Cut through the coronavirus crisis

Cut Through The Crisis

What your company should be doing to survive the economic fallout of Covid-19

At Machete Creative, we help brands ‘cut through the clutter’ of the digital world. But as we expect to see many brands to do in the upcoming weeks, we’ve had to relook what we do and how we do it – and for the Machete team that means helping clients ‘cut through the crisis’ and effectively reinventing their own business models.
As a creative agency, we’re here to solve problems. The way we do that has just changed. We are not merely ‘working from home’, we’re working during a pandemic and we all need to adapt as fast as we can. Amongst juggling how to be an employee or employer as well as a parent and an educator, we also need to reinvent the way we do business and the way we market business.
Internally we need to make sure that we are all doing our part for humanity first and foremost before trying to sell anything. It’s important to hold 1-on-1 sessions with your team mates to check in amongst all the Zoom meetings. As creatives we often feed off each other, so the challenge now is to find that same energy in online brainstorm sessions. Hold collective coffee breaks or start the day with a virtual breakfast before a big meeting – taking care of your company morale and mental health is essential to the way we function not only throughout this pandemic but how we reemerge as a society afterwards.
In a country like South Africa we face many challenges to business during this time, the biggest one being access to internet, data and hardware. But for those of us who are in a fortunate enough position to work from home, the problem with access is in excess – how do your switch off now that you’re constantly online and available?
With the consumer demand post Covid-19 being so unpredictable in terms of both safety and money limitations, how do we rebuild the economy and instil confidence in our clients? Tone is everything right now and its crucial to not being seen as merely window dressing. What we need to be focusing on now is how to create things of value that give back to society, either within our own agencies or through our clients – and how do we package that?
According to Harvard Business Review, here’s how to market during a downturn:

“Think of your customers as falling into four groups:

1. The slam-on-the-brakes segment feels most vulnerable and hardest hit financially. This group reduces all types of spending by eliminating, postponing, decreasing, or substituting purchases. Although lower-income consumers typically fall into this segment, anxious higher-income consumers can as well, particularly if health or income circumstances change for the worse.

2. Pained-but-patient consumers tend to be resilient and optimistic about the long term but less confident about the prospects for recovery in the near term or their ability to maintain their standard of living. Like slam-on-the-brakes consumers, they economize in all areas, though less aggressively. They constitute the largest segment and include the great majority of households unscathed by unemployment, representing a wide range of income levels. As news gets worse, pained-but-patient consumers increasingly migrate into the slam-on-the-brakes segment.

3. Comfortably well-off consumers feel secure about their ability to ride out current and future bumps in the economy. They consume at near-prerecession levels, though now they tend to be a little more selective (and less conspicuous) about their purchases. The segment consists primarily of people in the top 5% income bracket. It also includes those who are less wealthy but feel confident about the stability of their finances—the comfortably retired, for example, or investors who got out of the market early or had their money in low-risk investments such as CDs.

4. The live-for-today segment carries on as usual and for the most part remains unconcerned about savings. The consumers in this group respond to the recession mainly by extending their timetables for making major purchases. Typically urban and younger, they are more likely to rent than to own, and they spend on experiences rather than stuff (with the exception of consumer electronics). They’re unlikely to change their consumption behavior unless they become unemployed.

Regardless of which group consumers belong to, they prioritize consumption by sorting products and services into four categories:

  • Essentials are necessary for survival or perceived as central to well-being.
  • Treats are indulgences whose immediate purchase is considered justifiable.
  • Postponables are needed or desired items whose purchase can be reasonably put off.
  • Expendables are perceived as unnecessary or unjustifiable.

All consumers consider basic levels of food, shelter, and clothing to be essentials, and most would put transportation and medical care in that category. Beyond that, the assignment of particular goods and services to the various categories is highly idiosyncratic.

Throughout a downturn, all consumers except those in the live-for-today segment typically reevaluate their consumption priorities. We know from previous recessions that such products and services as restaurant dining, travel, arts and entertainment, new clothing, automobiles, appliances, and consumer electronics can quickly shift in consumers’ minds from essentials to treats, postponables, or even expendables, depending on the individual. As priorities change, consumers may altogether eliminate purchases in certain categories, such as household services (cleaning, lawn care, snow removal), moving them from essentials, say, into expendables. Or they may substitute purchases in one category for purchases in another, perhaps swapping dining out (a treat) for cooking at home (an essential). And because most consumers become more price sensitive and less brand loyal during recessions, they can be expected to seek out favorite products and brands at reduced prices or settle for less-preferred alternatives. For example, they may choose cheaper private labels or switch from organic to nonorganic foods.

Surgically trimming the budget is easier to do during a downturn than in prosperous times. Tough times provide an imperative to cut loose poor performers and eliminate low-yield tactics. When survival is at stake, it is easier to get companywide buy-in for revising marketing strategies and reallocating investments. Managers can defy old mind-sets and creatively search for superior solutions to customer needs instead of relying on the next line extension. The challenge is to make well-defended, case-by-case recommendations about where to cut spending, where to hold it steady, and even where to increase it.

Assess opportunities

Begin by performing triage on your brands and products or services. Determine which have poor survival prospects, which may suffer declining sales but can be stabilized, and which are likely to flourish during the recession and afterward.

Allocate for the long term

When sales start to decline, companies shouldn’t panic and alter a brand’s fundamental proposition or positioning.

Balance the communications budget

During recessions cash-strapped marketing departments are under pressure to do more with less and demonstrate high returns on investment. Typically, the share of the advertising budget devoted to broadcast media shrinks, whereas the share that goes toward efforts with more-measurable results, such as direct marketing campaigns and online ads, grows. Point-of-purchase marketing—promoting price cuts or generating in-store excitement—also tends to pick up during recessions.

Streamline product portfolios

In the comparatively mild recession of 2001, marketers were able to get by with temporary, minor adjustments to production quantities and avoid wholesale revisions of prices or product lines. In a deeper recession, marketers can benefit by cleaning up their product lines and so should seize the initiative early rather than waiting to be forced into making changes.

Improve affordability

Slam-on-the-brakes and pained-but-patient customers in particular will be shopping around for the best deals. All businesses will increasingly compete on price.

Bolster trust

Worried consumers—even in the comfortably well-off and live-for-today segments—see familiar, trusted brands and products as a safe and comforting choice in trying times. Reassuring messages that reinforce an emotional connection with the brand and demonstrate empathy are vital.

Positioning for Recovery

Survivors that make it through this recession by focusing their attention on consumer needs and core brands will be strongly positioned for sunnier days ahead. However, companies must understand how people’s behavior may change following the recession so they will be able to offer products and communicate messages aligned with the needs of new consumer segments.”

Nic Shepherd About the author
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