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COVID-19 Collaboration Series - How smart brands are responding in a downturn

Summary of discussion

While COVID-19 has set off a downturn in advertising, we are consuming more media than ever. Media supply is outstripping demand and driving down prices, giving the opportunity to cheaply grow share of voice and market. Some would argue it's never been a better time to advertise. But will only the brave seize this opportunity?

This is an edited transcript of a discussion led by Russel Howcroft on how smart brands are responding in a downturn. 

Key points 

  • There has been a sudden downturn in advertising but we are consuming more media than ever before - it’s never been better value to advertise

  • Media supply is outstripping advertiser demand and driving down prices, giving the opportunity to cheaply grow share of voice and market.

  • Recessions do not mean lower ROIs. 54% of brands saw ROI improvement during the last recession

  • Businesses who advertise during a downturn will come out quicker and stronger.

  • By not advertising, competitors will gain share of voice and market

  • Production has been hit very hard, but we are seeing imaginative responses to restrictions and limitations

  • The public are still open to receiving advertising messages, so long as it is well meaning.

Overview 

Times like these are obviously pretty strange, particularly stressful if you're in media, advertising and brand. These times create all sorts of issues because most marketing expenditure is variable and gets whacked pretty quickly. There’s an ongoing battle that occurs every downturn around what to do with marketing or more precisely advertising expenditure. Yet there is so much academic research and papers around the importance of brand and the opportunity presented by a downturn. 

Today’s discussion is going to draw on a number of academic sources including the following:

  • Byron Sharp, Professor of Marketing Science and Director of the Ehrenberg-Bass Institute for Marketing Science at the University of South Australia. Byron has one of the most important academic voices in the world of media marketing and advertising 
  • Mark Ritson, also a huge influence in the world of media and marketing who offers a virtual MBA with over 4000 people enrolled. He has done a huge amount of thinking around what brands should do in a downturn 
  • Peter Field, principal Binet and Field, has undertaken 20 years of research in the power of brands and in particular, what happens in a downturn and what you can do to succeed
  • Analytic Partners, a New York based consultancy, is making huge inroads in the areas of marketing return on investment analysis, which lots of significant advertisers in Australia are now using
  • The Harvard Business Review which includes lots of papers on what companies should be doing in a downturn.

How brands are responding to COVID-19

The COVID Crisis Phases
  #1
Response
#2
Recalibrate
#3
Recover
#4
Reset
Societal Response Reactive and collective anxiety characterised by fear, denial and panic.   We readjust and replace behaviours with lo-fi and hi-fi solutions as we settle into new routines. We re-evaluate perspectives and proactively consider our actions moving forward, seeing both a rebound and reset of behaviours. We integrate and embed new behaviours, redefine our vision and fight for new norms.
Needs Functional: Clarity, Authority
Emotional: Security, Control  
Functional: Utility, Support Emotional: Hope, Joy Functional: Reflection, Regeneration
Emotional: Sense of purpose, agency
Functional: Self-sufficiency Emotional: Redefinition, Energy
Brand Response Solidarity, Generosity Show clarity and direction Innovation, Adaptation
Celebrate humanity and reconnection at scale 
Reinvention, Reputation
Help people reflect and rebuild
Optimism, Empathetic Consumerism
Redefine vision and values 
Behavioural Levers Eliminate Complexity, Collectivism Social proofing, Play Reframing, Evocation Commitment, Modelling
Tone Confident, Reassuring Inventive, Open Inspiring, Transparent Optimistic, Driven

We’ve been using the framework above to give clients some guidance on how we think they should express themselves throughout the course of the crisis. If we assume we're in the recalibrate stage right now, then what we are seeing in the brand response is a lot of innovation and an incredible amount of adaptation.

Clearly the opportunity that the digital world provides businesses and brands to innovate is exciting.  And from a communication perspective the message is to celebrate humanity. We’re seeing lots of advertising that's doing just that and you can see how powerful it is. 

It is also really interesting to see underneeds in the recalibrate phase the notion of utility. When you are talking about brands you must be able to express the utility that the brand has, or what is the core reason why someone should buy it. Brands with strong utility need to push that front and centre during these times.

