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.
It was surveyed that 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.
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.
Matthew Chappell, Gain Theory, said; “There are discussions about cutting budgets, either due to lack of funds or due to not wanting to prompt demand.”
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.
“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.
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.
SOURCE: Sarah Vizard
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