By Michael J. McDermott
Clipped by shrinking budgets and C-suite demands to demonstrate ROI for all their expenditures, marketers now face a curveball the likes of which they have never seen before: dealing with the marketing impact of COVID-19 and radical changes in consumer behavior. There will be winners and losers when the dust settles, and the media-spending decisions that marketers make now will have implications well into the future.
The coronavirus and the subsequent economic fallout are causing major disruptions in media spending plans, according to a recent report by eMarketer.
Nearly half of the 200 marketers responding to the survey said they delayed a campaign launch since the pandemic started, and 45 percent said they have pulled the plug on a campaign already underway, the study found. Advertisers are adjusting media budgets and shifting channel allocations on the fly, while others are putting new ad programming on hold for the time-being.
"What's interesting is that the uncertainty is so broad-based," says John Kenny, chief strategy officer at FCB Chicago. Brands in categories most affected by recent changes are left wondering when their customers will be able — and willing — to reengage with them.
Categories projected to be hardest hit through the end of this year include travel and tourism, brick‑and‑mortar retail, restaurants, and automotive, according to the IAB.
For brands in categories that have seen increased volume because of the pandemic, such as consumer packaged goods and grocery stores, there is pervasive uncertainty around supply issues. "Both ends of the spectrum are struggling with how to advertise at a time when either demand or supply is uncertain," Kenny adds.
Ongoing Changes in Consumer Behavior
Amid reduced budgets due to the coronavirus, marketers have started to reprioritize their media planning and spending. Rather than focusing on long-form media, they should concentrate on keeping their brand top-of-mind for as many people as possible, Kenny says. "You don't know where your growth is going to come from — no one has models for situations like this — so media choices that allow you to go broad have been most effective," he adds, pointing to shorter-form media such as six-second pre-roll or 15-second linear TV spots.
A big challenge marketers face in allocating media spending post-COVID is the loss of predictability in consumer behavior. Consumer research firm Toluna and its subsidiary companies, Harris Interactive Europe and KuRunData, have been tracking consumer behavior and consumption since the beginning of the outbreak. "We've conducted the study every two weeks across 19 markets around the globe, and the changes in consumer behavior have been swift and notable," reports Michele Morelli, SVP of global marketing strategy at Toluna.
Among the significant shifts in consumer behavior affecting media spending plans are the increased amount of time people spend on social media, the big jump in consumption of online video, skyrocketing revenues in pure play e-commerce, and the steep decline in mobile searches, says Ellie Bamford, VP and head of media at agency R/GA. "This has led to some obvious changes in how [marketers] are managing their media mix and where they are putting dollars: more social, more video, less outdoor, [and] the realization that desktop isn't dead," she says.
With so much in flux it's next to impossible to predict how long COVID-triggered changes in consumer behavior will last. "There are so many unknowns in terms of how consumers will behave in a post-COVID environment," Morelli says. "Will we still be socially distancing in pools, restaurants, and other places? Will messaging still need to be focused on hygiene and safety? No one can answer these questions quite yet, so it's incumbent on brands to monitor consumers in real-time to understand how and where to engage them."
E-commerce Creeps to the Core
Despite the challenges, the current turmoil is also creating opportunities for some marketers. R/GA, for example, is seeing a decline of up to 60 percent in CPM (cost per thousand) and CPC (cost per click) prices, Bamford says. "Even Facebook CPMs have fallen 15 to 20 percent," she says. "With less money chasing more eyeballs, cost per view drops. This is an ideal opportunity for some marketers to acquire new customers at a lower cost than previously."
"Our big recommendation is for clients to remind people that 'panic' is not one of the four Ps of marketing."
— John Kenny, chief strategy officer at FCB Chicago
Morelli adds that the situation is a huge opportunity for brand marketers to steal share and start to build a loyal base amid this disruption. This is especially true in categories in which major brands are experiencing supply shortages. "Global COVID-19 Barometer results showed that (a third or more of) U.S. consumers who were unable to access their normal product or service try a new product or brand," Morelli says.
Another result of the COVID-19 pandemic: An accelerating transition to e-commerce. Himanshu Jain, head of e-commerce advertising and solutions at CommerceIQ, says it signals "a permanent shift in how people buy consumer goods."
CommerceIQ, which uses machine learning and algorithms to help brands optimize their advertising on marketplaces including Amazon, Instacart, and Walmart, expects e‑commerce to account for 50 percent of retail sales in the next five years and plateau anywhere from 16 to 27 percent higher than previously predicted. "Another way to think about it is that the timeline for e-commerce has accelerated by at least five years," Jain says.
The pandemic has led to a surge in net-new customers turning to e-commerce in categories they previously hadn't engaged, such as groceries and home improvement. "This presents a massive opportunity for brand marketers to surface their products in front of shoppers and convert them into customers and brand loyalists," Jain adds.
Doing so won't be easy. It will require marketers to master a new set of media buying skills and to adopt KPIs that transcend ROAS (return on advertising spend). To succeed in the big e-commerce marketplaces, brands need to take a profit-first approach to ensure ad spend is optimized on high‑inventory, high-margin products to minimize out‑of‑stock and CRAP (can't realize a profit) risk while maximizing overall profitability, Jain says.
Follow the Bouncing Ball
There's no denying the magnitude of change underway in the media planning and buying space, and all that uncertainty is spooking some marketers. In a stark indication of the uncertainty, more than two dozen brands declined to comment when asked how the crisis has altered their media spending and planning. But, as FCB's Kenny points out, marketers need to keep their cool to navigate such an unknown terrain.
"Our big recommendation is for clients to remind people that 'panic' is not one of the four Ps (product, price, place, promotion) of marketing," he says. "Our job right now is to not overreact to every new piece of data, but to relook at the long-term trends we've been making marketing bets on, identify how the recession and pandemic are impacting those trends, and adjust accordingly."