There is nothing certain about the Covid-19 lockdown and the impending downturn. Economists cannot predict how things would go back to being “normal” and when.
Your Plan A, probably drawn up during the beginning of the year is not valid anymore. You need a Plan B.
Amidst such uncertainty, how should you think about your marketing objectives and spends? The lockdown will end in a few weeks. Will these 3-4 weeks of lockdown dramatically change our assessment and outlook for the next 12 months?
We don’t know for sure, but we can make some reasonable assumptions. Here are a few.
All in all, we are not looking at an economy springing back to pre-Covid times. We can expect a steady crawl back over several months. How many months? That is anybody’s guess.
We need to make some assumptions to start with. And calibrate those assumptions every month as we navigate through this.
There are financial crises that the world has dealt with, as recently as in 2008. That experience would help in drawing the assumptions.
What are some assumptions we could make?
Covid has adversely affected several sectors but a few sectors are seeing great tailwinds. A few other sectors are in the doldrums expecting no growth or slight declines.
Your own strategy going forward will depend on your answer to the following questions.
For luxury brands: Irrespective of the sector, if you are a luxury brand the opportunity is to maintain salience. Be there, wait it out until the demand gets back to normal. As you exit the crisis, your brand should command better recall versus your competitors.
Depending on the cash cushion (see below) and business goals normalized for 6 months of impact, you should decide on your spending on salience.
The only channels which make sense for luxury brands are TV, OTT or digital. If the cash outlay does not support TV, try OTT and programmatic on digital. The consumption of such digital options is significantly increasing, courtesy Covid.
For necessity brands: If your product/service can be categorized as a necessity, this is the time to try for a significantly higher share of voice and share of mind. This of course, again, within the boundaries defined by your cash flows.
Expect competition to be intense because each brand would fight for salience. The endeavor should be to come out of the Covid crisis with better recall and preference numbers so that as things normalize, you see better sales.
Remember, the time to realize returns on your marketing spends will be longer than usual. Add 3-4 months to your payback timeframe as you revise your marketing budget.
This is perhaps the most important consideration.If you have significant cash reserves and can invest (even though returns might take time to materialize), you are in a very envious position.
Regardless of your sector or market segment you can invest to increase recall and wait it out for a few months for transactions to restart. You’d emerge as a brand with a strong ‘pull’ and therefore will be able to hold on to your pricing and avoid promotional spends.
For most brands, cash flow will be sluggish and cash reserves might not be enough.In such circumstances, invest in promotional spends to move product and accelerate cash flows.If you are a startup, the burn would need to be adjusted to enhance the runway. Assumptions on new money coming in should not be optimistic. Do not “buy growth” in anticipation of that attractive Series B or Series C.
A general theme across sectors would be to over index on digital.
The lockdown will have some unintended but good consequences. The comfort of using technology, digital payments, e-commerce, telehealth will make even the most non-savvy consumers open to the idea of using more digital. Such habits are difficult to reverse.
The habit of consuming media on digital or OTT will take stronger roots. Regardless of your objective – salience, preference, promotional spends – try programmatic, OTT and other opportunities within digital. Your CFO would love that your outcome measures are tangible and that digital allows you to experiment before you scale spends.
This might be an opportunity to make digital contribute significantly to your business.