What it takes for CMOs to prepare for an uncertain future

Recessionary thinking isn't something many marketing leaders have experienced. But with the covid-induced economic recession on our doorstep, what can they do to try to come to terms with this new normal?

The words ‘new normal’ have quickly emerged as the go-to phrase for describing the world created by the COVID-19 crisis and its impact on the economy and national psyche. But have we even reached the ‘new normal’ yet?

Even as Australia begins to recover from a health crisis unlike any seen in living memory, the country is about to embark on another crisis of a similarly unpredictable nature, as the economy enters recession for the first time in almost 30 years. And with economic activity currently propped up by government stimulus payments, forming a clear picture of the long-term impact of COVID-19 and the following recession on consumer sentiment and behaviour remains difficult.

For marketers already fatigued and beleaguered by this year’s extraordinary circumstances, the new normal may still be many months away.

Faced with so much uncertainty, what can marketers do today to prepare themselves for such an uncertain future? Does the past provide lessons that will apply in this situation, and what strategies can marketers adopt to minimise the impact of future crises on their brands – and their own mental health?

It is easy to forget that recessions used to be regular occurrences in the Australian economy. Leaving aside the so-called Global Financial Crisis (GFC) in the late 2000s, which mostly hit North Atlantic countries and missed Australia due to government stimulus spending and the strength of the Chinese economy, prior to the early 1990s the local economy had experienced recessions approximately every eight to ten years for the previous three decades.

But with the last significant Australian recession being felt in 1991, it is likely most current CMOs would have been in junior roles, or possibly still studying, at that time.

The result, according to the associate professor of marketing at UNSW, Nitika Garg, is that aside from those marketers who have worked overseas or within an industry that was directly impact by the GFC, such as banking, most marketers haven’t experienced a recession in their working lifetime, let along one driven by a pandemic. That means they are coming to grips with a new set of customer behaviours for which they have little practical experience.

“One of the things that defines a pandemic is the fear associated with it, which necessarily leads to a lot of uncertainty,” Garg tells CMO. “What happens whenever there is uncertainty is people become more conservative and take less risks, and that leads to an economic recession that we are getting into.

“We are in a vicious cycle where we are trapped between uncertainty, fear and frustration, and people are just not sure how to cope with it. It is not part of human psychology to deal with uncertainty for this stretch of time.”

A further wildcard is the social isolation the pandemic is engendered – something Garg says humans are also not naturally equipped to handle.

“Not only are you in fearful conditions but your support network is depleted,” Garg says. “We really don’t have an understanding of how this will impact us long term.”

Tools and behaviours

One marketer who does have lived experience of a recession at least is the principal of the brand change consultancy Brandquest, Graeme Gladman. He was working as a creative director across various retail brands the last time that Australia faced a recession.

Gladman says in the early 1990s there was no ecommerce or data analytics capability as it stands today – two tools that will play a key role in the arsenal marketers can deploy to lift their organisations out of recession.

“The only tool back then was to continue pulling the discount lever, or bundling product,” he says. “That kind of thing was about as sophisticated as it could get. Every mass retailer was on the discount drug, and there was no facility other than discount.”

But not only do many of today’s CMOs find themselves dealing with the first recession of their professional careers, they are also facing a recession unlike any that preceded it, due to the unpredictability of the COVID-19 virus.

“If you want to contrast the two recessions, last time it was purely economic,” Gladman says. “The recession was fixed, and you knew the boundaries within which you had to operate. Now these boundaries that are framing the 2020 recession are much more fluid and less certain.

“There is blue sky somewhere, but at the moment it is hard to see blue sky.”

Food for Thought: After Covid, then what?

What marketers can learn from today to reinvent brand marketing tomorrow

Earlier recessions were marked by fairly consistent patterns of consumer behaviour, with sales of staple goods and small luxury items such as chocolate and alcohol generally performing well. But this recession comes off the back of forced behavioural changes. In previous recessions, entertainment options such as pubs and cinemas performed well, but both options have been off the table for consumers for much of 2020, and social distancing concerns will limit their ability to attract crowds for the foreseeable future.

The picture is further complicated by direct government intervention in the economy in the form of JobKeeper and JobSeeker payments, the former of which is keeping people in work who would otherwise be unemployed. It is likely the true state of the economy can only be properly established once these interventions have been completely wound back.

But even before then, there are troubling signals as to the future stability of the economy. Research conducted by real-time consumer insight platform, Toluna, of 1001 Australians between 17-20 September found 29 per cent believed their financial situation was worse than six months ago, and 38 per cent had reduced spending. While 13 reported their situation had improved, this might be due to the impact of stimulus payments.

Furthermore, Toluna found spending had become more considered, with 45 per cent of respondents stating they now waited for sales, and 38 per cent spending more time researching before purchasing. Just shy of one-third (32 per cent) gave greater consideration to their financial situation.

Perhaps most concerning in terms of long-term economic activity were Toluna’s findings in relation to consumer sentiment, with 62 per cent being concerned about their income decreasing, 67 per cent being worried about losing capital, and 49 per cent concerned about becoming unemployed. All these factors are likely to see consumers holding on to cash in the short term and do not bode well for the economy in 2021. While the latest Federal Government Budget promises hefty tax cuts and payments in a bid to stimulate cash flowing across the economy, that impact remains to be seen.

According to Toluna country head for A/NZ, Sej Patel, its research highlights a sense of financial insecurity and cautiousness around spending, now and over the next six to 12 months.

“The recession means Australians are planning to tighten their wallets and cut down on unnecessary purchases such as eating out and entertainment, while more time spent at home is resulting in bigger budgets for groceries and utilities,” Patel says.

Up next: Spending your way out of the recession, plus behaviours to watch

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