Wouldn't it be nice if brands became playful? In the recovery stage, there's an opportunity for brands to pick up what's going on in social media, i.e. content that's been created by people that are just having a lot of fun. One thing that doesn't happen much in the world of brand building is this idea of having fun but there's no reason why it shouldn’t. It's mainly due to a sense of fear. I think if there’s ever a time to take a creative leap, it’s now. 

The crisis also provides an incredible opportunity for businesses and brands to build trust. The Edelman Trust Barometer has shown a steady decline in trust in institutions, brands, media and government. There is an opportunity now for brands to build trust and to repair some of the damage that's been done over the past decade. I would argue your tone of voice plays a huge role here -  be likeable, don’t be too worthy, and give it a go. 

There has been a sudden downturn in advertising but we are consuming more media than ever before - it’s never been better value to advertise

Because advertising is a variable expense, it's very quick to be cut in a downturn.  It is incredibly difficult to win the argument that continued advertising investment is required, particularly when we’ve just experienced the sudden downturn that we have. 

But what's so interesting is that we have never seen greater value in the advertising market place.  If there was a way to think in the long term, then businesses and brands can absolutely reap the rewards. 

Media consumption has gone up in the mainstream by around 30%. MasterChef for example has doubled its viewership, and yet the price of advertising within these programs has dramatically declined. So companies are able to buy into that advertising market at a price they haven't been able to buy into for a very long time. 

Many of you would have noticed the amount of full-page press advertising that's going on. It is interesting when you consider the power of a full-page press ad, the medium is the message and it's something that those of us that have worked in the news world, have always known to be the case. There is a significant difference between the impact of a full-page press ad, and a press ad which isn’t full page. Many brands, including the banks have used full-page press ads because they wanted to be very clear about what it is they wanted to say. 

My favourite ad was by the National Farmers Federation. Running about ten days into the shutdown, as people started panic buying, they advised the public not to worry as Australia makes enough food to feed 75 million people. This was a brilliant piece of advertising and it's interesting how many people now know that fact. The other thing about that medium is it will invariably find itself on radio and TV breakfast shows that morning. So it becomes more than just the press ad. It helps frame the news and sets up the facts and really did help calm the place down. It's hugely important that we recognise the power of advertising  to change the dialogue. 

It's been really interesting to watch the government and how they have used the power of advertising to get across their messaging. It is so critical that that message gets out as the government can't expect everyone to watch a PMs press conference, listen to the news or read the front page of the newspaper. But if they spend enough on advertising they will get to everyone.

Media supply is outstripping advertiser demand and driving down prices, giving the opportunity to cheaply grow share of voice and market.

As mentioned before, outstripping advertising demand has driven down prices. This provides brands an opportunity to expand their share of voice and that will correlate to share of market. Let’s say I spend $10 million on advertising and that gives me 10% share of voice and 10% market share in a $100 million category. If my competitors are reducing their spend but I maintain my spend and let's say the market size shrinks from $100 million to $50 million then I've gone from a 10 percent share of voice holder to a 20% share of voice holder. The result is that I will get 20% market share over a 1 to 3 year period. I’m not just saying this, there is a lot of academic work as cited upfront to support it. You can buy extra share of voice at a number which is way lower than what it was costing you in the past. These are incredible opportunities, in particular I think for third and fourth players.

Recessions do not mean lower ROIs. 54% of brands saw ROI improvement during the last recession

Analytic Partners have built a global practice around return on advertising investment. They have proven that recessions don’t mean a lower return on investment. In fact, 54% of brands saw their returns improve during the last 2008 recession. This is based on their global database. But despite this fact, it is still about winning the argument in the boardroom around the opportunities to invest in order to build the business.

Time and time again it has been proven that businesses who advertise during a downturn will come out quicker and stronger.

If you think about your own media consumption behavior,  I imagine you will be consuming more media than you have in the past. And increasingly you will notice the advertisers. It was fascinating for me to see a brand advertising its marshmallow range. It's a long time since I've seen an ad for marshmallows, but I'll bet they sold a lot of marshmallows. Simply putting their brand back in front of the consumer reminds the consumer of their product, reminds them of the utility, and then gets the sale. 

