From April 15, 2020 to April 30, 2020, Dentsu Aegis Network collected responses from 701 clients across 36 markets[i] to take a deeper look at how the COVID-19 pandemic has impacted their business plans, how they have responded to this unprecedented situation so far, and how they envision the post COVID-19 future.
In this article, we highlight some of the key learnings from the The Reality of Recovery: A Post COVID-19 World report built from the results of this survey.
Absorbing the shock: the challenge of balancing short-term business continuity and long-term recovery planning
Undeniably, the COVID-19 pandemic represents an immense challenge for brands: three respondents out of four (77%) evaluate the impact on sales as major (i.e., giving a 7+ score on a 1 to 10 importance scale). The figures are particularly impressive for the Travel, Tourism and Transportation industry, with 88% of respondents giving a 10 score (vs 9% of FMCG respondents as a comparison). We clearly see that the consequences of the pandemic are felt across many dimensions of organisations, from e-commerce to logistics, to supply chain and marketing. With declining sales, the lack of liquidity is the most oft-quoted immediate challenge by the respondents (54% of them), closely followed by reduced footfall (52%) and marketing challenges (48%).
As a response to this difficult challenge, almost everyone (95% of respondents) has been reviewing their 2020 marketing plan, with the delicate task of finding the right balance between short-term actions to mitigate the impact on revenue and longer-term planning to accelerate business recovery. Although six respondents out of ten (59%) have already changed their plan for the full year, a third of respondents (31%) seem to favour a short-term focus for driving their marketing response, reporting they only changed the plans for the first half of 2020 so far.
Some brands push to seize the short-term opportunities amid the crisis.
Although most industries make do with reduced marketing budgets, interestingly, some brands report increasing marketing investment. For instance, Technology & Telecommunications respondents report budget increases twice as much as their Finance & Insurance counterparts (20% vs 9%). Complementary data can shed light on these disparities. For instance, Dentsu Aegis Network closely tracks YOY variations in search demand per category. In the UK, the search demand (last 30 days) for the Consumer Electronics category is 98% higher than in 2019 at the same period, while the search demand for the Insurance category is 44% lower than last year at the same period. This consumer data helps us understand why Technology & Telecommunications marketers are more aggressive with their marketing budgets to capture this increased demand (compared to other industries). Our survey also reveals that there are about as many respondents who decided to experiment with new channels than ones who made a more conservative decision to stop spending, further demonstrating the wide variety of responses in these challenging times.
Regarding event-based opportunities, only one marketer out of five who planned to communicate around a major event postponed to 2021 (e.g., Summer Olympic Games, UEFA European Championship) will move 100% of the designated budget to next year. One half (47%) declare they are reallocating that budget to other activities in 2020 and one third (31%) report opting for a mixed 2020-21 approach. Here again, their decisions relate to the immediate opportunities of each industry: only 6% of Technology & Telecommunications respondents (a category where demand seems more resilient relatively to other categories) declare they will move these budgets entirely to 2021, while 36% of Travel, Tourism & Transportation respondents intend to postpone the entire budgets for these events to 2021, with the hope that travel disruptions won’t be as intense next year.
Recovery planning is happening now.
In parallel with short-term measures, recovery planning is keeping marketers busy. As many national governments are progressively announcing timelines to ease confinement restrictions, three quarters of marketers (73%) have already started planning for recovery. Less than one marketer out of ten declares recovery is not yet on the company’s agenda. The Americas are a bit behind the rest of the world when it comes to recovery planning (67% have started planning for recovery vs. 77% in EMEA), and offline-driven businesses (i.e., the ones making most of their sales through offline channels) are ahead of online businesses (75% vs. 66%).
Implications for brands
- There are opportunities for brands in the midst of the crisis. It is key for marketers to collect relevant and timely consumer intelligence to identify unaddressed and under-served needs. In a context where all investment decisions are examined even more thoroughly, relevant data prove critical for marketers to secure advertising budgets internally, and, as a result, to maintain or increase their relative share of voice. For instance, a close monitoring of analytics, search, and social data can reveal changing patterns in consumer demand and sentiment that could represent growth opportunities for brands, enabling diversification and leading to stronger resilience.
