A black swan is a term famously coined by author and statistician Nassim Nicholas Taleb in his book The Black Swan: The Impact of the Highly Improbable, as a metaphorical event, positive or negative, that is deemed improbable yet causes massive consequences.
Much like the financial crisis of 2008–2009, the recent COVID-19 coronavirus outbreak has rattled the world, seemingly out of no-where.
What started on December 31st, 2019 in Wuhan, China with the first confirmed cases, has now ballooned into a global pandemic with 170,000 confirmed cases in 135 plus countries and over 6,500 deaths (sadly, these numbers are continuing to grow rapidly and will likely be higher by the time you read this). Countries such as Italy and Spain have been put into a nation-wide lockdown. The United States has declared a National Emergency and restricted travel from Europe, the UK and Ireland as it determines its testing and containment strategy.
There have been some silver lining moments such as Tom Hanks sharing witty and positive messages on social media about his and his wife’s recovery from coronavirus in Australia. Or hundreds singing Italy’s national anthem from their balconies as they deal with self-quarantine.
The business community has largely been left on their heels, as we all watch as the day-by-day updates and actions unfold. While some organizations like Patagonia have taken swift action to shut down global sales and operations for the next 30 days with full pay to employees, much of the start-up and mid-market business community can not sit on the sidelines and hope for the best. They are fighting to survive like everyone else.
Once first evaluating their human capital strategy and contingency plans in lieu of the coronavirus pandemic, many brands will be digging into their P&L’s and 2020 forecasts. Marketing will surely be one of many line items Founders, CEO’s, CMO’s, CFO’s and Boards will be looking at to understand current investments, sunk costs and opportunities.
How To Think About The Macro-Trends On A Customer Level
Marketing 101 says that brands should focus their budgets on where their audience is, and right now, people are increasingly staying home. In the immediate term, Markacy expects to see a lift in digital audience reach with the frequency of online touchpoints rapidly increasing as people stay-in and watch more TV, engage with videos, listen to podcasts, use social media, do their shopping online, and get food delivered.
The majority of eCommerce businesses should expect to see volatility and potential reductions in efficiency from their advertising efforts in the immediate future. Even for brands that allocate the majority of their ad dollars to digital media, the general market uncertainty will likely impact consumer discretionary spending at some point. In recent days, we are seeing reductions in conversion rate and CPMs — which may be a function of both reluctant consumer demand and advertisers conserving capital. That said, certain segments are performing well (food delivery, personal care, wellness, cleaning supplies, healthcare) and may continue to outperform depending on the overall macroeconomic trajectory and new information we learn in the coming days and weeks.
In the meantime, we continue to encourage a nimble strategy and active monitoring of consumer shopping behavior to determine what works best for your business.
The travel and entertainment industry continues to take the biggest hit as airlines and cruise ships are completely shutting down advertising investments and in some cases, entire operations.
Obviously, most retail segments are going to get hit hard near-term and for the indefinite future which is why you have seen Nike, Apple, All Birds, Glossier, Warby Parker and others say they are shutting down their doors to the public for two weeks or more to evaluate the situation. Any marketing dollars used to promote in-store sales should be evaluated to free up cash-flow for future investments post-crisis.
Be Thoughtful In Your Communications
The global economy is fragile right now and brands need to be very thoughtful about how they are communicating with their end customers and the broader community during these turmoil times.
In times of global panic, transparency, trust and compassion win. Customers remember the brands that went above and beyond and handled things the right way.
Brands cannot be ignorant of the changing needs and broader emotional state of their customers. At all costs, brands should avoid leaning into marketing fear or panic, as it could cause negative brand association if consumers take it the wrong way.
Certain brands are already getting in front of potential market backlash with Molson Coors recently announcing on March 11th they were shutting down a campaign called “Official Beer of ‘Working’ Remotely”, which was made to be a spoof that people would blow off work to watch March Madness.
Hershey is also pulling a few ads that it planned to release as part of a new campaign showing people hugging and holding hands.
Ford had planned to make an announcement on its new highly anticipated Bronco, but like other brands are delaying new product launches until coronavirus uncertainty clears.
Many brands are sending proactive communications to their customers in response to coronavirus and how they are addressing it within their own operations to provide transparency. Consult with your PR and marketing communication teams and develop strong guiding principles and perform a cross-channel reconciliation of each of your front-facing marketing messages. If your product or service is in some way related to helping customers stay clean, rested, healthy, or at home, we encourage continued thoughtfulness about accentuating these communication points.
