Whether you are in China or elsewhere, I’m sure you can agree with us that the start of 2020 really gave us a wake-up call. A shake-up on what we take as conventions and norms of the world around us. It disrupted perfectly crafted and synchronised global processes, as well as supply chains and systems. It asks us to re-imagine, reflect and adapt to the changing consumer habits but even more so it teaches us.
There are hundreds of articles and research about the effects of COVID-19 to the Chinese economy, brands and consumers. We’ve taken the liberty to review some of the most comprehensive and thoughtful write-ups to create our own insight and conclusions.
Learning from historical data back in 2003, from the date of when SARS new infection rates reported 0 to the date of announcement of full recovery there was at least a one and half month’s gap. Therefore, we anticipate that for COVID-19 would happen sometime at the end of Q2 or beginning Q3 as we are still experiencing an average of 300 new infections daily.
With this scenario in mind we are likely to experience the following conditions;
Short Term – Frugal Fatigue
A phenomenon that happens when consumers get tired of pinching pennies and delaying gratification. Extreme frugality can often lead to splurging. The months that we have been cooped up at home with only the satisfaction of buying egg mixers, exercise equipment, and gaming consoles on JingDong amongst other boredom curing items can only provide minimal levels of support on our consumerism addiction.
Consumer confidence in China was at its peak in November 2019, according to OECD. Although COVID-19 is impacting on the luxury category, we anticipate a round of rebound spending on premium and luxury brands even before full recovery as consumers make up for the lost time and begin to reward themselves.
The following chart shows the increased talkability and WOM Exposure a selection of luxury fashion brands experienced during different stages of the outbreak. Once the strict quarantine rules loosened and people returned to work, we can see an increase in appetite for luxury brands.
Obviously, not everyone is going to be buying a Hermes bag so this copious spending will be distributed across beauty, cosmetics, fashion and food & beverage categories. Industries such as travel and outdoor leisure activities (fitness, cinema, performances, exhibitions etc.) should make a swift recovery in H2 under the condition that globally the overall COVID-19 situation stabilises at the same pace as China. These brands will be good candidates in co-marketing opportunities as they would be looking to maximise their exposure and enhanced experience to regain consumers attention.
Short Term – Desire for a sense of normality
According to Kantar’s recent research, the top 5 desires of consumers post-outbreak all include going outside and getting on with daily life, whether it is dining outside, going shopping or simply sitting under the sun. The outbreak seemed to have sparked a new appreciation for daily and mundane activities such as daily commute in public transport, alfresco dining and window shopping. This gives the consumer a visage that old is new again and an opportunity for brands to attract and recruit consumers through novel promotions and activations. Pop up stores, roadshows and experiential once again will become a key component of the marketing toolbox in the back half of 2020.
Medium Term – Be like water
Brands with higher brand awareness and better perception are more resistant against downturns and crisis. Let’s use the restaurant business to simplify it. Think of brand awareness and perception as a restaurant’s cash reserves, stronger brands have more cash reserves and more loyal patrons thereby making them harder to fold in times of lower consumption and demand.
It is not to say if you are a relative spring chicken in the business that you won’t survive. Here you have the advantage to adapt. This means fluidity will be key here. We don’t mean just in financial terms, also in the way you mould and shift your product, service and even your customer experience will all form a lasting impression on the consumer. It might turn some new consumers and lapsed consumers into regular patrons.
The following chart shows the increased positive impression of a selection of brands who have actively adapted to the changing conditions whether through pivoting their product & service or shown their support in relevant marketing efforts and campaigns.
Long Term – A renewed focus on building brands, comms imperative and content
Brands with lower reserves will need to build up their reserves again post-outbreak to ensure they are stronger in the future. However, the knee jerk reaction is to chase short term sales to make the recovery less painful, jumping on popular sales tactics such as live streaming, influencer and IP marketing with no real added benefit to the brand. This will land your brand in a similar situation and at OMD we believe in building stronger brands to help combat any lull you might face in the foreseeable future.
This means changing the formula temporarily and shifting the focus of your marketing. While 2019 was all about commerce, community and content, under the new light of 2020 we need to stop putting sales as driving purpose of the campaign instead pivot to craft campaigns that change behaviours or perceptions and sales will naturally come as a result.
Below is a model of what we’ve seen to form the basis of new base models when crafting winning strategies and communication ideas for your brand.
The melting pot of these 4Cs will deliver against the killer creative idea that is needed to both deliver you short-term sales and build long-term brand.
Long Term – Highway to digital transformation
The consensus and sentiment amongst the community to date remains positive. Although COVID-19 is making a dent to the usual cheerful beginning of the new year, it isn’t going to delay or change the course of macro consumer and economic trends that China has been building up to for the past 5 years. Some would agree that the outbreak, in fact, accelerated what is inevitable realities and bringing them forward a couple of years. Brands need to embrace these new realities and prepare to upgrade their product and service to suit the changing needs of consumers.
Here are some tools to include in your digital business toolbox
- Personalised service concierge – 1 to 1 customer service
- Always-on support centre that supports self-serve options
- Differentiation of experience between owned channels such as WeChat Official Account, eCommerce stores, Mini Programs (Ali, WeChat, Douyin), Douyin account
- Integration of WeChat corporate and DingTalk into the CRM systems and internal corporate communication systems
- Building your own data lakes to collate, combine and optimise your omni-presence
The road to recovery is going to be a battle in itself. After looking at a wider range of signals and having clarity on how different factors will impact the short & long term, it will allow time and space to plan. This means businesses can implement and adjust the right strategies for them. To do this we need a more agile and frequent feedback loop to understand what’s working and what isn’t. This and more empathy are key factors in getting through this difficult time.