How the Impact of COVID-19 Is Changing Marketing

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?

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

IAB-Winterberry Group State of Data (2020)

 Q3 Will Start a Recovery … of Sorts

Source: Advertiser Perceptions, Pivotal Research Group (2020), as reported by Winterberry Group

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.

A Look at Marketing Spend Recalibrated: Where Are the Green Shoots?

We are well into Q2, and the pandemic is having a detrimental impact on U.S. marketing spend. How much so? Firm principal Bruce Biegel recently updated some parts of The Winterberry Group’s Annual Outlook report as COVID19 took hold, citing various sources — and the updated data is worth a look.

We are well into Q2, and the pandemic is having a detrimental impact on U.S. marketing spend. How much so?

That’s where we turn to The Winterberry Group which tracks data, digital, and direct marketing spend vs. general advertising, and releases its Annual Outlook each year in January. As COVID19 took hold, firm principal Bruce Biegel recently updated some of its numbers, citing various sources — and they are worth a look:

Source: Winterberry Group, April 2020.

Green Shoots in Media

Hey, I see a green shoot here. In digital, while display, search, and social are taking the greatest hits, digital video’s loss is less pronounced — and we might guess why. Consumers are consuming digital media in record numbers. In fact, OTT (connected TV) and podcast ad spend is out of sync with the number of consumers migrating to these media, even before the pandemic took hold.

As reported in Digiday:

“According to Magna Global, OTT accounts for 29% of TV viewing but so far has only captured 3% of TV ad budgets. And as consumers increasingly flock to internet-connected TV devices, a wide range of players — from tech giants, to device sellers to TV networks and more — are building services to capture a share of the ad dollars that will inevitably flow into the OTT ecosystem.”

So if anything, advertisers may need to get their tech stacks ready to enable OTT and podcast engagement. But this is not a linear TV buy based on cost-per-thousand (CPM). This is an opportunity to personalize, target, and attribute on a 1:1 level.

Another green shoot: Email remains a staple. Again, as we stay at home, whether as consumers or as business people, it’s been email that is sustaining connections for many brands. So “flat spending” is a positive, even as price compression is underway.

Offline is not a pretty picture — right now.

Source: Winterberry Group, April 2020.

My last post sought to document U.S. Postal Service’s woes. I still believe direct mail is a brand differentiator, particularly right now — as I watch my own household pause from the sameness of screens, and take our “print” moment with each day’s incoming mail and catalogs. We’ve dog-eared pages, placed our DTC (direct to consumer) orders, and even some B2B purchases for home office supplies. (Thankfully, all but one of us are still working.)

Green Shoots in Verticals

The Winterberry Group also examined some primary verticals — which ones will lead our economic recovery?

One green shoot is identified as financial services. After the Great Recession (2008-2009), the financial sector — which prompted the Recession beginning with subprime mortgages — recapitalized and strengthened reserves. Banks had to do it, by law. As a result, they are better positioned to weather the pandemic storm; though there may be pressure to lend to less-than-stellar-credit customers, the Winterberry Group reports. We shall see. As of May 7, the NASDAQ had completely erased its 2020 year-to-date market loss.

Source: Winterberry Group, April 2020.

In the Media & Entertainment sector, live events are effectively gone — except where they can go virtual, but that’s hardly a dollar-for-dollar exchange. The good news is that media subscriptions (for on-demand media) are rapidly increasing, and ad-supported on-demand media also is increasing — pertinent to the aforementioned OTT discussion.

And another green shoot candidate, Healthcare & Pharma, is actually on neutral ground. Some trends, such as telemedicine, online prescription fulfillment, and anything COVID-related — are booming, but elective surgeries are on hold, and 33+ million laid-off Americans may wind up uninsured.

Source: Winterberry Group, April 2020.

Ingenuity — The Greatest Green Shoot of All

And my last green shoot is this — our own innovation, agility, and creativity. I leave you with this one anecdote heard last week on National Public Radio.

Can you imagine being a member of the Graduating Class of 2020? These students will go down in history perhaps as a model of resiliency. Time will tell. But next door in North Salem, NY, the town and school system landed on a novel idea: The faculty, students and families will drive one hour north to a one of the state’s few remaining drive-in theaters. The commencement address will be projected — and the diplomas handed out vehicle by vehicle.

Who knows, maybe Summer 2020 will be the Great American Comeback of the drive-in theater. Maybe Bruce will need to update his out-of-home and cinematic spending accordingly. (You can learn more from Bruce at this upcoming June 17 Direct Marketing Club of New York virtual briefing on your laptop. Registration here.)

I love such ingenuity. If you know of other examples, please share them in the comments section. Stay safe — and keep America innovating.

 

 

Brands Need to Keep Engaging – Don’t Just Stop Because of Crisis

We are in extraordinary times – and it’s only prudent to recognize this. While the Fed may be doing everything possible to keep our economy afloat, we likely will remain in limbo until a public health victory is apparent. It’s time to take stock of what we do on behalf of our brands and clients, to immediate effect.

Among thousands of businesses these past two-plus weeks, many of us have effectively handed our marketing decisions over to finance and accounting. Which means, if you’re not producing an immediate revenue gain, you’re probably being cost-reduced to the bone, if not entirely out of work. Such is the illiquidous, flash-frozen effect of COVID-19 on our economy. We’ve lost more U.S. jobs in three weeks than we did during the expanse of the Great Recession.

Cash is in crunch, and though The Fed may be doing everything possible to keep our economy afloat (will it work?) we likely will remain in limbo until a public health victory is apparent. That could be months. It may yet take longer to resume growth – and who knows how business and consumer behavior may have changed by then? We are in extraordinary times – and it’s only prudent to recognize this.

It’s time to take stock of what we do on behalf of our brands and clients, to immediate effect. There is much work to do.

Marketing Must Continue … With Prudence

  • Every pharmacy, drug store, food store, and big-box retailer – and the agencies that support them – should proactively communicate store safety measures, and elevate “conveniences” such as shop-online-and-pick-up-in-store to the preferred method of distribution. This is an opportunity to build consumer and brand trust.
  • For financial marketers, the need to connect with consumers right now regarding savings, budgeting tools, and capital preservation should be a high priority. Make it happen.
  • On television, I’ve seen the messages of optimism from the likes of Walmart, Toyota, and Ford. (Post your inspired ad in the comments section below to share, please.) We need these messages right now. Beyond our own mortality, we will emerge on the other side of this. Brands need to be megaphones for hope and empathy. And certainly not insensitivity.
  • Perhaps TV spending is too steep for many brands’ budgets. In my email inbox, my favorite restaurants offer meals-to-go, my coffee house enables virtual tips for unemployed baristas and healthcare workers, and nonprofit organizations are postponing their live fundraising events with an online ask for the here and now. Needs don’t stop, in fact, the chronic has become acute. For those of us who can afford to help, there’s a collective mood to give. There are reasons to keep relevant communication appropriately flowing to audiences.
  • My previous post addressed data quality. Let me repeat: all those mobile and data visitors to your sites right now must not go unrecognized. Ensure you have a data and tech plan to identify (perhaps in the form of free registration, analyze, and engage accordingly.
  • Respond to the Census. Yes, do it for democracy. But we in the marketing business also know how invaluable Census data is to the economy, and the strategies we map for our brands.

So, yes, we’re all facing a flash freeze. And marketing-as-normal needs to be re-calibrated. So let’s re-calibrate … show our CFOs the likely payback, and let’s get going.