- Robust and up-to-date intelligence on media consumption and the media channels competitive landscape is equally important. From the cancellation of major sports events to working from home, to increasing online shopping and streaming consumption, many factors distort people’s typical media consumption. As audiences move, the supply and demand dynamics follow, and new trading opportunities open. Marketers can make the most of these media opportunities to maximise their share of voice or redirect advertising spend to promote their most effective sales channels.
- While budget fluidity is essential to make the most of these immediate opportunities, it is important for marketers to keep an eye on longer-term ambitions (already under pressure before the pandemic) and to work now on a clear recovery plan. To be effective, recovery planning should follow three principles:
- Recovery will be the fruit of a collective effort. As silos drive chaos, recovery planning should not be led separately by each department. Instead, it should be spear-headed by top leadership. Otherwise, individual recovery plans may be, at best, disjointed and, at worst, contradictory.
- Recovery plans must be flexible, not be set in stone. As epidemiologists warn the virus is here to stay and several waves are likely expected, the odds of a V-shaped recovery scenario appear to be getting smaller. Recovery will look more like a marathon than a sprint. An effective recovery plan should be a living document, exploring several scenarios and regularly reassessed in light of the evolving economic outlook, fluctuating regulations and consumer demand. Don’t underestimate the local factor, even within a single market, as people’s attitudes and behaviours are likely to follow the evolution of the public health situation, not the administrative partition of territories.
- Recovery plans must be realistic. Recovery planning should not simply aim at restoring the pre COVID-19 situation for the company. It should recognise the new operating realities (e.g., reduced workforce) and as such, include the areas where the company will need to invest to transform (e.g., automation), with documented actions and concrete ways to measure progress.
The transformation catalyst: the crisis accelerates the move to digital
Before the pandemic, Dentsu Aegis Network's survey of 1,000 CMOs found that 79% believed they must transform, not just optimise, their businesses through digital technologies. If we are to derive one truth from the current events, it is that the pandemic accelerates brands’ transformation, especially regarding their digital capabilities.
We asked respondents to share the key measures they took to respond to the consequences of the pandemic on their customers and their businesses, and to tell us in which capabilities they will need to invest long-term in the aftermath of the pandemic. Five patterns emerge from their answers.
Content is king in times of crisis, and investment in content is likely to stick
When the crisis amplified and lockdown measures spread, many brands made theirs the ‘First, do no harm’ adage, by quickly adapting their content to not appear out of touch with the current events. More than half (55%) of respondents have adapted their creatives and content to respond to the consequences of the pandemic. It is by far the measure the most frequently taken by marketers (it ranks #1 across all regions), and 50% declare they will need to invest more in content over the long term.
Implications for brands
To generate a consistent consumer response, brands must have a clear understanding of the content created across the organisation, even when it is not under the direct responsibility of the marketing department. The buck doesn’t stop with rolling out an emotional hero TV commercial, and brands should not neglect the other types of content that serve consumers from either an emotional, informational or transactional perspective. A successful content strategy encompasses many facets such as delivering accurate information about logistics (e.g., up-to-date store hours in maps), temporary customer practices (e.g., clear return policies), product information (e.g., stock levels in search ads), etc. Making sure the content is consistent from the first interaction to the product page is fundamental.
In the midst of the pandemic, brands should consider the following when reviewing their content strategy:
- Culture and process: How resilient is the creative process in the new ways of working? While working from home can provide more focus to creative teams, how does the organisation compensate for the missing energy of the office?
- Content optimisation: How is the existing content optimised for performance? Is the information easily accessible when people go to search engines or land on the brand’s website? SEO, UX and CRO should not be afterthoughts.
