Marketing handbook in times of lockdown

“What shall I do with my brand in the Coronavirus crisis?” That’s the question that most agencies are getting from their clients these days. At APG Spain, us planners want to shed some light in the shape of insights.

We’re going through uncertain times, so let’s start with the things we know for sure: it’s been a few weeks since we’ve been stuck at home in Spain, and the government has officially extended the lockdown period until at least mid April.

The only thing we can do is something rarely done in the world of marketing: to learn from the past. Even if we’ve never faced a global pandemic before (during the Spanish flu of 1918 both marketing and advertising were in their infancy), we have faced a number of recessions in the last century.

A recession is defined as two consecutive quarters of negative economic growth. This means that the current context cannot be defined as such just yet, although experts already point to the slowdown of the economy and the uncertainty in markets is not dissimilar to that of a recessionary period.  

Fortunately, the relationship between advertising expenditure and a recessionary economy is well documented from the crisis of 1921 until the latest one in 2008¹. There are some pretty clear learnings:

• In general, virtually all businesses see reduced profits when their market is in recession. However, businesses that cut their advertising expenditures during the 1990 crisis lost no less profitability than those who actually increase spending by an average of 10%². That means that cutting spending in an effort to increase profits in a recession simply doesn’t work. Cutting cost is the easiest way to be efficient, not effective. 
• Again in 1990, brands who cut their spending lost an average of 0.1% of the total market, while those that made a significant increase in advertising spend saw their market share rise by an average of 0.5%². There’s a clear lesson here: marketers that maintain or increase advertising expenditures in a recession gain market share.
• In the recession of 2008, Millward Brown showed us that budget cuts are relative: those brands who apply budget cuts proportionately larger to those of their competitors risk a sharper decline in market share³. In other words, a downturn is an opportunity to grow share of voice by simply leaving media investment untouched, since it’s likely that many competing brands will reduce their media allocation.
• Not all sectors work the same way: in categories where price is a main purchase driver and brand names have little weight (like gas or mineral water, for instance) brands will drop market share quicker when cutting their investment. On the contrary, brands in categories less price-dependent (luxury cars or perfume, to mention just a few) are more resilient³.
• The return on advertising expenditure is 4x times larger in the medium and long term than in the short term. Therefore the actual longer-term business harm will be more considerable, but will not be noticed at first³.

So going back to the original question we are all facing, here are some answers to what to do with a brand during this COVID-19 crisis:

1. It’s tempting to assume that people under lockdown do not consume stuff, but that’s simply untrue. Companies that produce everyday items are doing business as usual. In fact in Spanish supermarket sales went up +8% in the first week of lockdown. We’re not just talking toilet paper: with every single Spanish bar closed, beer sales have spiked +78%.
2. What can change is brand preference inside a category: in the 2008 recession, sales of private label brands soared in Spain as a means for consumers to save money. Brands today need to continue offering added value, driving brand awareness and preference if they want people to actively choose them.
3. A big shift: grocery shopping online has become the new normal. The challenge for brands is how to build physical availability in the websites of key retailers like Mercadona, Carrefour, El Corte Inglés. And of course, brands who do not have a plan for Amazon now have a real incentive to do something about it, quickly. 
4. The idea of building advertising budgets as a function of future sales is a self-fulfilling prophecy: if the investment is cut, sales will inevitably drop.
5. Beware of the use of price promotions, unless your brand can live with tighter margins (or some serious cost-cutting can be done elsewhere within the organisation). If your brand has a functional or emotional edge over the competition, people who had to shift to private label brands to save money in the recession will come back once normality is restored. Low prices are hard to increase.
6. The average media consumption has skyrocketed: TV is being watched on average a record 7 hours per person daily. Internet traffic is up +80%. And yet advertising investment is down (and probably media rates are dropping too). For a brand it has never been this easy to achieve effectiveness.
7. Your brand does not need to have a point of view on coronavirus and this whole lockdown conundrum. There is a fine line between being opportune and being opportunistic these days. Brands are built by being useful and entertaining. If you have nothing helpful to do during this pandemic, at least try to entertain audiences through great creative work.
8. In tough times, it’s really key that brands and clients work as one team. Sharing key business metrics (sales, share of market, etc.), actively listening to real people in the street and online and being able to react in real time without ever forgetting about long term brand building.
9. Speaking of brand building, remember the golden rule of 60/40 budget split between brand building and activation. Brands are built (and destroyed) over long periods of time. Right now it is not sales of the next quarter that are at stake, it’s sales over the next five years we should be worried about.
10. The coronavirus will eventually go away and before we know it people will be happily driving their cars, bars and restaurants will be packed and Instagram will feature airplane wings against a sky backdrop once again. Brands that did not drop the ball in uncertain times will be the ones reaping the rewards when things go back to normal.

Bibliography:
Tellis, G y Tellis, K: A Critical Review and Synthesis of Research on Advertising in a Recession
Biel, A y King, S: Options and Opportunities for Consumer Businesses: Advertising During a Recession
Advertising in a downturn. Institute of Practitioners of Advertising, 2008.

This article has initially been published on LinkedIn (Spanish).