The coronavirus crisis is a story with an unclear ending. What is clear is that the human impact is already tragic and that companies have an imperative to act immediately to protect their employees, address business challenges and risks, to help to mitigate the outbreak in whatever ways they can.
Here at Intelligiants, we are keen to better understand the ripple effect of this global health crisis to the online space and how online businesses should be responding.
Coronavirus has now put almost every country in the world on high alert and now qualifies as a pandemic with over 100 countries affected.
The primary concern of the majority is the wellbeing of friends and family, with added concern over the more vulnerable. As such people’s behaviour is shifting from caution to concern!
The economic impact of this concern and the effect it will have on brands marketing strategies is big topic to cover, but a much needed one!
- The Economic Impact – Some Scenarios
- Riding an Economic Downturn
- Resilient Industry Verticals
- Adjusting Your Marketing with a Responsible Approach
- Quick Recovery
To date – Some 47% of businesses are already thought to have felt the impact of the outbreak but at this stage, less than 10% of these have reduced spending on advertising, but many are assessing the reallocation of media spends across the different channels (SEO, SEM, Affiliate, Social & Offline).
So, what shifts in marketing spends are occurring?
Shifts in advertising spends will very much depend on the industry sector and channels each business has established a dependency on, alongside their geographical reach.
Offline to Online – With people expected to be spending more time at home, many of the more autonomous brands have responded by shifting spend from offline media to online, to increase their market penetration and ROI.
Geographic Focus – There appears to have been an early shift for businesses within the travel, medical and insurance markets.
Of course, these shifts are for the short-term and not the long term…
The Economic Impact – Some Scenarios
Three broad economic scenarios that might unfold as follows: –
- Quick Recovery
- Global Slowdown
- Pandemic-Driven Recession
Quick Recovery Scenario
In this scenario even though the infected case count continues to grow, given the virus’s high level of transmission, normality begins to manifest itself, as people become more educated about the low fatality rates in children and working-age adults, as such these groups continue their normal daily lives.
Widespread concern begins to ebb as the disease continues to spread and the groups most at risk self-isolate to avoid any harm.
Working-age adults remain concerned about their parents and older friends, neighbours and colleagues, and take steps to ensure their safety with help groups and the coming together of societies after the initial panic of the unknown.
This scenario assumes that younger people are affected enough to change some daily habits (for example, they wash hands more frequently) but not so much that they shift to survival mode and take steps that come at a higher cost, such as staying home from work and keeping children home from school.
Economies begin to recover by the end of Q2. By that point, consumer confidence does not fully recover until the end of Q3.
Global Slowdown Scenario
This scenario assumes that the other countries around the world are not able to achieve the same rapid control that China managed – sadly the most realistic of the three scenarios and one that is unfolding infront of us.
With high transmission and localised infection across Europe and the Americas, as result of delayed action and harsh measures being implemented, (including school closings and cancellation of public events).
The thoughts from medical specialists are that the transmissibility of the virus will decline naturally within the northern hemisphere by spring.
Now, it’s with no surprise that this scenario sees much greater shift in people’s daily behaviours, with over cellos reactions lasting for six to eight weeks in towns and cities with active transmission, and three to four weeks in neighbouring towns that are more isolated and less frequented.
This would mean that the worst hit industries would be catering, travel, homewares and other luxuries. The which is thought to possess the ability to knock Global GDP growth for 2020 in half (1 percent / 1.5 percent). Setting the worldwide economies into a slowdown but not recession.
In this scenario the slowdown would have an impact on the small and mid-size companies more so than the largest ones, with the less developed economies suffering more than advanced ones.
Interestingly not all industry sectors need to be so equally worried. Service sectors, including aviation, travel, and tourism, are likely to be hardest hit. Airlines have already experienced a steep fall in traffic on their highest-profit international routes (especially in Asia–Pacific). In this scenario, airlines miss out on the summer peak travel season, leading to bankruptcies (FlyBe, the UK regional carrier, is an early example) and consolidation across the sector. Many economists had already predicted that a wave of consolidation was already possible in some parts of the industry; COVID-19 is simply acting as an aggressive accelerant. Now we have Britush Airwats, TUI and Easy Jet ceasing all operations, with more to follow. But that’s means an increase in demand after the panic period for localised holiday breaks.
In consumer goods, you would expect to see a steep drop in consumer demand, in the form of delayed demand (this means people still need/want it but are waiting). This has implications for the many consumer companies (and their suppliers) that operate on low working-capital margins.
Demand returns in May–June, as concern about the virus diminishes and people become more educated and less afraid.
Other sectors will see delayed demand. In consumer goods, for example, customers may put off discretionary spending because of worry about the pandemic but will eventually purchase such items later, once the fear subsides and confidence returns. These demand shocks—extended for some time in regions that are unable to contain the virus—can mean significantly lower annual growth. Some sectors, such as aviation, will be more deeply affected.
For most other sectors, the impact is the result of a drop national and global GDP, rather than a direct impact of changed behaviours. Oil and gas, for instance, will be adversely affected as oil prices stay lower than expected until Q3, as travel demand depletes.
Stay close to your customers. Companies that navigate disruptions better often succeed because they invest in their core customer segments and anticipate their behaviours. In China, for example, while consumer demand is down, it has not disappeared people have dramatically shifted toward online shopping for all types of goods, including food and produce delivery. Companies should invest in online as part of their push for omnichannel distribution; this includes ensuring the quality of goods sold online. Customer’s changing preferences are not likely to go back to pre-outbreak norms.