- Technology: Is the business equipped to update content fast while minimising the risk of mistakes? Solutions like Product Information Management platforms can help brands centralise information so that each environment can be updated at once.
The pandemic acts as an e-commerce accelerator.
It is clear the current crisis will accelerate the adoption of e-commerce, both in terms of consumer usage and in terms of investment from brands. A third of respondents (33%) have already expanded their e-commerce presence amid the crisis. The push for e-commerce has been particularly strong for offline-driven businesses (37% vs. 17% for online-driven businesses) and for industries relying heavily on retailers (49% of FMCG and 53% of F&B respondents expanded their e-commerce presence) in an attempt to partially offset their lost offline sales. As many people still don’t feel comfortable leaving home (e.g., 48% in the US according to the Dentsu Crisis Navigator) and are still relying on online channels for their daily purchases (e.g., +74% online demand YOY for fashion collections in the NL according to iProspect), this e-commerce arms race shows no signs of slowing down in the immediate future. It should also continue beyond the pandemic, with six respondents out of ten (59%) declaring they need to invest in their e-commerce capabilities on the long term. Once again, this need for e-commerce transformation is even more significant for offline businesses (63%) and for categories that traditionally rely on points of sale: FMCG (78%), F&B (76%), Automotive (74%).
Implications for brands
Growing online sales to be both profitable on the short term and viable on the long term is no easy feat. What worked for traditional retail isn’t guaranteed to work online, and the volume of parameters to consider, from logistics and technical infrastructure to advertising and customer support, can be overwhelming for brands, especially for the ones playing catch up. How can we make the most of marketplaces in a limited time? How can we quickly ramp up our Direct-to-Consumer sales? How can headless commerce provide flexibility to adapt to uncertain situations as we plan for recovery? All these questions are all the more difficult when the company doesn’t have e-commerce specialists among its ranks.
In 2019, we introduced the Commerce Success Framework (CSF) to help marketers drive their commerce strategy across four key areas: Availability, Findability, Buyability and Repeatability. In these challenging times, the CSF can provide marketers with a useful lens to prioritise the key actions necessary to build or maintain a robust commerce presence.
The pressure to get closer to customers has increased.
With media budgets under pressure, many marketers have paid particular attention to their existing customers: 32% of respondents increased their CRM activity, and 45% believe they will need to invest in CRM long term. Online-driven businesses, which typically have more direct relationships with their consumers, have been leveraging CRM more than their offline-driven counterparts. We can see clear differences between categories with stronger CRM programmes and the ones that don’t have access to a lot of customer data due to intermediation: while more than 40% of respondents in the Finance & Insurance, Travel & Tourism and Automotive categories have increased their CRM activity, only around 20% in the FMCG and F&B categories have done so. This deficit in direct access to customers is not news for categories depending on retailers, and many have started Direct-To-Consumer initiatives and tried new models (e.g., subscriptions) over the last few years to regain control over customer relationships (and data). By shutting down many points of sale, the COVID-19 crisis has exposed remaining disparities in CRM maturity.
Implications for brands
Upgrading CRM capabilities is not an investment that proves useful only in times of crisis, it is a winning strategy in the long term. New depth of customer data can help the product development team adapt the product portfolio to address emerging consumer needs. It can help marketing and creative teams tap into new insights to build messages more aligned with customer priorities. It can be leveraged to build new services (e.g., customer frequent questions can help build a simple support chatbot in a few hours). First-party data can also power media targeting and help customer acquisition (e.g., modelling of similar audiences), and becomes all the more important as browsers are cracking down on third-party cookies and as legislators around the world are promoting more restrictive policies around data practices. All these applications for CRM enable stronger customer experiences, which are critical in a period where big life changes push consumers to reconsider their routines and purchase habits.