52% of brands that increased marketing investment saw year-to-year ROI growth over a two-year period

In the conversation I had with Mark Ritson recently we were talking around why there's so much research and evidence that those that stick at it during these periods are the ones that win in the long-term. And why is it that so few actually do it, in particular in the Australian market. The reality is that the Australia market is a very price-driven market. We're a quarter-by-quarter driven market, and that’s not a strong brand building market. So yet again, that's the opportunity. 

If you have a look at Proctor and Gamble, the largest advertiser in the world and unbelievably, skillful marketer, what do they do in a downturn? They make sure they’re getting an extra share of voice because they know they are going to slingshot out of the recession and find themselves in an even stronger position than before. The really smart P&G brands tap into that emotion that I spoke of earlier.  They have always been a very functionally driven advertiser but they know how to tell stories around their brands and use this time to gain even greater market share. 

However, brands that reduce media spend in 2020 by $50 million, will on average, lose $130m in sales in 2020 alone

It's very difficult to have these conversations in a market that's actually growing let alone one in a downturn, but what I worry about is what occurred after 2008. In 2008, that $10 million advertiser that we were talking about before, likely had its budget cut to say $7million. That budget would have remained through 2008, 2009 and beyond. Even by 2019 it might have inched its way back to $10million but that’s just getting back to where it was in 2008. That's why I argue there was so little growth prior to this period. It's a frightening thought that virtually no media inflation occurred over that decade and it's clearly turning into backwards territory right now, and may be for some time. This is despite the fact that the evidence is that if you spend at a time like this, you will reap the rewards as we come out the other side. 

Risk: by not advertising, competitors will gain share of voice & market

There are some smart advertisers that have seized this opportunity to gain share of voice and share of market. The delivery marketplace is advertising heavily as are some traditional advertisers such as  McDonald's. They’re making sure that we realise we can still use their product, use their utility and do it in a COVID-19 safe way. We are also seeing a lot of media advertising in media about the media. I just hope that their incredible audience growth at some point in time turns into advertising revenue growth, we need that to happen. 

Production has been hit very hard, but we are seeing imaginative responses to the restrictions and limitations

Without advertising revenue growth, there will be flow-on impact to the production of content. Overseas travel bans and border restrictions present a genuine concern for the production industry in Australia. We're going to have to make purely Australian stories for Australian consumption. That's good news, however, it's only good news if there's the revenues available for those TV shows to be made. So I wonder what the government can do to help make that spend go up. I know we’re all looking to the government to help industry but the production industry is going to absolutely need some help and pretty soon too. 

We know the public are still open to receiving advertising messages, so long as it is well meaning

The other challenge is how do you produce in a COVID-19 safe environment? Whether you're making television advertising or a television show, you’re going to need quite a lot of people to be involved. And that's, that's why I particularly like the recent Apple commercial because it was filmed on iPhones. It's demonstrating the utility and wrapping it up in a beautiful tone of voice. And it wouldn't be that expensive to make. This has always been one of the “difficulties” of advertising - it’s expensive to make and has been for the last 50 years, but with technology it isn't expensive to make now. 

There must be a fine line between getting the tone of voice right in relation to circumstances like COVID-19. Certain companies at the inception of the social separations and the restrictions didn’t quite get it right - what are your thoughts on that?

What I would urge everyone to do is download TikTok or ask your family to show it to you. This is the modern tone of voice. It's a social media platform which unlike Facebook is not about “likes” and unlike Instagram its not about sharing photos of yourself. It's about creativity, it's about fun and it's about anything you can do I can copy rather than anything you can do, I can do better. That to me is the leading indicator of where tone is going. I sincerely hope that the post COVID world is a lot more relaxed in how we communicate with each other and not so worthy. And I think TikTok is a leading indicator on the sort of tone of voice that we can expect coming through brands. Check it out. 

Are brands still using focus groups? Or can we be more agile?  How do we test a campaign in this environment?

