There are lessons that can be learned from past recessions, but the one the world is now entering is likely to look rather different; The WARC Guide to Marketing in the COVID-19 Recession, published today, presents advertisers, agencies and media owners with relevant frameworks, actionable ideas, and examples of how major marketers are already putting plans into practice.
Observers believe this COVID-induced recession will be both longer and deeper than previous recessions – even countries that escaped the worst of the pandemic can’t avoid the economic consequences. “The shape of the recovery is difficult to predict and will vary by sector,” says David Tiltman, VP Content, WARC.
“With many brands unable to distribute products and services, the usual advice to ‘keep advertising’ may not apply in all cases, and marketers need to take a nuanced approach based on their brand’s situation.”
“This WARC Guide to Marketing in a Recession pulls together the best thinking from across the industry on navigating the post-lockdown period,” says Lena Roland, Managing Editor, WARC Knowledge. It includes learnings from past recessions, explains how the COVID-19 recession is different, offers lessons from China, recommends key actions that brands can take now, and identifies growth opportunities beyond the lockdown. (Subscribers can read The WARC Guide to Marketing in the COVID-19 Recession in full here.)
The playbook for ‘normal’ recessions
A significant body of research studies suggests that significantly reducing ad spend in a recession has a negative long-term impact on brands in terms of sales, market share, growth and return on investment. Companies that maintained investment recovered more quickly.
WARC has identified five marketing lessons from previous recessions:
(1) During recessionary times, media costs decline. (2) Defend your share of voice – cutting ad spend risks damaging market share. (3) Investing in ad spend during a recession brings long-term advantage. (4) Once a decline in market share sets in, it can be hard to reverse. (5) “Going dark” can weaken consumer “bonding” metrics.
Recession 2020: What we know so far
The COVID-19 recession is the first pandemic-driven downturn of the modern era. It is a healthcare crisis, leading to a severe economic slump. That also makes the shape of the recovery hard to predict, as consequences of the lockdown become apparent and there is a risk of further outbreaks.
Cuts in media spend have been immediate and sharp. According to an Ebiquity survey, 73% of brands expect to see no sales growth this year and 81% have cut their advertising investment. Unsurprisingly, the media most hit are Out-of-home (down 73%) and Cinema (down 72%).
And according to the latest Advertising Association/WARC Expenditure Report, the COVID-19 outbreak will wipe more than £4bn from the total UK ad spend for the current year, felt across all digital channels as well as traditional.
The 2020 downturn is set to be a demand and supply-side shock, caused first by lockdown and then by critical value chain components breaking down, particularly in China, leading to disruption in product and service delivery.
Recession 2020: Actions to take now
As lockdown measures are lifted and the recession takes hold, WARC offers key actions to help brands rebound. They vary depending on a company’s resources, and if operating in a boom or bust category. Brands should:
• review their lockdown playbook,
• keep advertising if they can,
• if a brand has to reduce ad spend, use other levers to remain visible,
• maintain creative where possible,
• tailor the approach to brand-building and activation,
• kill or cut back on ‘dwarf’ brands,
• look for signs of new habit formation,
• audit e-commerce capability,
• build strategic alliances,
• review pricing but try to avoid discounting.
Early lessons from China
China, being further along the COVID-19 path than any other country, is being watched closely for indicators of changed consumer behaviour and brand responses.
As lockdown there is lifted, Chinese consumers, remain cautious and media habits are changing again, meaning marketers should retain a degree of flexibility in their media plans.
Restoring consumer confidence is proving a key challenge in China – and many brands are finding that packaging innovations can help resolve this. For example, Meituan, an online-to-offline service launched contactless shields that protect customers from infection when eating.
Opportunities for future growth
1. Further down the road to recovery, WARC notes that SMEs will be among the hardest hit and suggests consumers may support initiatives that help rebuild local business and communities.
2. Finance brands can go beyond communications to support hard-hit consumers: according to Google, online searches for “financial help” recently grew 203% in just one week, as unemployment jumps.
3. Consumer goods brands can play with pack size to meet consumer needs. For brands seeking to defend market share from private-label, adding value through formats, innovation or value-on pack is going to be critical.
4. Develop a ‘close-to-home’ strategy: People will be eager to leave their homes, but the potential of a further outbreak – combined with economic hardship – means many will prepare their homes as a safe place of sanctuary and safety. Trend forecasting company WGSN (WARC’s sister brand) predicts home health and hygiene will be a key investment category. And Accenture predicts a rise in home spending.
5. Close-to-home means food stockpiling habits may persist: Conagra, the CPG company, says the increased trial of frozen food during the lockdown offers a long-term opportunity for the category. Food companies may benefit from range extension and new product development in frozen and long-life products.
6. The ‘health economy’ will create new opportunities: Accenture notes that a “health economy” will emerge that will create “white space” opportunities for brands. The pandemic may be the catalyst for radical and lasting transformation of how health and wellness is experienced and delivered. Brands in categories outside health and wellness may be affected too and should review opportunities to form partnerships that can reassure or help health-focused consumers.
7. COVID-19 is accelerating the need for digital transformation: Many of the trends caused or accelerated by the COVID-19 require the rewiring of companies around data and digital services. At a time of significant consumer change, there is an opportunity for CMOs to play a leading role in interpreting those changes and acting as ‘super connectors’ between internal functions.