Well, it’s not as if we can start 2020 all over again — we’re already halfway through this year thus far. Yet, we can say one thing: COVID-19 and its recessionary impacts may be hanging around awhile. How may this have changed marketing mid-year, and possibly changed it permanently?
Such prognostications have kept The Winterberry Group, a marketing research consultancy, plenty busy since March: reading the tea leaves of government data, industry interviews, marketing dashboards, econometric algorithms, and the like. Principal Bruce Biegel told a Direct Marketing Club of New York audience this past week that indeed June has been better than May, which was better than April — when the U.S. (and much of the global) economy was in free fall.
So what’s underway and what’s in store for us midyear? Have we turned a corner?
Our Comeback Will Not Be a U-Turn — ‘Swoosh!’
When unemployment shoots up to 17.1%, and 40 million American jobs either furlough or disappear, there’s going to be a lag effect. The “wallet” recession is upon us, as consumers hang onto their savings, or eat through them, so there’s not going to be the same level of demand that drives upward of two-thirds of the U.S. economy.
New York City is a COVID-19 epicenter — and the commercial real estate market may take five to 10 years to recover, reports The Economist (subscription required). Knowledge workers will return, eventually. But densely populated urban centers, where innovations accelerate the economy, may look and feel different for some time, and that in and of itself could hamper national and global growth. Can other innovation clusters stave off the virus to protect collaboration?
And then there’s our world of advertising. Biegel sees digital being a “winner,” as traditional media continues to take a drubbing. Linear TV spending dropped by a quarter this quarter, and direct mail by half. Experiential and sponsorship spending has been slashed by 75%, as concerts, live sports, conferences, and festivals all took a public health-ordered hiatus. Yet, even in digital categories, Q2 has yelled “ouch.”
Email is the only channel to have held its own, though pricing pressure has cut margins. Social, search, and digital display all have posted drops from 25% to 40% during the quarter — and though all our eyes were home watching Disney+, Netflix, and the like, even OTT/addressable TV ad spending was down by 5%. With the Newfronts coming this week, it will be interesting to see what types of digital media may post gains.
So if June’s “recovery” in media spend is any indication, Q3 (sans Olympics) and Q4 (yes, we’re still having an Election, last time I checked) should be solid though not buoyant. Biegel says it may be a “swoosh” recovery — think Nike’s logo — down fast, but up again slowly, steadily and resiliently. Which begs the questions: Can ad businesses, business models, and brands cope with a new reality?
The “new normal” is about coming out of the COVID-19 crisis — and half of executives surveyed by The Winterberry Group aren’t expecting miracles:
Medium-Term Budget Cuts
Q3 Will Start a Recovery … of Sorts
And, Biegel reported, that it may indeed take to 2024 — with COVID-19 firmly in a rear view mirror — for a recovery to be complete, according to IPG Mediabrands Magna. It is predicting a 4.4% ad spend contraction this year, a 4% recovery next year, and “subdued” results thereafter until mid-decade.
So How Have We Changed — and Will These New Behaviors Stick?
Some effects, though, may indeed have permanence in how Americans consume media — perhaps hastening trends already underway, or creating a whole rethink of how we act as consumers. Consider these impacts:
- Streaming to TVs more than doubled during COVID-19 crisis. Have we rewired our video consumption habits away from scheduled programming for good?
- Mobile data traffic surged 380% in March alone. Consumers have taken to their smartphones everywhere — so how has mobile viewing altered consumer’s screen habits across devices, and will it stick?
- DTC brands and catalogs know all about remote selling — and so do millions of consumers who have now come to love shopping this way.
- Video game use is up 60% — opening the door to more in-game advertising opportunities. This may change the mix of brands seeking to engage consumers there.
- In January there were 280,000 posted job openings in data analytics. There are 21,000 today. More than half of marketers expect predictive modeling and segmentation to occupy their marketing strategy concerns for the balance of 2020.
- Tangible value matters. Consumers will be demanding more pricing benefits from brand loyalty, and less VIP experiences. We may be getting tired of lockdowns but we are steadfast in a recession, savings conscious mindset.
- Business travel – yes, your clients may be returning to the office, but do they really want to see YOU? What can B2B marketers and sellers achieve virtually?
It’s ironic, Biegel said, that privacy laws and the crumbling cookie are making customer recognition harder in the addressable media ecosystem, just as consumers expect and demand to be recognized. Identity resolution platforms will evolve to cope with these new marketplace realities — both of which are independent of COVID-19 – but the solutions will bring forth a blend of technologies, processes, and people yet to be fully formulated. These are still open and important marketplace issues.
So assuming we’re healthful health-wise, we have some challenges ahead in ad land. I’m glad to have some guideposts in this unprecedented time.