My advice is continue to use digital platforms. There are some very smart products available to help with qualitative research in a digital world. These also provide opportunities to be more efficient and help drive the cost down. I think there’s been a global trend since 2008 focused on making marketing faster, cheaper and better. It is an overriding objective of the business community and I think that we're going to find lots of faster, cheaper, better outcomes.  

What is your take on the government’s messaging around the CovidSafe app and more generally? I’ve looked at some of the communications internationally around COVID-19 and I wanted to know how you think our government is doing?

I think after a shaky start they've done fantastically well. I think that most of us would cut them some slack on the shaky start as getting their head around the right messaging must have been incredibly difficult.  

The only thing I would say is there needs to be some messaging around confidence. For me there are two really important words -  trust and confidence. We all need to trust each other and trust is a two way thing - that's a really critical message. And what I mean by confidence is that if you display and practice the right COVID behaviours and download the app, then the government will have greater confidence in relaxing the restrictions. There is an adult-to-adult tone of voice opportunity there around the need to be confident in our decision making. 

How do you see brands preparing for the long term impacts of COVID-19? 

It will be really interesting to see where demand comes from.  There’s not going to be any issue with supply, but are people going to be prepared to buy? In China there was a frenzy on Gucci bags, but the Australian consumer is somewhat different. I'm hopeful that brands take it upon themselves when thinking about the medium to long-term to really think about generating demand. Our economy is going to need demand generation and this is one of the great things that advertising does. It's all about exciting one’s wants and I think we need a bit of excitement of one's wants in the not-too-distant future. 

In the current situation, some companies are investing in their social license to operate, trying to stand behind the community and adjusting either prices or making offers that recognise the  difficulty the community is going through.  Do you think the community will value that on the other side of the crisis and whether it's truly brand supporting?

I sincerely believe that it is. Before COVID-19, a lot of the talk around boardrooms was on the social license to operate. What we've discovered is just how important so many of our institutions are. We’ve discovered institutions including utilities, services, businesses and government that we've taken for granted actually really do matter in how Australia operates. I think this is a genuine opportunity for them to build their social licence to operate and I genuinely hope they succeed. Of course, it's all about the execution. But on the assumption they execute it with sophistication they ought to come out the other side in a better place. 

I am on a few NFP Boards and my question is in the current environment when people's personal finances are down what should be our tone / utility in this season?  

It would depend on the focus of the not for profit. My immediate reaction is I think people will be concerned for those that are on the streets at home over overseas issues. Maybe it's just about media choice. I’d be sticking with traditional media, one of the most powerful methods is direct mail, which has really lost it's way over the last 15 years. That will make a resurgence and is a massive opportunity for not just not-for-profits but for anyone. Back to the mailbox is a smart move I think. 

Private labels are becoming a bigger thing with major supermarkets and if you’re trying to promote your own brand you're really going to struggle against those brands and even get shelf space. What's your particular view on that?

There's no question it's really tough.One of the reasons why there's been a decline in fast-moving consumer goods is the decline in brand marketing. Twenty years ago it was a massive sector in advertising but now supermarkets take up a lot of spend via trade. 

I think smart brands in FMCG need to attach themselves to something that the consumer finds engaging and interesting. For example anything in the cooking area has quite a lot of support because people are doing more baking at home. It’s our job as marketers to make sure that isn’t a short term thing. And that's definitely the opportunity. Rather than trying to innovate, maybe there’s just a need to be consistently communicating in some way, shape or form. Consistency, I think is somewhat under-rated. 

What advice would you give the banks on how to maintain themselves as saviours of the economy rather than the enemy, particularly as we move through and beyond the crisis?

It's been fascinating watching the banks and this is their opportunity around social license to operate to recalibrate their relationship with the Australian public. In an advertising sense there’s been some fantastic work. One of the ads I wanted to highlight was the very simple commercial that Westpac has created around online banking. It's understanding there are many people that don’t know how to bank online and are going to need a hand. That to me was really solid thinking by Westpac. I hope that the banks continue to behave in a way which is appropriate and they reap the rewards over the coming months and years.  

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