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Understanding history

Written by James Gray on Wednesday, 20 May 2020. Posted in Online, Sales & Marketing

James Gray believes marketers must learn from precedent and then apply this knowledge to develop strategies for dealing with the uncertainty of post-Covid-19.

Understanding history

James Gray believes marketers must learn from precedent and then apply this knowledge to develop strategies for dealing with the uncertainty of post-Covid-19.

The Coronavirus pandemic has obviously had a huge impact on day-to-day life in the UK during the first quarter of 2020.

Businesses of all sizes must adapt not only operationally, but across almost every other department.

Although the UK Government claims we are over the ‘first peak’, we will certainly have to wait somewhat longer to discover the full impact of Covid-19.

How badly has it affected economic activity? And what will be the long term effect, with many experts predicting a very high likelihood of recession – all over again?

Although governments across the globe are planning a range of measures to ensure that any sort of recession is as short and as shallow as possible, there is every chance that marketers may be tempted to reduce marketing and advertising costs to an absolute bare minimum.

This may be their desired course of action, especially if this happens to be their first experience of a downturn.

However, in this article, I’ll show how this may prove to have a negative impact on businesses.

Cost-cutting is a reaction, not a strategy

A study by Les Binet and Peter Field from 2007, called ‘Marketing In The Era Of Accountability’, reports that companies cutting investment by 50% for one year – before returning to ‘normal weight’ following a downturn – can take up to two years to recover their lost share.

Conversely, businesses that actively increase exposure during a downturn can gain up to three times more SOM* (Share of Market) and SOV** (Share of Voice) during the first two years of recovery.

Similarly, Tony Hillier’s ‘Successful Competitive Strategies For Recession And Recovery’ cites how “Surplus share of spend/exposure generates faster market share gains in the depressed media spend of the downturn.”

In simpler words, this explains how you can make valuable % share gains while other businesses (both competitors and those in other industries) rein-in their spending.

Losses suffered by a regressive policy, such as ‘going back into your shell’, when compared to potential gains from expanding your Share of Voice, are sometimes quite stark.

Numerous specialists and economists have likened the current uncertainty of Covid-19, with the early days of the global financial crisis of 2008.

Back then, uncertainty and fear made many businesses assume the worst. And this, of course, begs the question: Is this level of extreme caution and fearfulness the right approach to take?

What can brands learn from previous downturns? Can we use this information to help us battle through difficult times and subsequently emerge even stronger?

Precedent: The 2002 SARS Epidemic

During the 2002 SARS epidemic, 8,000 cases were confirmed and 774 people died – more than 80% of these on mainland China.

Sadly, these numbers have been surpassed many times over by the Covid-19 virus, but parallels can certainly be made.

Uncertainty, human loss, lockdown and social distancing: China’s population experienced all of these 18 years ago, albeit on a smaller and more localised scale.

And the parallels don’t just stop at the social impact. The SARS epidemic acted as a trigger for mass online adoption in the country, as China started to utilise their mobile devices, using the internet to gather information.

This triggered a digital entertainment and e-commerce revolution within China, as millions were confined to their homes.

During the epidemic, many took to their mobile devices to search for answers, which created an e-commerce revolution.

SARS is actually credited with promoting the growth of a huge range of digital businesses in the country.

Although many countries issued travel warnings regarding China, many companies wanted to do business there, and many were forced to turn to Alibaba.com to source Chinese goods. 

From March 2003, Alibaba’s B2B e-commerce business added 4,000 new members and 9,000 listings every day.

This brought about a staggering increase in business which, pre-SARs’ epidemic, would have been almost incomprehensible.

Chinese suppliers began to invest more in online marketing through Alibaba’s platform. The result being that Alibaba’s business grew 50% that year, and experienced daily revenues greater than 10m Chinese Yuan (RMB).

Over half of the 1.4m suppliers on the B2B platform saw strong sales growth during this period and arguably helped to build the ‘new digital model’ for doing international business with China.

These studies demonstrate how history can teach us to find glimmers of hope. They prove we should seek opportunities while searching for an escape route from periods of adversity during challenging times, such as those experienced in the wake of SARS and Covid-19 – the latter is still sadly alive and kicking.

Learning from the past

In Wonderful’s recent Scale or Fail webinar, entitled ‘Surviving and Thriving in Times of Uncertainty,’ our team covered a section called ‘Learning from Precedent.’

This summarised examples of how businesses can move forward and there are five key learnings which can be applied to the current crisis. 

1: ‘ Black Swan Events’ can break a brand, or make it: Black Swan events refer to catastrophes such as SARS, Ebola or COVID-19. These periods question a business’s purpose, values and commitment, but are equally a good test of a company’s agility, creativity and spirit.

2: There will be an ‘After’: We don’t yet know when, but it will happen and when it does it will release pent-up demand.

3: And it will be a ‘Different Place’: There will be changes in both attitude and behaviour, creating new needs, new priorities and new competitive opportunities.

4: Vital to ‘Manage All Time Horizons’: Marketers who manage to turn crisis into opportunity, are those who consider and address impacts across the short, mid and long term.

5: ‘ Failing To Prepare’ and ‘Prepare To Fail’: Fortune favours those who are well prepared, agile and decisive. This is true in good times, and especially when the going gets tough.

What does this mean in the real world?

It would be easy to take the aforementioned research and studies on face value, and then apply these learnings to all businesses unilaterally.

However, it is clear that some industries (leisure, travel and automotive to name just three) have been impacted more negatively than others.

It’s important to apply these learnings case-by-case, and to adapt a strategy to suit your business in the short-term.

At the same time you must always try to build good foundations for the mid and longer-terms as well.

I hope that this article has demonstrated how uncertainty can also lead to new opportunities.

There is clear evidence to prove that those who sustain or invest in their marketing operations will emerge triumphant when life finally returns to the ‘new normal.’

The Wonderful Creative Agency team have been working with a number of clients on different strategies, with regards to planning for all three time horizons.

For some, this has meant adapting a B2B strategy which is geared heavily towards customer and revenue acquisition, by adopting the route of trade events and shows.

Alternatively, there is the digital-first approach and there is plenty to learn from the experiences of Alibaba during 2002 and 2003.

Alibaba benefited from the behavioural changes of consumers in the short term, and then maximised customer value by thinking long term.

Further exploration of these strategies can be found in Wonderful’s Scale or Fail webinar series, which discusses how businesses can survive and thrive during these times of terrible uncertainty.

** – SOV is defined as an individual brand's per-cent of total spending for the category over a specific time period.
* – SOM is the same brand's per-cent of total sales for the new category for the same period.


About the Author

James Gray

James Gray

James Gray is a classically-trained marketer with a passion for all things digital and an unequivocal love of data. He’s Head of Digital at Wonderful, and has crafted data-driven digital strategies for B2B and B2C clients. These include global brands such as Virgin and Mazda, as well as some of Britain’s market-leaders like LEVC and Deltic.

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