Brian Wieser, Global President, Business Intelligence at GroupM, shares his outlook for the ad industry and global economy as part of The WARC Guide to Marketing in the COVID-19 Recession.
The scale of the decline of the global economy has become clearer, as has the degree to which most countries’ attempts at mitigating the impact of the pandemic have been insufficient. There is increased certainty that the economic decline will be both longer and deeper than expected.
A month ago, advertisers in some markets – Japan and Singapore, for instance – would have been hoping that they may avoid the worst of the pandemic. Yet, as we see with Singapore’s lockdown and Tokyo going into lockdown at different points, it is going to be difficult for any market to really avoid the consequences of COVID-19.
China serves as a useful reference point, given that it went through the decline a few months earlier than most countries and has still to emerge. Its climb out of the abyss has not been easy, and it will probably better in comparison with how Europe and the US will fare.
Businesses should re-evaluate everything
It has been hard to predict business decision-making during the outbreak, outside of knowing that certain industries like travel will be hit particularly hard, and would potentially reduce advertising spend. We could not have anticipated that brands in categories doing well would find it difficult to manage supply chains, and would, as a result, have to avoid stoking demand.
The academic research I’ve seen examining marketing investment during a recession has been limited, and there is probably success bias baked into these studies. Consider a fictional historic recession where the automotive industry invested but the horse-and-buggy industry failed to do so. Well, guess what – the inevitable would’ve happened anyway.
The best way to support a business for the long-run is to start by looking at where the market opportunities lie. Where is the customer need that can be fulfilled? Brands should look with fresh eye at what demand exists. Decision-makers should be open-minded to new ways of doing things, especially if they are substantially less expensive towards accomplishing the same goal.
If you have a better idea, this is the time to put it forward.
What different ways are there to distribute a product through to a customer? What is the best way to engage with a customer on an on-going basis? Every company – everyone that sells something – should be thinking in those terms, and growth follows from that.
Direct-to-consumer businesses offer a good example for companies that have not invested aggressively in the past. There’s still time, because this is going to drag on for a while.
Advertising investment matters, but not as much as product
I remember 14 years ago, when Microsoft was launching Zune to go up against the iPod. Would the right approach have been to baseline media investment against what Apple was spending on its comparable product? Or should it have made sure it had the right overall product? The latter is far more important than benchmarking spend against any other company, and the same is true today.
That’s something that gets lost in some of the historical research telling marketers to keep their spending up during a recession. Advertisers should question how many impressions or how many versions of the creative copy they need to satisfy their business goals, and then spend against those requirements. Not spending for its own sake. After all, if you competitor cuts spend in half and you cut by 25%, then you’re better off and you’ve taken more share of voice.
Start with the product, start with the proposition and your overall business, and then look for the growth opportunities. Because growth is going to be out there, for all the doom and gloom. I genuinely believe there are substantial opportunities.
Media consumption will probably remain high
You could end lockdown on every country on Earth today, and you would probably only see a little increase in the activity vs. what is happening right now. People would go to work, but then they would go straight home, and they would not dawdle. This is what we’re seeing in China, and that is a country that has managed the crisis about as well as is possible.
The early evidence suggests we won’t see much of a return to normal behaviour until we have public confidence in being out and about, and that won’t be exist until a vaccine is widely distributed. In lieu of this, we may see better levels of confidence with things like widespread use of facemasks and contact tracing. Because people will spend more time at home during the pandemic, overall media consumption will probably stay somewhat elevated on pre-pandemic levels.
However, in terms of media pricing dynamics, this will be marketer-specific. For example, if a brand was heavily dependent on sports and they still want to buy gross ratings points of television impressions, their average price is probably going to be a lot lower just by the virtue of that shift in the nature of the content they are buying. There could also be marketers who will change their mix and look to buy inventory which is more expensive than they are used to. That apple-to-apple comparison is difficult, even in the best of times. However, on average it’s safe to say that there are factors on balance which would cause more pricing compression than we would otherwise have seen.
While new programming may be somewhat limited in the near-term because of production shutdowns, television studios will figure out how to get back into the game. There will be COVID-friendly production tactics. It’s going to be a problem for certain kinds of programming, but not all kinds of programming. While you might not have 5000-soldier costume dramas produced, plenty of content can be made in sanitary environments over short production cycles. And coming out of the pandemic, we’ll probably see lots of new productions from individual writers.
An optimistic outlook – for some
Opportunities can come from this, both for advertisers and for media owners. Every brand should be looking for opportunities, and questioning assumptions about their company’s competitive position. What are the ways in which you can reinvent the category? That the economy will be weak is a given, but any one business’s outcomes are not, and shouldn’t be taken as given.
The WARC Guide to Marketing in the COVID-19 Recession launches tomorrow, May 12. You can sign up here for the WARC Talks 360 series of webinars on this topic taking place May 19-22.