Growth delayed but not indefinitely
The year 2020, which we had expected to show a return to growth for many South African brands, has not turned out that way. COVID-19 arrived unannounced, unexpected, and definitely unwanted. While the health implications became everyone’s initial priority, financial concerns soon overshadowed them as extended lockdowns saw global and local economies sink to unprecedented lows.
Some have said that the impact of the last few months has been more severe than that of the 2008 Global Financial Crisis and the Great Depression combined. I agree. In both of the earlier shocks, stock markets crashed, unemployment rates soared, credit flow froze up, and businesses collapsed. And we’ve seen the same this year. But it took the financial crisis and Great Depression three years to accomplish what COVID-19 managed to do in just three weeks.
Navigating the current crisis transcends normal marketing, business, and brand practices. As waves of disruption keep coming and business owners keep a hopeful eye on the horizon for signs of stability and recovery, your own success will depend on how well you steer back towards business as “unusual.”
As Churchill aptly said, ”never waste a good crisis”. A recession is not a time to slow down; it is a time to speed up. So, what should you do? Put plans in place to continue the business while protecting employees and customers. Recognize that every business in your industry is likely to take a hit, so how well you ride out the crisis will depend on responding to it more effectively than your competitors.
Tactically, decisions will need to be made on a brand-by-brand basis. There are some brands that will have little option but to curtail expenditures and batten down the hatches to ride out the storm, such as airlines, casual dining, and department stores. Survival will depend as much on debt load as brand equity, but once things start to return to normal, we can expect the stronger brands to bounce back faster, particularly if weaker companies don’t make it.
However, there will be many categories that will be relatively unaffected. If your brand is one of them, the question becomes more about how you should respond to the crisis. I believe that companies that are seen to put the needs of people first and bottom lines second may take a short-term financial hit but will likely come out stronger in the new normal.
So, what are marketers to do? The effects of an economic downturn will vary for different types of products and services, so it is vital to understand consumer strategies in order to find growth. During the Great Recession, strong brands regained their original share prices much faster than the S&P 500 in general. So, strengthening your brand’s connection with its existing and potential customers is vital, and to do that you need to remain focused.
Above all, you should reinforce the attributes that make you appealing and differentiated by concentrating on four things: your competition, your brand, your customers, and your communication. Focus on what makes your brand Meaningfully Different to build trust and affinity. Invest in above-the-line media and compelling content to maintain a connection. If you have a strong and successful brand, continue doing what has worked for you in the past. If your brand is in a relatively weak position, try systematically exploiting the strengths you have while addressing your weaknesses.
This year has seen South African consumers challenged on multiple fronts, and as the recession deepens disposable income has not kept pace with inflation. But in uncertain times, people need reassurance and look for it in the brands they trust. So, while disposable income may be constrained, that does not mean people will settle for just any brand. During recessions, consumers and marketers alike must make the best of a bad situation. While not every brand will cut marketing spending, those that do will find themselves at a disadvantage when the recession ends. If you can succeed in remaining top-of-mind for consumers, you should be well-positioned to take advantage of weaker competition when good times return.
Last, but not least, don’t do anything which might be construed as taking advantage of the crisis. Yes, you need to generate cash, but if your brand is seen to be doing so at people’s expense, their negative memories will long outlast the crisis.
At Kantar, we’re here to help you with every aspect of the task ahead. Our extensive local team has deep experience and insight into how South African consumers are reacting to the crisis, in good ways and bad. Throughout the year, we have kept our fingers on the pulse of commerce, including ongoing shifts in behavior that should have profound implications for the future.
We are seeing a changed South Africa, one in which people are building new relationships with brands at unprecedented speed. We can help you understand what’s working and what’s decidedly not in the market today. Should you pivot to e-commerce? Is it time to retrench or invest? Where can you safely divest and what’s essential to future success?
If you’re wondering about questions like these, please reach out to your Kantar contacts, or connect with me directly at Charles.Foster@kantar.com. And I wish you good luck—we could all use a bit of it nowadays, couldn’t we?