Pandemic & Recession Scenario
This scenario is like the global slowdown, except it assumes that the virus is not seasonal (unaffected by spring in the northern hemisphere).
Infection growth continues throughout Q2 and Q3, potentially overwhelming healthcare systems around the world and pushing out a recovery in consumer confidence to Q3 or beyond. This scenario results in a recession, with global growth in 2020 falling to between –1.5 percent and 0.5 percent.
Riding an Economic Downturn
Sadly, the smaller independent businesses may find that they don’t have the funds, support, flexibility or network to weather the economic changes as easily as the larger ones. But those with a survival instinct stand a much better chance than those that focus on fear. Remember while people react to the short-term calibration of the crisis, you should never lose sight of your long-term vision, i.e., prepare now for campaigns that reflect optimism to capture resurgence of demand and ready your promotions/incentives to capture a share of sales when the markets begin to acclimatise to the crisis.
There’s a saying – never miss out on an opportunity like a good recession
Weathering and not just surviving, but thriving, through change separates winners from losers
The Impact on Industry Verticals
So, for any marketing provider, the impact of the current crisis will depend very much on their client portfolio. As we all know traditionally speaking, marketing is viewed as a cost centre based on direct ROI, so inevitably, it’s one of the first things that comes under scrutiny.
When an agency takes a brand as a client, it’s important to think about how the brand fares in the global marketplace and how sensitive it is to the economy, sadly unless you only work with food & funerals, your business will never be completely safe or immune to the impact of any economic shifts.
The most agile companies can redeploy new sales channels to account for shortfalls – one beauty company in China achieved 200% growth in year-on-year sales after hiring online influencers to push their products online.
Affected Industries & Business Sectors
- Oil & Gas
- Investment Banking
- Traditional Retail
- Professional Sports
- Car Hire
- Car Sales
- Chemical Production
- Adult Services
- Sports Betting
- Estate Agents
- Film Production
- Offline Advertising
- Beauty Treatment
- Theme Parks
- Landbased Casinos
- Rental Market
- Market Traders
- Supercar Sales
- Online Gaming
- Online Marketing
- App Stores
- Short Term Loans
- Video Conferencing
- Home DIY
- Online Shopping
- Online Streaming
- Online Education
- Job Boards
- Arts & Crafts
- Medical Supplies
Prepare for Increased online media consumption
As more people stay home, self-isolation and quarantine measures could increase media consumption in the home. This may result in an increased use of entertainment services such as video on-demand and gaming.
In China, after the country implemented nationwide isolation measures, average weekly downloads of apps during the first two weeks of February jumped 40% compared with the average for the whole of 2019, according to the Financial Times. In the same month, weekly game downloads on Apple devices were up 80% versus 2019.
Nielsen data from China during the coronavirus outbreak shows that traditional media also received a boost in consumption – TV viewership grew after Lunar New Year, when normally it experiences a dip.
Adjusting Your Marketing with a Responsible Approach
We cannot forget that this situation is first a humanitarian issue, as such brands must be sensitive & responsive to avoid future reputational damage, as such brands should be focused to helping customers through the virus and its implications.
Demonstrate purpose. Businesses are only as strong as the communities of which they are a part. Companies need to figure out how to support response efforts—such as by providing money, equipment, or expertise. For example, a few companies have shifted production to create medical masks and clothing.
Many Brands should look to align their internal and external communications, towards the public interest instead of pushing messages targeting sales generation.
The exception would be the online gaming industry, where increased user engagement is likely and capitalising on this early will secure an increase brand awareness.
As ever, brands should follow media consumption patterns to optimise media splits and consider the context of placement, as well as absolute reach potentials of increased home video or digital media consumption. With digital socialising on the increase as more people stay at home, consider leveraging increased time spent online by increasing budgets to social and SEO channels, with PPC being expensive & highly aggressive focus on good strong content production to capitalise on the featured snippets. Make sure the correct content and social assets are available mobile, portrait, short-form video etc. Above all, brands should respond authentically based on their brand positioning, values and tone of voice.
Practice the plan. Many top teams do not invest time in understanding what it takes to plan for disruptions until they are in one. This is where roundtables or simulations are invaluable.
Simulations should clarify decision owners, ensure that roles for each top-team member are clear, call out the “elephants in the room” that may slow down the response, and ensure that, in the event, the actions needed to carry out the plan are fully understood and the required investment readily available.
Increase Media Spends
Brands that responsibly maintain or increase their ad spend during times of change could also win the hearts and minds of consumers in the longer-term. There’s an abundance of studies from previous economic downturns and pandemics, that show increasing investment sustains brand long-term growth.
Depending on the brand and the category, there’s everything to be gained by committing media investment during the crisis, as such tuning into the behavioural shifts will simply drive commercial innovation.
Whether businesses will heed this advice is unknown at this time because the usual response to uncertainty is to pull back or delay investments. In many organisations, marketing is seen as a cost centre and is, therefore, one of the first parts of a business to see cuts. But in times of hardship this is often the incorrect action to take if you can afford to ride the storm.
Existing economic concerns regarding worldwide recessions are also adding to the conservatism!
As always if we were told rain is expected – many will reach for an umbrella!
Focus on opportunties, seekfor your strengths… a lot of interesting technical developments will ease us into navigating this very difficult time and we will suffer in one way or another. But by focusing on the most cost effective approaches we will stand a far better chance of coming out stronger, wiser and better for it.