Contrary to many first reactions, cutting media spend in the context of the pandemic isn’t the best decision in the long run. Chasing immediate savings not only hinders rebound possibilities; it obscures the most important truth: the learned few who act now can drastically improve their positions.
History Repeating
However novel the current outbreak may seem to the masses, analysis shows historical recurrences to the careful observer. Market leaders wane while challengers capture market share.
Call it recession, bubble or crunch, look at the early 90s, 2000 or 2008: common knowledge says earnings fall and media budgets follow. Yet, according to a recent survey*, a surprisingly significant percentage of businesses (14%) manage to increase both sales and margins regardless of obstacles.
Pizza Hut and Taco Bell drastically outperformed McDonald’s following the 1990-91 bust. Having maintained or increased ad spend, a year later their sales were up (61% and 40%) while the giant was losing 28%. Following a similar approach, 2009 saw Amazon’s sales jump by 28%.
Discerning individuals will see that understanding the strategic choices made by these companies during previous crises is paramount.
Current Costs Falling
Basic supply and demand rules are at play: right now ad space is plentiful, and advertisers are reluctant to buy any. Anyone can therefore see why costs are dropping. Less evident for those stuck on the surface of events: a return on investment dream scenario.
The internet as a whole has seen its numbers swell. Online business is now core to daily lives. The impact of the epidemic is clear: variations coincide with lockdown announcements, e-commerce traffic is up by 20% compared to the 2006-16 period and its growth in Western markets is steady. Multimedia consumption soars as people spend more time inside. Device use is up (70% say they were using their mobile phones more as a direct result of COVID-19 in March 2020). So is the amount of page views and videos seen both on TV and online. As content is growing, so is advertising space.
While all this is happening, ad spend is in decline worldwide: 2.85% less than last year, as of March. US programmatic ad revenues more than average (15% to 28%). All EMEA Artefact campaigns between the 6th of January and the 20th of April show a decrease in prices of online advertising.
Fewer buyers and more stock: as a result those who move first will see the impact of their campaigns multiplied by the lack of presence of their competitors at a fraction of the normal prices.
Creating Opportunities
There are two main pathways for smart advertising campaigns under COVID-19: focus on awareness or conversions. Based on the fact that sectors are not equal, the key is to know which product categories are under/overperforming to choose the course:
- Rebound through awareness: if sales are low in a time of crisis, maintaining a strong presence can ensure consumers come back once the general situation improves (Pizza Hut case). In today’s pandemic, connecting means acknowledging changing habits, ways of seeing things and anticipating the future. Two factors must be taken into account. First the correlation between optimism and spending anticipation: countries worst hit by the virus are particularly dejected, most plan on months of troubled financial waters, few anticipate increased incomes. Addressing optimists and pessimists differently is paramount. Second are dos and don’ts: while consumers do not expect brands to stop advertising, attention depends on the chosen tone and topic. Companies should “talk about how the brand is helpful in the new everyday life” and “not exploit the coronavirus to promote [themselves]”. Messages need to adapt accordingly.
- Market share gain through conversions: with retail sites traffic at +219%, companies dealing in the best performing product categories should make full use of the fact that conversion rates increase quickly, but critically not for everyone. Now is the best moment to apply pressure on competitors while increasing sales through campaigns optimising conversions.
History is clear: companies running appropriate media plans during crises can come out thriving. But timing is of the essence, as only first movers fully benefit from the small window of opportunity. Right now advertising prices are low and space is available. Companies currently doing well should focus on conversions to boost sales further and increase market share. Those struggling more can ensure a rebound by aiming for awareness: results will materialise if message and tone are chosen wisely.
*Artefact-Reasons to Keep Investing in Media During the COVID-19 Pandemic-review
By Florian Thiebault
Consulting Director
Artefact