Joel Spence – Chief Growth & Digital Officer
There’s no denying that Covid-19 has re-shaped the global economy and caused one of the most dynamic impacts across business and industry the world has ever seen, with global impact valuations ranging from $1.5tn to $12tn.
In the UK, Morgan Stanley predict a short, but very deep recession, forecasting that British economic output will shrink by around 10% or more in the three months to the end of June, and just over 5% in 2020 if social restrictions can be relaxed in the second half of the year.
We have never seen anything like this. While we have a booming food retail, logistics, streaming and ecommerce market, we’re also faced with huge impact to global travel, government intervention causing a short but static standstill in a range of private sectors and the knock-on effect of all those businesses supply chains being affected.
Many jobs are at risk as a result and there’s a huge fear factor across the nation for both their jobs and their health, reducing consumer confidence. While the knock-on effects will be felt for some time, following a period of shut down, the retail, leisure, dining and entertainment sectors will re- open, meaning a huge return to business.
With such significant measures taken by the government to intervene in the redundancies facing some companies and individuals with their 80% (up to £2,500) salary scheme, there may be more money in the economy for consumers to spend on their return.
A final dynamic to consider is the lockdown affect, as the UK now has strict rules enforced meaning they can only leave the house for health reasons, to go to the shop, or for one piece of exercise per day. All non- essential businesses have closed temporarily, meaning we may have the biggest spike in people at home, and online, there has ever been in the UK.
While a big issue for the economy, this is a huge opportunity for communicators and marketers, who now have a very active audience which if handled right, could create new and stronger relationships for when we go back to market.
So, in summary:
• The economy has taken a huge hit.
• Some sectors are booming, but the demand supply curve means that product needs to be found – and not overly marketed.
• Travel, tourism, retail, dining, entertainment, and fitness brands are all on hold for three months, during this time those businesses with poor cash flow will struggle to survive.
• People are losing jobs, consumer confidence is down, however, the government is offering as much support as possible to ensure that consumers can pay their bills and have cash to spend when the economy restarts.
• The UK is on lockdown meaning more people at home and online than ever.
• For marketers, this is a huge opportunity to change strategy and play a positive, supportive role in customers lives during this stressful and scary time.
What is the hope for recovery?
There isn’t much data available, but taking economic impact data from the Chinese market, we can see a sharp decline in economic performance as the Wuhan shutdown begins, but in the months following, the steady start of a recovery, through that shutdown.
Hope of a V-shaped recession/recovery…
It seems unavoidable that the world is about to go into recession, however, the depth and recovery of this is currently unknown. With analysts reviewing historical data comparing the current trajectory to that of the Great Depression (1929) and the 10-year run up (around the time of the Spanish flu), there are striking similarities to our current trajectory.
The recovery is dependent on several drivers, such as the degree to which demand will be delayed, whether the shock is a spike or lasts, and whether there is any structural damage to the mechanics of the economy.
When reviewing prior epidemics, most recessions driven by the economic slow-down induced by contagion are all V-shaped, with GDP Growth bouncing back and economic decline being overcome by growth over the course of the next fiscal year.
The V-shaped scenario is a classic economy shock, a displacement of output, but growth eventually rebounds. In this scenario, annual growth rates could fully absorb the shock. Though it may seem optimistic amid today’s gloom, this is being considered as plausible.
More skeptical economists, however, are foreseeing the potential of a W-shaped recession with a bounceback and recurring decline over time with eventual recovery. Other potential views include a U-shaped recession or L-shaped, both of which lean more pessimistically towards a slower recovery due to the impact potential on the labour market.
How does this impact sectors?
Moody’s issued advice on high, moderate and low exposure sectors that reflect the forecast slowdown, and it’s obvious where the winners and losers lie.
The detail in how each sector will be hit will be nuanced, however, most high street and consumer businesses will see a sharper return, over that of luxury goods or big-ticket purchases, as consumer confidence and unemployment will have risen.
For those of you within low exposure sectors, I envy you and for those in moderate to high exposure, we hope that the following advice may support a sharp return to growth.
So, what should marketers do now?
In short, don’t stop marketing…
How you act now is completely dependent on your market, your technical capability and your cashflow and this article is not meant to lecture any business on what’s right for them.
Within the current climate, however, and in the midst of economic shock, marketing budgets have quickly been commandeered by finance directors and CFO’s, most of whom are going into survival mode to reduce spend and optimise cashflow.
The advice offered here is to give a marketers POV upon how strategy must switch during our potential V-Shaped recession and the ’stalled engine’ we currently face to ensure that your customer base is engaged and grows as the engine begins to rev again.
Within areas of high and moderate exposure, most companies have slammed the brakes on new customer acquisition and hit hold on project and campaigns. Our advice could be summarised as follows.
1. Reduce new customer acquisition to save media spend.
2. Do not write off this line completely, ringfence some media budget for opportunistic and pro-active advertising.
3. Maintain CRM, Content and Social communications, however, quickly adapt communications strategies to take a more supportive, informative and entertaining approach – we have lots of customers in lock down to engage.
4. Drive customer engagement and maximise digital PR opportunities to newsjack and maintain brand relevance throughout the period of lockdown.
5. Use additional capacity within your team to press on with improvement projects, such as technical SEO, content development, conversion optimisation, reviewing data to inform strategy, reviewing data and technical architecture and capabilities. Training on marketing technology and tools, training via Google, Moz and other providers to upskill your teams, and creating a H2 strategy for the bounce back.
6. Define a ‘back to market strategy’ that considers content, communications and channel activation to ensure an ethical return to a sales focus, or an aggressive return to performance marketing activity.
7. Review performance over the past 12 months, team, channels and suppliers, and potentially use this time to review what’s working, what isn’t working anymore, and what you should be doing, to ensure that you are going back to market stronger than ever.
Inevitably things will eventually get better. What should businesses consider as we move towards a better future, and how can they be best placed to win when life returns to normal?
While brands quickly strive to reduce marketing spend, they are faced with a more engaged, online and at home audience than ever before.
To read the rest of What Matters Now? please download the full report here