The coronavirus has now put almost every country in the world on alert, as concerns rise that the virus that started in China could significantly impact the wellbeing and lives of people the world over.
For most countries, with the health of the population rightly the first and primary concern, the behaviour of both people and businesses is shifting to caution and concern. The economic impact of this caution was immediate for some, with major Asian airline brands such as Cathay Pacific and Singapore Airlines already announcing the potential need for staff to take unpaid leave.
To understand what the ripple effect of the global health crisis will be on the marketing industry, and how agencies and clients should be responding, The Drum has spoken to agencies across China and the wider Asia Pacific.
Some industry sources are predicting annual advertising growth rates in China will fall from 7% growth in 2020 to 3.9%. This forecast was also based on seeing a slower performance on ad spend growth in 2019, as well as the likely pull back on spending from some brands. Sources said that despite this, there are still areas of strong growth and are forecasting e-commerce advertising spend to grow by 17.7% and social media spending to rise by 22.2%.
Dentsu Aegis Network (DAN) surveyed clients in China over the past week, collating the answers of 155 clients and client leaders, to get a more nuanced understanding of how businesses are responding in the short-term.
Some 47% of businesses said their sales had already significantly or severely impacted by the outbreak of coronavirus but at this stage, only 7% said they had stopped spending on advertising completely.
The geographic focus of activity has been an early shift for businesses, with 22% saying they had already changed creative and regional focus due to the virus. Likewise, with people spending more time at home, brands have responded by shifting spend from offline media to online, with 14% saying they were moving budget from offline media.
Overall, most strategy shifts are for the short-term, according to the research, with 61% making changes for the near-term and just 9% making amends to longer-term plans.
Cheuk Chiang, chief executive for greater north Asia at DAN, explains that the first concern for brands should be around reputation and helping customers through the virus.
“Firstly we cannot forget that this situation is first a humanitarian issue. In this context, brands must be sensitive and responsive to avoid reputational damage. Content should reflect the changing times and consumer sentiment. Brands that take a utility approach to the promotion will better connect. From a media investment perspective, we’re re-evaluating out of home placements and will increase investment in digital channels especially short video and social platforms with a focus on driving to commerce,” he explains.
This advice is echoed by Chris Stephenson, regional head of strategy and planning, PHD APAC, who advises that brands need to think about the public interest, as well as driving sales.
“In developing a response, it is important to be sensitive in brand messaging to the situation – a brand should look to align their communications so that it’s in the public interest versus pushing messages for sales generation. As ever, brands should follow media consumption patterns to optimise media splits and take into account the context of placement as well as absolute reach potentials of increased home video or digital media consumption.
With digital socialising on the increase as more people stay at home, consider leveraging increased time spent by increasing budgets to social channels and ensure the right content and social assets are available (made for mobile, vertical, short-form video, etc). Above all, brands should respond authentically based on their brand positioning, values and tone of voice,” he says.
An example of a brand that’s already adapted to become more digitally available for people at home and created a utility approach to promotion is Midea, which held a series of live streams with key opinion leaders (KOLs) and doctors to cover topics like healthy cooking at home with views from doctors on how to prevent infection.
DAN’s Chiang also explains that brands that responsibly maintain or increase their ad spend during times of change could also win the hearts and minds of consumers in the longer-term.
“Winning a share of voice at this time supports a long-term recovery plan. Some 34% of our respondents said they were planning to either maintain or increase spending in 2020. There is a bank of studies from previous downturns to show that increasing investment sustains brand long-term growth. Our econometric modelling consultancy D2D has shown that there is compelling econometric evidence to support the argument that advertising has a long-term impact on sales. Diverting marketing expenditure into short-term price promotions usually damages the brand values and is also likely to be unprofitable,” he explains.
Using the Sars outbreak as a proxy for some of the shifts we will see, PHD’s Stephenson says tuning into the behavioural shifts this will drive could potentially help brands innovate.
“Depending on the brand and the category, there is everything to be gained by committing media investment to your crisis response. Kantar Worldwide data from China during SARS crisis of 2003 demonstrated longer-term gains for in-home essentials, and anecdotal evidence from the same time suggests that it was the pivots into online delivery that formed the basis of the Chinese e-commerce platforms that we see today.
