The effect of Covid-19 downturn on advertising
How to mitigate the effects
The effects on media consumption notably on TV and OOH
Forecasting markets and categories from any perspective is always difficult, but it has never been as complex as in today’s volatile fluid situation. The highlights presented in the town hall by the speakers are summarized in Joe Mandese's Red, White & Blog article "Why Covid-19 Is Like Being Stranded in the Arctic, And Why You Shouldn't Freak Out."
Generally, it was agreed that established advertising principles focused on marketing investments to ensure that share-of-voice exceeded market share, even during a potential recession, would optimize sales over the long term. It was also recommended that in this period, advertising creative should be oriented to brand building and equity building.
As research has consistently shown, brand-health indicators suffer when ad spend is cut or SOV is reduced. Evidence was presented that advertising will help sustain a price premium, and Nike was referenced regarding its commitment to the private sector playing a major role in the recovery.
In any disaster, nimbleness, innovation, relevance, consumer trust and especially customer service “above and beyond” — so rare today — will help companies survive and ultimately gain market share.
I suggest those companies that have generated “goodwill” by “going above and beyond” with their customers over the years are likely to be paid significant dividends in brand loyalty during these grim times. Just consider your favorite brands. One of mine from recent experience is Kohler.
Kohler “gets it,” versus those companies that subcontract customer service abroad, based on the worst phrase in customer service today — “This call will be monitored for quality purposes." Those subcontractors are forced to follow a script, which only frustrates and annoys the hell out of its customers!
In terms of media effects, the ramifications, at least short term, are already significant.
It was reported that travel represents 11% of Google’s search revenues and that typically close to 50% of travel budgets are invested online. Consequently, in this category, off-line media ad revenues will be affected much less than digital online by the current shutdown. Naturally, the good news or bad news for media will change by media platform and/or ad category.
With TV scatter in the doldrums and the live upfronts cancelled, commercial loads may shorten to mid-term. However, this reduces clutter, which improves ad impact plus TV consumption, according to Nielsen. As pointed out, national TV advertising is oriented to long-term commitment and relationships. So even with an extended disruption, the speakers agreed that “compromise financial arrangements will be worked out over the longer term.”
Not only advertising but content has been decimated in the sports arena. The knock-on effect of sporting event cancellations is horrendous — not only to the TV networks, the event venues and all the sports bodies, but to the psyche of the devoted sports fans worldwide.
The consequences of the Olympic disruptions will be tragic for many of the elite athletes who won't make the team next year. It's also a nightmare for the Japanese, the sponsors and the TV networks. On the bright side, an Olympics in 2021 will help the global recovery and help boost the travel industry but….!
The speakers did express serious concerns for cinema and OOH. However, these platforms can, and I am sure will, embrace agility, consumer relevance, unheard of opportunities and the chance to possibly adjust course — and be stronger in the long term.
The $2.2 trillion U.S. relief package to be approved by Congress was mentioned in terms of its particular potential to keep alive small businesses that do not lay off workers and the crucial importance of those businesses to the day-to-day U.S. economy.
This discussion among the speakers led to perhaps the best quote of the day: “The Americans will always do the right thing… after they’ve exhausted all the alternatives.” While often attributed to Sir Winston Churchill, it should be attributed to Abba Eban (in March 1967), an Israeli politician and diplomat who did not reference “Americans” but “men and nations.”