Let’s get the bad news over with: the effects of the coronavirus on the economy, GDP and consumer habits are widely predicted by politicians, statisticians, economists – and most of adland – to be as deep and far-reaching as those experienced during, and after, the Second World War.
This is not a normal recession, and, as such, it’s a challenge to learn from past experience, because the dynamics are so different this time.
"Both supply-side and demand-side have been suppressed through legislation. It’s a kind of government recession that’s been mandated through policy, which is totally extraordinary," Craig Mawdsley, chief strategy officer at Abbott Mead Vickers BBDO, says.
There’s no crystal ball here, but there is the Purchasing Managers Index (PMI) – a monthly survey of trading conditions among purchasing managers in private sector companies. April brought the worst results for the UK services sector in two decades, since research firm IHS Markit began compiling the data, with 80% of companies reporting a decline in activity.
The eurozone PMI also hit an all-time low. And, as the global economy sinks into a deep recession, the advertising market is set to follow. UK ad expenditure is forecast to drop 16.7% this year, eclipsing the 2008-9 financial crisis, according to a report by the Advertising Association and Warc.
So far, so shit. But there are reasons to be cheerful. This time there’s neither the loss of confidence in the financial markets to contend with, nor the loss of liquidity, and neither do we have to rebuild the nation’s infrastructure.
Les Binet, group head of effectiveness at Adam & Eve/DDB, explains: "Deep recessions, where an economy contracts by 10% or more, have only happened about 47 times, ever, in any country, and they’re nearly all associated with the First or Second World War. And when you get a contraction that deep, sometimes there’s an immediate rebound, but more usually, there’s a long, slow rate of recovery. However, because most of those contractions were associated with war, there was a lot of structural damage to the economy: buildings, roads, hospitals, schools, factories, pipelines and gas works destroyed." He points out that, without that physical damage, "this recovery could be quite fast".
The prognosis from financial specialist Bloomberg Economics is that things could return to "normal" by the end of 2021. But, lockdowns could last longer, there may be a secondary resurgence of Covid-19, or a knock-on financial crisis might occur, just like that of 2008.
The last of those is unlikely, with banks now generally considered to be in a much better financial position to weather the shock, according to Dr Grace Kite, managing director of Gracious Economics, econometrics specialist for brands such as ITV, Asos and Wagamama. She believes there are good reasons to be optimistic that we are not at the start of a 2008-type recession, recovery from which may have been hampered by government principles of austerity and paying down debt. Now, prevailing thinking could be moving in a different direction.
Steal a march on competitors
When the time comes for the nation to head out of the crisis and into "the more classic deep recession and recovery", Binet believes that some of the rules from the past can help brands learn how to emerge stronger from the recession.
He says: "Analysis of previous recessions tends to suggest that, although most firms have to make cutbacks, not all businesses behave in the same way, and during tough times, firms that make basic necessities, such as FMCGs, can often do well, because many other brand owners may not be able to afford to advertise, but rates will be cheaper. So, for them, it’s a buying opportunity in the media marketplace and they can use that as a way to basically increase the effectiveness of their advertising and the ROI. But if you’re a car manufacturer or luxury-goods brand, the trick is to cut adspend less than your rivals do, and sneak past them."
Indeed, those brands that continued to invest in advertising during the financial crisis were shown to have recovered nine times faster following it, according to Kantar’s BrandZ database. "Brands that hold their nerve while competitors reduce spend are likely to benefit strongly," Jane Ostler, Kantar’s global head of media, insights division, says. Media pressure simulation scenarios carried out by the firm showed "going dark" can have a swift impact on sales and saliency, while retaining 50% of spend significantly limits losses.
Binet cites the example of Wrigley, which continued to advertise during the Second World War, even though its product was often unavailable. As well as producing posters advising people only to buy as much gum as they needed and "chew it for longer", the brand also contributed to the war effort by giving up its tin-foil wrapper "to meet the needs of the government", an action that is believed to have fuelled consumer warmth towards the brand for decades after.
Indeed, while products are in short supply or unavailable, some brands must either go dark or focus on building long-term brand value. Patrick Fagan, co-founder and chief science officer at Capuchin, says it is analogous with the engines on an aeroplane: you might not notice them when they’re there, but you certainly notice them when they’re not. "So brands who stop advertising and stop building that mental real estate will probably be the ones to suffer in the future," he adds.