Evaluating Your Marketing Line Items
As mentioned above, for most B2C brands with retail exposure, it makes sense to trim back any unnecessary investments aimed at driving in-store sales while evaluating broader trends.
Experiential and event marketing investments that are not sunk costs should be evaluated for free cash flow over the next two months. BMW has already postponed two of its “Ultimate Driving Experience’’ events in March and April where it takes potential customers through an immersive driving experience showcasing the brand’s latest vehicles. Out-of-home marketing investments should also be rationalized where it makes sense as outdoor activity will be significantly curtailed for the near and mid-term.
So where do you invest if you’re trying to reach a customer base that is spending more time at home?
If an at-home audience is consuming more TV, video, social media marketing campaigns, and generally spending more time online, this is a good place to maintain new and repeat customer engagement — especially if your business has eCommerce operations.
What are video assets your brand has in stock that can be put into thoughtful social campaigns, YouTube pre-roll or Connected-TV and Broadcast-TV ads? If you are already running this type of media, monitor it closely with your team and partners over the coming weeks so that you can match budgets with real demand and ride out the market peaks and valleys over the coming weeks.
B2C brands should also be evaluating their affiliate partner promotions and influencer relationships to drive continued exposure where it makes sense. Pay close attention to what your paid influencers are saying outside of branded posts for instance. You do not want to get thrown into a bad narrative with existing partners who are expressing their fear but still trying to get paid. Email and SMS communications should be mapped out strategically for the next 60 days, as they represent a cost-efficient way to stay engaged with your tribe at home. Promotional strategies and free shipping for eCommerce should also be considered to give customers an excuse to keep spending.
Brands can also be evaluating getting ahead on strategic internal projects where possible to get ahead of their competition coming out of this uncertain environment.
Global Supply Chains & Logistics
The coronavirus not only presents a front-office challenge in terms of reaching end consumers but also creates issues on the supply-side. Many start-ups and mid-market B2C brands manufacture their goods in China and other international locations — and U.S. domestic locations are also starting to be impacted.
Brands need to look critically at their inventory positions to see what is in stock and more importantly what is out, and where they can get it manufactured. Tallying current inventory positions will give brands a better understanding of what products they have to sell to keep the lights on over the next 30–60 days and tailor marketing efforts. Strong communications with partners on production, manufacturing, warehousing, and shipping need to take place now if they have not already to ensure business continuity plans are foundationally sound.
Brands should also expect delivery windows to increase as the global logistics infrastructure gets stress tested with more online and delivery orders and stricter safety measures. Whole Foods food deliveries already started to get maxed out last week and Amazon is already publishing delivery delays due to high demand. Customer service teams need to be on the front-lines to help customers navigate through these delays and other business disruptions.
We are all in this together. Governments and organizations globally are starting to take the dramatic actions required and hopefully we will all look back on this and learn something from it to protect us from future pandemics.
Businesses of any size have the ability to rally their people, customers, and stakeholders around making an impact on coronavirus. Delta Air Lines CEO Ed Bastian publicly announced recently that he was forgoing his salary for 6 months in addition to additional steps to protect his customers, employees and the business from mass flight cancellations. Reddit co-founder Alexis Ohanian bought a Times Square billboard about coronavirus urging people to stay home using the hashtag #flattenthecurve.
Here at Markacy, we are evaluating direct ways to support New York City Hospitals with testing as the coronavirus pandemic unfolds.
Find a way to support your local community, find an on-brand way to donate to a cause like the World Health Organization, or take actions and form partnerships that address the broader need for more COVID-19 testing. Chinese billionaire Jack Ma and CEO of Alibaba said last week he will donate one million face masks and 500,000 coronavirus testing kits to the US to curb the spread of the virus. Many professional athletes and sports franchise owners have pledged significant financial support to hourly employees now out of work, and to the broader fight on COVID-19.
Be bold, be human, and be thoughtful.
The business environment will likely remain volatile over the coming weeks and months. Leaders need to make sure their people are safe and rationalize investments now for later in 2020 and longer-term business growth. We also encourage developing operations and communications strategies for the next 30/60/90 days (revisiting regularly) and making sure everyone across your organization is engaged to stay as coordinated as possible.