It is particularly important for brands to have a clear strategy according to the engagement levels of their clients, and to avoid alienating customers and draining their existing customer base. Too many brands fell into the trap of suddenly mass emailing every single person who bought their products once, taking the risk of appearing opportunistic and damaging customer relationship. Additionally, brands need to have the technical infrastructure in place to support their long-term CRM ambition, and should avoid panic buying oversized solutions that are not be adaptable to their future growth needs or are inconsistent with their data strategy.
The pandemic could slow the move towards inhousing.
Advocates of inhousing champion the idea that cost saving, greater agility, better control and increased efficiency are key benefits of moving marketing activities in house. On paper, all these benefits are perfect for times of crisis. However, when asked in which capabilities they think they will need to invest long-term in the aftermath of the COVID-19 pandemic, only 9% of respondents select ‘Inhousing’ (the lowest percentage of all the options proposed to respondents; in comparison, 59% of respondents selected ‘E-Commerce’).
Implications for brands
There is a fairly direct explanation for brands reconsidering their inhousing ambitions short term: as businesses are looking to cut expenses, the high costs associated with expanding in-house operations (e.g., hiring, onboarding, training) can be prohibitive for organisations. However, and more interestingly, our respondents were specifically asked about their areas of investment for the long term, which means that the reasons for the moderate enthusiasm for increasing investment in inhousing go beyond cost control considerations. We can assume the crisis brought to light strategic and operational challenges, which may make some brands reconsider their inhousing ambitions.
As 35% of the respondents intend to invest more in Ad tech (e.g., analytics, monitoring, innovation) in the future, it is critical they have real clarity about their business goals, the role of digital in the go-to-market model, and the various implications for the organisation. A company must conduct a thorough review encompassing the customer experience, the potential return on investment, the impact on the organisation (e.g., negotiating the right partnerships with platforms, keeping teams abreast of the latest product features, regularly vetting data sources for legal compliance) and change management if it is to avoid joining the ranks of the 40% of marketers who invested in technology to collect customer data but don’t know how to turn it into business value.
Marketers are not yet fully convinced of the business impact of pro bono actions.
According to the Dentsu Crisis Navigator, half of US consumers (46%) want to see brands donating time, money, or products to causes and those in need. Similar studies led by Dentsu Aegis Network show similar expectations from consumers across the globe. For instance, a report by Carat in Spain shows that 77% of consumers declare they will buy more from a brand that takes positive actions, with donations to public bodies and changes in supply chain and products to support COVID-19 response being the most valued actions. However, despite the host of TV commercials showcasing brands’ pro bono initiatives, less than one respondent out of five (17%) actually took pro bono actions according to our survey. This behaviour seems more prevalent among EMEA marketers (21%) than their Americas (12%) and APAC (13%) counterparts.
Implications for brands
As the International Monetary Fund predicts the ‘worst economic downturn since the Great Depression’, with global growth in 2020 to fall to -3%, it is still too early to say whether consumers will be able to follow words with actions by spending more with the brands who took pro bono actions, and thus if pro bono actions can turn into a net increase in new customers. Consequently, marketers looking for a direct ROI pattern may dismiss or de-prioritise pro bono initiatives.
This could reveal to be a risky bet. On the short term, brands could lose part of their connection with their customers and be more exposed to price elasticity. On the long term, it could leave customers feeling the brand is letting them down in a critical time. Nurturing trust is a constant endeavour, yet one that can be derailed in a fraction of a second. This is especially true in the digital age, where social platforms act as catalysts for spreading information, and search engines are permanent collective memory. The company that demonstrates integrity in its intent and transparency in its actions will be able to build trust with its customers in the long term, and thus should be better positioned for faster recovery. Also, while marketers may focus on customers, they should remember that pro bono initiatives also affect their employer brand, both in the eyes of future candidates and current employees.
As we’ve seen, the COVID-19 pandemic has put brands to the test. It is no secret the next months will be difficult in many regards, but our client survey shows that marketers are aware of the consumer behaviour evolutions at play, and they are determined to go through this challenging period by accelerating their transformation to build foundations that will bear fruit beyond the crisis.