Latch on to live data
One major difference from previous downturns is that brands now have access to a wealth of live data and can assess immediately whether campaigns are earning ROI. Kevin O’Farrell, associate vice-president at Analytic Partners, which assesses media effectiveness data for brands, including McDonald’s, says his company has been leading simulations and scenario planning based on historical data. "But there’s only so much you can get from that, because these times are so unprecedented," he adds.
"So the focus is more on brands being agile and using live data as it’s coming in to help make decisions on where to increase activity. We’ve been running simulations with brands in terms of shifting more towards the brand equity as opposed to very specific products. There can be "huge" benefits from investing in brand equity during a downturn, "if it can be afforded", he says.
As life comes back on-stream, O’Farrell says it will be vital for brands to understand which activities and messages they should push – and how far they can push them to recover very quickly.
Being adaptable is key for brands re-evaluating the role they play and the value they’re creating in consumers’ lives, Will Sansom, joint head of strategy at The Brooklyn Brothers, says. "Brands that have the ability to be nimble and pivot and keep doing that until it feels more stable, are the ones that are going to have the most success, whereas the ones who feel like they’re steering an oil tanker to even get all the key stakeholders to a meeting are the ones that are going to struggle."
He singles out Patagonia’s "Don’t buy this jacket" campaign, which ran in the aftermath of the financial crisis in 2011. It launched the brand’s Common Threads initiative, encouraging customers to first look at their existing jacket and see whether it could be repaired or even sold on the brand’s eBay site. Patagonia, with its long history of environmentalism, was true to its cause and also relevant and present for current customers.
A similar strategy has been applied by The Brooklyn Brothers to its work for First Direct, which it has advised to concentrate on existing customers, offering them financial information, education and assistance during the crisis, rather than chasing new customers. "That’s where they know they can be most helpful right now. And that’s where we think best brand behaviour is, when you’re genuinely making a difference for the people who are loyal customers," Kim Walker, joint head of strategy at the agency, says.
Capitalise on change
But, of course, following the crisis and lockdowns, people’s habits will be in flux, and consumer patterns may have changed permanently. It takes 66 days for people to change an old habit or form a new one, according to Fagan. "If a behaviour is carried on consistently enough, it will become a habit, so when this goes on for a period of time, we will definitely see a change in behaviours," he says.
For behaviour to change back, he explains, consumers need the opportunity for that to happen; for example, shops would need to be open and flights operating, at the same prices (although inflation is expected to cause price hikes).
They also need motivation. "And that’s mainly where the change will happen," Fagan says. "People might see that they don’t need to go out every Friday night to a restaurant."
There must be an external trigger, too. If one day the government says everything’s open, that would be a huge trigger, but if it’s a more gradual change, "like boiling a frog", then the trigger is muted, and behaviours may not ever revert.
All client sectors will, of course, fare differently, and online retailers are predicted to emerge stronger. "There’s a bigger pie online for retailers after the lockdowns finish, and the job of marketing is to grab a bigger share of that," Kite says. O’Farrell describes this as a "key pivotal moment", with some brands looking to future outcomes, where 25%-50% of sales will be online. It means huge change in terms of supply and distribution channels to service new consumer behaviours, he says.
Brands that did well after the financial crisis were those that capitalised on behavioural changes. Sophie Lewis, chief strategy officer at Mcgarrybowen, says that the emergence of value supermarkets, such as Aldi and Lidl, was symptomatic of consumers’ desire to be seen as "clever with money" and getting the best value. The same happened with clothing and fast fashion, Lewis adds, pointing to Zara, for example, which has performed well.
Looking back through history, Apple, Microsoft, General Electric, IBM, General Motors, Burger King, CNN and Disney were all founded during recessions. Of course, the unicorns, including Airbnb, which was founded in August 2008 and reached a peak valuation of $35bn, and Pinterest, founded in December 2009 and valued at $10.6bn at its peak, originated during the financial crisis. So similar entities could emerge now, perhaps as a result of new consumer behaviours or needs.
"The world has changed," Adrian Walcott, managing director at Brands with Values, says. "So if brands have been online and digitally enabled, they will be even more relevant now. It’s about looking for opportunities to service consumers in new ways, and you might find that there’s a new opportunity post-Covid-19." He points to the rise of video-calling apps and exercise classes online. "For a lot of consumers, once they’ve made the switch, it will be the new normal," he adds.
