An anticipated global economic recession, hastened by the COVID-19 pandemic, will be different to anything brands have faced in modern times. Anna Hamill, Senior Editor – Brands, at WARC, assesses the lay of the land.

While the greyer economic skies were anticipated in 2020, few could have foreseen the COVID-19 pandemic swallowing the global economy whole.  Countries are in lockdown, international trade has largely hit the pause button, and supply chains brands rely on are facing huge upheaval. According to WARC data, advertising spend is already plummeting, and new analysis from the OECD estimates that the ‘direct initial hit’ to consumer spending could be around one-third in many major advanced economies, after the full implementation of lockdown measures. For many brand marketers, the overwhelming question being discussed on Zoom video calls is no longer ‘how does our brand grow this year?’ but ‘how does our brand survive this year?’

According to a panel of leading economists, simply applying the lessons from the 2008 global financial crisis won’t cut it in what experts predict is likely to be a considerably more damaging global economic downturn as a result of COVID-19.

 “We haven't had an experience like this… it's crucial to understand that unlike normal depressions, in which demand collapses, this is a deliberate decision by governments all over the world - to some degree - to close down their economies,” noted Martin Wolf, Chief Economics Commentator at the Financial Times, in its recent webinar “The Global Economic Emergency”.

“It's a supply shock, and a deliberate supply shock to manage a health problem. The big question we need to understand - that we cannot now answer, which is what makes it so uncertain - is how long will (countries) have to keep these lockdowns and social distancing measures in place to manage this? And the truth is, we don't know yet.”

Navigating the supply crunch

What makes the coming recession different is that brands are likely to be sandwiched between a supply-side and demand-side crunch simultaneously, which will have huge knock-on effects to marketing and advertising strategy. With supply chains frozen and manufacturing largely on hold for the immediate future, product availability is likely to become a major issue for many brands in the coming months.

“This is a supply shock in the first place, created as a response to a pandemic. So, the crucial question is how quickly we'll be through the pandemic… how much of our economy remains in one piece, (and) how much of underlying supply capacity is damaged by the prolonged stops. A lot of policy in the developed world is designed to minimize that,” Wolf said.

“But my view is, it is likely if these stops continue for a long time or are intermittent that the supply capacity will be quite severely damaged. It will take a while to recover.”

The question C-suite executives are likely to be asking is: what’s the point in advertising if the product isn’t available to buy? The smart marketer should be making the tough decisions to protect brand health, but given the level of economic certainly facing so many companies, they will need to hold their nerve and make stronger cases than ever to justify marketing investment to their Board.

Brands will also need to carefully plan any expansion in the online space during COVID-19 to avoid getting caught out in a supply crunch. In the e-commerce realm, brands are especially susceptible to the negative impacts of out-of-stock. ‘Out of stock’ can cost a brand its search and sales rank on huge platforms such as Amazon, and require much more investment to rebound.

Planning for a variety of scenarios

This economic recession will be unique, and the old lessons won’t necessarily apply. Brands need to prepare for a range of scenarios in the short and mid-term, against the backdrop of ongoing uncertainty.

“We have to accept that the global hit to growth and the challenges for economic management, let alone the terrible health challenges, are going to be significantly more profound and difficult to deal with than they were in 2009,” said Lord Adair Turner, Senior Fellow at the Institute of New Economic Thinking, on the webinar. Turner noted that “ineffective demand” – where consumers want to spend, but are maybe unable to due to lockdown – as one feature “we haven’t really faced before.”

This recession may change the growth equation for brands when it comes to target markets. Countries pouring money into stimulus to keep people employed - as the UK, Australia, New Zealand, and the US have done to varying extents – will still take a sizeable hit but be more resilient.

Developing countries with huge consumer bases but less ability to stimulate their economy are likely to struggle, especially in markets heavily reliant on impacted industries such as oil or tourism. This could negatively impact a lot of the growth that some brands have been chasing in parts of Asia, Africa or Latin America, where a growing middle class with more disposable cash has offered new opportunities in the last few years. COVID-19 is likely to force a change in approach in many emerging markets.

Making informed ad-spend decisions based on long-term brand health

The first decision on a lot of C-suite agendas right now is: should the brand stop advertising? Fresh data from the US indicates that brands are already pulling a lot of ad-spend in 2020, especially in traditional media channels such as out-of-home, radio, print and linear television, even as people return to traditional news media in droves for trusted information. 

Marketers are understandably jittery, given the uncertain road ahead. Data from the World Federation of Advertisers released this week indicates that 81% of brands have temporarily deferred marketing spend as a result of the COVID-19 pandemic. Consumers aren’t really in the mood for ‘business as usual’ advertising either: globally, just 37% of consumers surveyed by GlobalWebIndex in March 2020 believed brands should continue advertising as normal, 36% were unsure, while 28% think campaigns need to change.

WARC evidence shows that while brands can sometimes get away with stopping advertising for a short period of time, stopping advertising on a prolonged basis can be damaging to the brand in the long term, especially when it comes to brand health and market share. Peter Field, a leading marketing effectiveness expert, advised in a recent LinkedIn webinar that “businesses should resist the seductive sales pressure from short-term media to increase activation spend, unless they are one of the fortunate few countercyclical businesses that can meet demand.”

“Do not abandon your existing brand campaign unless it is clearly unsympathetic to the mood of customers. There may be more value and reassurance in continuity than in change.”

Be helpful and do good

Even if a new product launch or seasonal campaign is on the rocks, there’s a huge amount that brands can still do to participate and stay front of mind for consumers. Already, brands who have elected to push forward with advertising are rolling out new campaigns centred around COVID-19. Research suggests that, right now, consumers more interested in brands that tackle the outbreak and provide key information.

One way brands can support the work of governments is by sharing information. As confirmed COVID-19 cases increase in developed countries, half of UK and US consumers feel they lack enough information to stay healthy. By taking a proactive role, brands can gain trust and respect, and drive more positive results when the outbreak ends. Brands that lack empathy or are perceived as leaping on a commercial opportunity will not fare well with frazzled consumers.

In the UK, ASDA, a grocery brand, is already using TV commercials to show demonstrate to consumers how they are supporting community food banks during the COVID-19 lockdown. Likewise, British frozen food brand Birds Eye is running new commercials featuring snapshots of the lockdown life. Expect to see more brands position themselves as good citizens helping their communities in coming weeks.

What changes brands can expect in consumer behaviour

As many brands seeks to scale-up in e-commerce, customer experience will be hugely important as brands compete on logistics and customer experience, as much as product or service specs. A March 2020 Kantar survey indicated that 32% of respondents expected to shop more online post-COVID-19. Brands will need to prepare for knock on effects in customer experience, logistics and fulfilment, mobile-first design, and uptake of cashless payments as consumers adapt to the ‘new normal.’

Rain Newton-Smith, Chief Economist at the Confederation of British Industry, pointed out in the webinar that the fast uptake of digital technologies represents a ‘green shoot’ post-COVID-19. The move toward digitisation is overall a positive for business, even amid trying circumstances.

“We know that so many businesses have adopted more digital technologies - because they needed to - at extreme scale, as have governments in trying to tackle the crisis. If we can take some of that agility in adopting new technologies, then maybe it will help to address the long-standing challenges in the UK around weak productivity,” she said.

She also noted that with air pollution waning, conversations about how companies can be more  sustainable or use less energy may again come to the for post-COVID-19. Consumer views are environmental impact could also change.

“If you think about what this has done for air pollution and air quality around the UK, it will be interesting to see whether it changes our mindsets about what it means for economies to grow more sustainably and the things that we value,” she said.