Freeze ads, and lose years
Companies that ‘go dark’ by withdrawing their advertising budgets during the Covid-19 crisis face a slump in profits, and it could take up to five years for them to catch up with their rivals
Brands and the ad agencies that build their campaigns face a new reality: the crisis brought on by Covid-19 is no longer about playing a waiting game. It is now a question of day-to-day survival.
In a new report entitled "How Brands Can Win in a Recession", agency Wunderman Thompson says in spite of all instincts to the contrary, this is the worst time to go dark and constrain creative output.
Miles Murphy believes the report can help brands navigate through waters they have never traversed. He took over the reins as CEO for Wunderman Thompson SA (a WPP-owned firm), one of the country’s largest marketing services agencies, just a few days after the lockdown began.
The key question, of course, is how to convince brands not to go dark and fail to re-allocate budgets. Speaking to the FM, Murphy says: "Evidence from 16 global recessions over the past 100 years shows that turning off marketing, at a time when you need to maintain consumer preference to keep the sales coming in, will begin to negatively affect profit anywhere between six months and three years and brands that cut all marketing spend in year one of a recession can take up to five years to catch up with those that maintained spend. Worse still, as consumers are strongly habitual, share lost, or potential share gains forgone, will be harder to recapture as the economy expands again."
Brands right now are also dealing with a tonal dilemma. Do they maintain a creative edge or become more pragmatic in their messaging? Murphy believes it’s about keeping promises. He says during challenging times brands need to keep promises now more than ever by demonstrating ethical business practices; coming up with solutions; avoiding exploitation; and showing sensitivity.
"Your behaviour communication should come naturally out of what you are already doing, without feeling boastful or exploitative. Salience is still king, and creative, emotional branding, and video in particular, remain some of the most effective communications strategies."
Experts can preach optimism from the brand pulpit until they are blue in the face but ultimately it must come down to money or at least re-allocating or re-prioritising budgets. Murphy says: "As belts tighten, SA brands are asking themselves what do we cut? The studies we’ve highlighted in our report show that investment in marketing, product development, and customer service in a recession can be beneficial to brand recovery. New product launches are a good short-term investment. But investing in these areas does not necessarily mean an increase in spend overall. As competitors nearly always reduce spend, even just maintaining spend at this time presents an opportunity to grow share."
Murphy also believes brands and their agencies need to apply their minds to a post-pandemic strategy. "Recessions provide a great opportunity to observe emerging trends and re-evaluate strategies. Habits are disrupted, pain points will be felt more acutely at this time and customers will be more vocal with what they need. Take this opportunity to listen, understand their needs and respond. As new behaviours emerge, trends speed up and others slow down. Try to identify macro drivers and which horses you want to bet on."
Murphy says the rebuild phase is about returning to the pre-pandemic status quo. There’s an opportunity, he says, and a business imperative to see things that competitors have missed, to create a "new normal" that redefines existing customer relationships and accepts change. "Whether it’s about leaping boldly and much faster than you intended into digital transformation, or becoming more agile on one’s supply chain, and everything in between, the healthier brands will be using the recession to identify disruptions, think about new models, spot opportunities for diversifying products or services, and to shape their business responses accordingly."
Murphy also suggests that brands adopt a mindset of what the Wunderman report terms strategic dexterity. "With the 24-hour news cycle, the relentless increase in Covid cases, the changing nature of lockdown and the evolution of consumer reaction to it all, the best businesses are planning for a wide range of scenarios and making sure they are ready for all eventualities. In our own business we have moved from a quarterly budgeting cycle to a weekly one.
"Ultimately, different consumer groups and industries will be affected in different ways. We’ve developed a model for looking at this. We consider the combination of consumer and product categories to develop bespoke strategies for brands," he says.
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