Coronavirus is wreaking havoc on business worldwide, and marketers are scrambling to realign strategies. The Organisation for Economic Cooperation and Development is warning that Coronavirus could cut global economic growth in half. As the shortage of testing kits eases, higher numbers of US cases are being uncovered. Trading on the stock market was halted to suppress a market freefall. People are hoarding bottled water and other supplies.
Impact on Products and Services
You probably know that some products and services have been harder hit than others. For example, the travel and hospitality industries have been especially hard hit. Mega events are being canceled, affecting a full array of service businesses – airlines, hotels, restaurants, and ground transportation. Some marketers are reporting a recent 15% drop in online product sales with Coronavirus being the only obvious possible factor as consumer reluctance to receive deliveries grows.
“The impact on … the world through business travel and tourism, supply chains, commodities and lower confidence is growing …” – Organisation for Economic Cooperation and Development
In today’s world economy, manufacturers spanning the globe rely on components from China. To offset losses, advertising agency planners are shifting focus to industries with less exposure to travel, manufacturing, imports, and large-venue entertainment.
Coronavirus is also skewing ad data. According to Digiday, Coronavirus is now the second-most common blocked word behind Trump on news channels, as advertisers veer away from having their ads associated with bad news or controversial topics.
How Marketers are Coping
Some marketers are temporarily halting campaigns, while others are reassigning budgets. Some are cutting back budgets across the board, pausing the less productive, top-of-funnel campaigns while retaining only the most productive components of their campaigns. In other words, awareness campaigns, because they contribute less to actual sales, are the first to get cut, while campaigns targeting customers already in buying mode are retained. Agencies are focusing on retargeting campaigns where potential customers have abandoned carts or have visited websites with specific products.
“Procter & Gamble Unilever, Apple, Microsoft, Danone, AB InBev, Burberry and Aston Martin, made cuts to sales forecasts for the year …” – Seb Joseph, Digiday
Unfortunately, marketers are preliminarily planning for fourth quarter now and it is far too early to predict how Coronavirus will affect buying habits over the next few months. There is real potential for a marketing disaster as advertisers rethink plans for year-end and possibly reserve funds for when consumer spending returns to normal levels. Advertisers will likely reallocate funds or pause campaigns altogether, as consumers stock up on necessities and conserve cash.
Some advertisers will be shifting to a recession-like strategy – reserving capital and using only the most productive of ad campaigns as a measure to survive until consumer stability returns. Unfortunately for those of us in the business, in times of uncertainty, ad spending is often one of the easiest expenditures to pause. TV ads are often booked months in advance with penalties for cancelation. This makes digital media that much more vulnerable to budget cuts. However, the longer the recovery takes to initiate, the more likely brand advertising and TV ads will fall behind search and digital marketing budgets, as digital ads tend to capture consumers closer to the actual purchase.
Contingency planning is top-of-mind as the daily news is increasingly concerning. Having a Plan B is probably wise, given today’s mindset. Detailed and frequent data analysis will help advertisers determine where to adjust ad budgets, as will flexible planning that responds to fluctuations.