saying brands are pulling spend and putting in place sweeping keyword blacklists to ensure they are not associated with the pandemic. The same is true for news media, with digital audiences up, but brands not following the eyeballs.
Most brands fall into one of three categories: either coronavirus has been catastrophic for their business, as in the case of airlines, hotels and pubs; it has driven huge demand, as in the case of supermarkets and broadband providers; or there has been a drop in demand, but not a catastrophic one – so most retailers, car makers and bookmakers.
Senior partner at consultancy Gain Theory, Matthew Chappell, says: “In pretty much every case, there are discussions about cutting budgets, either due to lack of funds or due to not wanting to prompt demand beyond capacity.”
Is cutting spend the right choice?
With the UK and global economy heading towards recession at the very least, many companies are trying to shore up their top lines by cutting marketing spend. There is certainly little reason for brands to be investing in activity that drives sales activation given that demand has either reduced dramatically or peaked, putting pressure on supply chains.
“We are helping our clients to work out which channels spend should be cut from first and we are seeing the greatest case for cutting bottom of funnel, more immediate response channels,” says Chappell.
This is the polar opposite of what happened during the last recession in 2008/09 when most companies cut back on brand building in favour of performance spend. That course of action would be “totally inappropriate now,” according to marketing consultant Peter Field.
Majority of marketers delaying campaigns as coronavirus fears escalate
“Brands have one of two problems: either they can’t meet demand because of panic buying, so who wants to stimulate short-term sales; or they have no customers because people are not allowed to go and buy it, in which case ditto,” he explains.
“The only sensible course for any advertiser who wants to maintain a presence through this recession – and if your business is teetering on the edge of bankruptcy you aren’t going to be able to do this – is to be putting money into long-term brand building because the role of that investment is for the recovery, not for now.”
Group sales and marketing manager at hospitality company Moriarty Group, Helen O’Dowda, agrees: “It’s rational to think that if the sales aren’t coming in we need to stop all campaigns, all activity on social media and all communication with our target audience, but this is where so many brands are getting it wrong.
“Now is the time to think outside the box, of ways we can remain human with our audience in a bid to help where help is needed, in a bid to be the voice of reason and consistency in a time of uncertainty, and in a behind-the-scenes bid to come out on top when this crisis subsides and we are all functionally back in business.”
The only sensible course for any advertiser who wants to maintain a presence through this recession…is to be putting money into long-term brand building.
In fact, the last recession can provide a number of case studies for where investment in brands paid dividends over the longer term. As rivals cut budgets, those that continue to invest will see their share of voice increase, and there is a strong correlation between share of voice and share of market, according to previous work by Field analysing the IPA databank.
One example is Virgin Atlantic. In 2008, as the credit crunch hit, passenger numbers fell and oil prices soared. But according to its entry into the IPA Effectiveness Awards in 2010, which won a silver, the airline’s response was to increase marketing spend and concentrate on brand building with the launch of its 25th anniversary campaign, ‘Still red hot’.
The campaign is estimated to have driven 20% of overall revenue during the campaign timeline, equal to a payback of £10.58 for every £1 invested.
Field’s previous work also shows that brands that went into panic mode – defined as cutting all ad spend – saw their market share, and therefore profitability, drop over the long term. Even where budgets were cut by 20%, profits took a hit.
Further data from Millward Brown (now Kantar) shows that 60% of brands that ‘go dark’ during a recession decline on at least one key brand metric. Plus there is a risk of word-of-mouth chatter about a brand (or buzz) going down, which can lead to a presumption of failure. This risk is greatest in categories where brand is less important and purchases are more price-driven.
Forget about empathetic emails during the coronavirus outbreak and start making your brand money
Field explains: “We know going dark is no way forward. There is a value to society and the economy of not being seen to panic as a business. If all advertisers pull their money, the effect on consumer morale and business sentiment of the country would suffer as a result.
“There is a value in being seen to be an advertiser. [Going dark] would only add to the sense of crisis and panic, as well as undermining their brand in the long term.”
How to advertise
It seems clear that for those companies that can afford to, continuing to advertise through the crisis will be key to recovery and long-term growth.
But what is less clear is what and how to advertise. The case of Cadbury shows both brands and consumers are cognisant to communications that sound out of kilter with the current mood.
A survey of UK consumers by GlobalWebIndex between 16 and 20 March sheds a little light. It found that 37% believe brands should advertise as normal, 29% believe they should advertise differently, and 34% say they are uncertain.
People will want brands to be generous, modest, self-aware, have a sense of humour and demonstrate spontaneity.
Orlando Wood, System1
Elsewhere, early data from System1, which tests consumers’ response to ads, suggests brands are worrying too much about a backlash against their ads that is yet to materialise.
It has seen no drop in emotional response scores for ads that have launched in the past few weeks, while work to retest ads that originally aired in January or February suggests that responses are stable here as well.
System1 has found, however, that emotional advertising is performing better than rational advertising. And that some emotions are better than others.
For example, Bupa’s ‘Is it normal?’ campaign, which talks about mental health, now performs better in testing than it did at launch, while an ad from a car brand that talks about competitive racing and beating other drivers performs considerably worse.
“People will want brands to be generous, modest, self-aware, have a sense of humour and demonstrate spontaneity,” says System1’s chief innovation officer, Orlando Wood.
“All the right brain features, which characterise what humanity is about, and less of the automated, mechanistic response – that’s what brands need to be doing.”
What consumers do want, however, is for brands to be helpful where they can. Globally, the GlobalWebIndex survey finds that people are most in favour of brands responding to the outbreak by providing flexible payment terms (83%), offering free services (81%) and closing non-essential stores (79%).
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Companies that take the initiative and really do something to help are reaping the rewards. BrewDog is one example. It has been vocal in its decision to use its distilleries to create hand sanitiser, which is being distributed free to charities and hospitals. Plus, the Scottish brewer is keeping its brand front-of-mind by creating virtual bars where people can share a beer online, take part in virtual pub quizzes and homebrew masterclasses and win merchandise.
This activity is already having an impact. According to YouGov BrandIndex, consumer perceptions of the brand are up by a statistically significant 4.6 points over the past two weeks, while it is now top of the rankings for beer and cider brands in terms of buzz (a balance of the positive and negative things said about a brand).
Kantar’s global head of media for its insights division, Jane Ostler, says building awareness and associations that don’t look crass will be important.
“Building longer-term brand preference is key. There are creative ways for brands to get involved. Can they help fund content or offer lower subscriptions?”
For Field, the safest way forward for brands is to stick to the kind of campaigns they were running before the crisis unless and until research proves there is negative feedback, while also looking for ways to be helpful.
“The unique characteristic of this is, because we all have a common enemy in Covid-19, everyone is coming together and the community response is a different level to anything we have seen previously in recessions,” he explains.
“Brands should enter into the same spirit. There are two facets to this – helping the population in general and being good to your own people. Companies that don’t do either of those things and are called out for not having done so are going to be very counter to the mood of the nation.”