Regroup, reassess, reshape
So how can brands change their offering to suit consumers of the future? Essentially, this is about more than simply communication; it’s an opportunity for brands to regroup and reassess their offering, product, place in the market and what they are doing for consumers. As Mawdsley says: "It’s about a fundamental reshaping of your brand’s offer; every single one of the four ‘p’s. It’s thinking about price and product harder than ever, and how you create versions of your product and how you can price them in such a way that you’ll be able to help people out and help them to rebuild their lives."
Product reinvention worked for Tourism Ireland when it developed and marketed the Wild Atlantic Way at the end of the financial crisis – rethinking and repackaging the product itself, rather than simply increasing adspend. The project involved the 2,500km road trip being "marketed as an experience that consumers could buy", Jason Cobbold, chief executive of BMB, explains. "Do not think you can just communicate your way out of a recession. Sometimes you need to think very fundamentally about what your brand offers."
Prepare for recovery
This is the time when brands will be judged on their actions, Binet says. He cites LVMH as a brand that will emerge into a post-Covid-19 world with its halo firmly intact, after using its perfume factories to manufacture hand sanitiser, which it then donated to French health authorities.
"LVMH said: ‘Let’s not think about this as a press release. Let’s not think about this as brand-building. Let’s just help.’ So, LVMH has suddenly rocketed to the top of my list of purpose-driven brands," he explains. "And a lot of the other so-called purpose-driven brands, which seem to be somewhere in the background – doing fuck all, as far as I can tell – are lagging way behind."
No-one knows when the Covid-19 crunch will end, how long it will take for things to return to normal, or even what that new normal will look like, but at the point when consumers are ready to emerge from their physical, mental and fiscal cocoons, brands – if they have survived the economic battering – must be there waiting to greet them and propel them into action.
In 1991, following the Gulf War, British Airways gave away 50,000 tickets to get people flying again. John King, its then chairman, explained the purpose of the promotion: "The engine of consumer demand did not just idle in neutral, it sputtered to a complete stop and now it needs a kickstart."
But who will kickstart the economy this time? St Luke’s chief executive, Neil Henderson, has a call to action: "When the time comes, we need one, two or three brands to say: ‘Right, we’re back and let’s get this economy moving again.’ People could be thinking about that right now."
9 steps towards recovery
Keep the lights on
"While it may be tempting to cut advertising spend during these challenging times, it’s vital that all brands consider how they continue to build longer-term preference, so they are prepared as the situation recovers."
Jane Ostler, global head of media, insights division, Kantar
Get off the hamster wheel
"If the conveyor belt slows down, you’ve got time to rethink what your purpose is, re-evaluate your audience and how you want to engage with them to maintain your point of difference."
Adrian Walcott, managing director, Brands with Values
Identify new consumer habits
"It’s about brands working out what the new behaviours are and whether they can respond to those."
Neil Henderson, chief executive, St Luke’s
"Some great comeback stories of brands have a narrative of continuous improvement. And it’s about creating that momentum, like Domino’s, which saw an extraordinary number of quarters of consecutive growth after a tough time."
Jason Cobbold, chief executive, BMB
Strengthen existing platforms
"Those with strong direct-to-consumer platforms are the ones who are benefiting. We see the likelihood of potential longer-term changes from this crisis. Doubling down on the direct-to-consumer platform and building out that infrastructure is key in terms of emerging stronger at the end of the crisis."
Kevin O’Farrell, associate vice-president, Analytic Partners
Embrace different ways of behaving
"One of the fantastically positive things is that we will have been forced into different ways of behaving, particularly with regard to the environment and waste, community spirit and the idea that we need to help each other, and I hope this will persist post the virus. Brands will need to understand that better."
Sophie Lewis, chief strategy officer, Mcgarrybowen
Look for opportunities
"It’s important for brands not to lose sight of new opportunities, so, for example, while everyone’s been at home they’ve been using apps like Zoom and House Party. Life as we know it is changing, so brands could tap into the huge advances in technology that everyone has got used to."
Patrick Fagan, co-founder and chief science officer, Capuchin
Brand-builders will get their reward
"Post Covid-19 will reward the most professional brand-builders who were doing it anyway; those who understood the value of long-term commitment to a strong brand, a consistent offer and a coherent purpose. If you start after the problems occur, it’s probably too late."
Craig Mawdsley, chief strategy officer, Abbott Mead Vickers BBDO
Keep on keeping on
"It takes 18 years to grow an adult human, but you can open a new company within about a day. And all the infrastructure is going to be here. All the bridges and wires and buildings and stuff are all going to be here. And if we look after the people, they will still be here."
Les Binet, group head of effectiveness, Adam & Eve/DDB