The seismic shifts that seem to be emerging are around e-commerce and emerging platforms for the distribution of products and services. e-commerce as a platform has already seen exponential growth, especially in FMCG which saw spending through e-commerce channels in China grow almost seven times as fast as the sector overall in 2019; a trend that the coronavirus outbreak is likely to accelerate.
We are also seeing e-commerce move into new areas, with even apartments now being sold through digital platforms. In China, real estate company Hengda launched an online campaign in cooperation with shopping platform Suning and offered a 25% discount on selected apartments, managing to sell 7,000 units within 6 days.
Brands should consider temporary opportunities, as well as those that arise through the emergence of new normals that become established as we emerge from the crisis. In terms of immediate opportunities, brands should consider how behaviours have changed to respond to the situation,” says Stephenson.
Whether businesses will heed this advice is unknown at this time because the usual response to uncertainty is to pull back or delay investments. In many organisations, marketing is seen as a cost centre and is, therefore, one of the first parts of a business to see cuts.
Leigh Terry, chief executive of IPG Mediabrands APAC, explains: “As a general rule in the absence of clarity as to long term impact, conservatism is the sentiment most felt - in addition to existing economic slowdown fears even prior to the start of the year and the news cycle of coronavirus.”
Existing economic concerns about recessions worldwide are also adding to the conservatism, according to Pat Law, founder of Goodstuph. However, she, as with everyone The Drum spoke to, is bullish about the opportunity this creates for smart brands and businesses.
“Traditionally speaking, marketing is viewed as a cost centre, so inevitably, it’s one of the first things that will get cut in this economic climate. How much an agency is affected is dependent on various factors, but perhaps one crucial one will be their client portfolio," she says.
"When an agency takes a brand as a client, it’s important to think about how the brand fares in the global market place, and how sensitive it is to the economy. I’d imagine agencies with travel, hospitality, retail and F&B clients will be badly affected, and certainly event management agencies as well."
“There’s a saying – never miss out on an opportunity like a good recession. Personally, as much as I’m more conservative this period of time, I am truly excited about the opportunities that arise from the occasion."
While some categories of agencies will be hit hardest, across the spectrum it’s the smaller independent businesses that won’t have the flexibility or network to weather changes as easily. Law, who is the founder of one of Singapore’s most well-established independent creative agencies, believes that survival instinct is what will carry agencies through.
“I’d like to think that by the very fact that we independent agencies do not have a sugar daddy to fall back on, our survival instinct’s incredibly high. While perhaps I speak only for Goodstuph here, but I don’t think any of us have a deadweight of an overpriced ECD who hasn’t performed in the last 18 months," she explains.
"We can’t afford the luxury of keeping such corporate fats. Still, it’d be silly to think we’re immune to the business impact of Covid-19. We just have to remember that while we react to the short-term calibration of the company, we should never lose sight of our long-term vision."
She also adds that this is the time for agencies to be focusing on client relationships, dispensing of any creative alter egos, citing her friend, the co-founder of Singapore-based agency Kinetic, Carolyn Teo, “Creatives win accounts. Suits keep accounts”.
China and APAC have had a slightly longer time to adjust to the impact of coronavirus, and these are countries that have already learned hard lessons from the Sars outbreak. With the world starting to feel a similar impact, the lessons from the region can be taken on across both Europe and the United States.
The key lesson for brands across the world is to be consumer-first and keep a sense of optimism because, as PHD’s Stephenson explains, the recovery will come around and brands need to be ready to thrive.
“During 2003, SARS, FMCG revenue YoY growth slowed down from 16% to 10% - 12%. The slowing down lasted for two months and ended after the relief of the epidemic. Explosive growth then subsequently happened in the following quarter," ” he adds.
"So yes, be ready for the recovery – prepare now for campaigns to reflect the optimism, for popped-up and expanded physical availability to capture resurgence of demand, and ready your promotions and incentives to capture a share of sales when they recover. But above all understand that weathering and not just surviving, but thriving, through change is what we all do now. That’s all our new normal, and has been for a while."