4 ways for CMOs to face-off the post-COVID recession
- 12 October, 2020 08:56
With Australia entering the uncharted waters of a pandemic-driven recession, it is becoming harder and harder make predictions about future customer sentiment and behaviour. There are signals and trends, however, that are evident today which begin to describe likely scenarios and outcomes.
So here are four factors marketers need to prepare for in the post-COVID recession.
1. Communication remains critical – for customers and staff
Good communication is essential for managing any crisis and remains critical no matter how long that crisis drags on for – even if that turns out to be for years.
One marketer who knows this from experience is David Morgan, who was the chief marketing officer at Perth-based Bankwest when its parent organisation, HBOS, was sunk by the GFC.
“We had spent two years going from the 15th largest bank to the fifth largest bank in this country and had built an employee culture and a proposition that everybody had rallied around,” Morgan tells CMO. “Then it all imploded through no fault of the employees themselves. It was really difficult to manage people who had built a bank and culture of optimism and genuine service for consumers to be kicked around like that.”
Morgan found himself in similar circumstances at his next role, when he joined Standard Chartered Bank as global head of marketing in 2011, at a time when other large banks were pulling out of developing markets.
“We came up with what I thought was one of the best brand campaigns I ever developed, which was ‘We’re here for good’,” Morgan says. “We put that on every single piece of material to reinforce to the local communities we were not withdrawing, and we were here for them.”
Now the principal of the marketing capability development consultancy MacMorgan, Morgan says it is important not to communicate to staff and customers alike that the organisation will be there to support them, no matter how long this crisis lasts.
According to associate professor of marketing at UNSW, Nitika Garg, marketers should not let messages be too weighed down by the feelings of doom and gloom that can accompany a recession.
“Using gentle appeals, both emotional and rational, to convince consumers that things are not as risky as they might seem,” she says. “You have to keep giving people information. They shouldn’t overwhelm consumers, but give them bite size information to help them get out of that state of uncertainty or fear, or at least manage it.
“That can remind consumers that this too, shall pass, and is not a permanent situation.”
However, she cautions marketers today need to be more careful than ever, as the risk of backlash against ill-thought communications now is greater simply because people are tired and fearful.
“Consumers are appreciative of when companies are making an effort, but they have short reserves of patience, because they are themselves frustrated and they are scared,” Garg says. “And when you are fearful one of the things you’ll do is lash out. So many campaigns across the world have caught flack because people have short fuses.”
2. Experience will trump brand loyalty
One key trend of the past decade has been the rise in importance of customer experience. While the extent to which the rise of CX has come at the expense of brand value is debatable, it is likely this change has accelerated as a result of the pandemic, and may accelerate faster still as we move into recession.
“For everybody, the brand is less important than it was ten to 15 years ago, because we moved to experience platforms because of digital,” Morgan says. “Any marketer who is promoting that brands are the centre of what customers want is living in the past. It is much more than just a brand play, it is a full experiential play.
“When we come out of the COVID crisis, is it not going to be just about how the brand showed up, it is going to be about how the businesses showed up.”
This time of crisis might also provide the impetus consumers require to overcome any residual guilt they feel about switching brand loyalty. Morgan says this trend played out in the UK in the wake of the both the 1990s recession and the GFC, as demonstrated by sales of some home-brand labels increasing from between 3 to 5 per cent per to 25 per cent.
“And it was simply because people didn’t have as much money in their pocketbooks as they had previously,” Morgan says. “I think the same will be true for Australia. The thing that gets people to try what they perceive to be lower quality in the first place is lack of money. And if it turns out to be quite a good product, why would you spend more money when you don’t need to?”
According to the principal of brand change consultancy Brandquest, Graeme Gladman, now would be a bad time for any brand to be providing a poor customer experience.
“Traditionally we have been dreadful in retail in Australia on customer service,” Gladman says. “Fortunately, the retailers got away with it because the percentage of Australians who travelled overseas and experienced good retail customer service in the 80s and 90s was minimal compared to now.
“The Holy Grail for any retailer is customer loyalty, and you don’t buy that, you earn that through customer experience. You can’t fake your way to brand loyalty.”
None of this means that brand values no longer matter – they just need to be the right values for the time. According to country head for A/NZ at real-time consumer insight platform Toluna, Sej Patel, his company’s recent research findings highlights a sense of financial insecurity and cautiousness around spending, now and over the next six to 12 months.
“For marketers, brand trust has never been more important,” Patel says. “Consumers have changed their spending habits over the last six months, taking more time to do their research before purchasing; with the opinions of friends and family highly influential. Brands must position themselves as trustworthy and reliable in order to be a consideration for cautious consumers.”
3. Rethink customer segments and trends
Fear and fatigue are hallmarks of any crisis, and their impact can play out many months or years after the crisis itself has passed.
According to the Melbourne Business School’s associate dean and director for the Centre of Business Analytics, Professor Ujwal Kayande, it is important for marketers to acknowledge that customers psyches and behaviours may be permanently different. This means re-examining their segments to account for changes to mental disposition around their real or perceived economic situation.
“I don’t know what the segment sizes will be, but there will be new segments that operate in different ways,” Kayande says.
One clear impact from the early days of the COVID-19 crisis was the instinct to panic-purchase which gripped many consumers. For the out-of-home advertising network Shopper Media Group, this drove a massive spike in foot traffic through the 400 convenience-based shopping centres where it hosts its digital advertising.
“We saw 37 per cent more traffic in our centres than Christmas trading of 2019,” says CEO, Ben Walker.
Because the company also provides free Wi-Fi to visitors, Shopper Media Group has been able to survey consumers as they log in and ask about their feelings and behaviours. And while panic buying might have abated, other changes have emerged.
“Where people were quite happy previously to be more fluid with grocery shopping or pantry stocking, since the pandemic we have seen people wanting to keep those pantries stocked,” says Shopper Media Group head of marketing, Karissa Fletcher. “It is interesting how these things trigger those changes in behaviour, and then they stick.”
Another funding has been that people are planning to start their Christmas shopping early this year.
“They know they are going to be entertaining and having to prepare food at home more often so they are stocking up to do that, and looking for quick and convenient ways to entertain a group of five or ten people at any time,” Fletcher says.
4. Don’t rely on data to describe reality
If data has become the currency of marketing, then marketers need to be paying more attention to ensure the data they are working with has the value they think it has.
According to Kayande, historical data many organisations have used as the basis for modelling may no longer be useful for creating forecasts to describe the rest of this year or 2021.
“One of the nice things about normal times is that your sales are fairly predictable, and the reactions of the market are fairly predictable, which is one of the reasons why analytics is so hot,” Kayande says. “The big unknown is what will happen six months from now, and that is something we can barely model.
“The behaviours you observe today are not reflective of the economy as it stands, because it has been artificially propped up. The real drama is going to happen next year when people won’t have that money at hand and will start feeling the pinch. And that is when certain kinds of product categories will start suffering.”
As a result, Kayande says many marketers are turning to scenario planning and agent-based simulations.
“At least then you are prepared for the scenarios that might eventuate, as opposed to just winging it and dealing with it when it occurs,” he says.
Another option is to run more frequent audience research activities, or to look for signals in other data sets, such as changes in Google search terms.
“You can at least get a sense of which direction people are headed in,” Kayande says. “It is a proxy - albeit it a crude one - for consumer sentiment, and how that will get reflected into sale of a product.”
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