Look Past COVID And How Will Marketers Handle the Economic Train Wreck?

Look Past COVID And How Will Marketers Handle the Economic Train Wreck?
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In his latest column for B&T, Strohfeldt Consulting’s Robert Strohfeldt argues CV-19 could be the kick up the butt lazy marketers actually need…

A day doesn’t pass without someone commenting on how they, a brand, their mum, their dog – every bugger is best handling the Covid pandemic. I am not being critical. Many businesses acted swiftly and thought laterally, making the best of a bad situation. For quite a few, the changes will be permanent, adding new revenue streams, when (if), we ever get back to some normality.

“Neve waste a good crisis”, attributed to Sir Winston Churchill, though it is believed Machiavelli coined term. (A good analogy for impact spectrum of the pandemic).

Travel, hospitality, and accommodation have been decimated – the cost to an airline the size of QANTAS having around 95 per cent of its fleet sitting idle is eye watering.

How many years will it take to make up for the losses of this financial year? But not just QANTAS, there countless other businesses who have been smashed you won’t read about in your social media news feed.

And we are continuously reminded of the shit we are in.

No denying, we (as in the whole world) has not encountered anything on this scale of damage since the Spanish Flu hit in 1918 (It was even more deadly).

Thirty years of continuous growth (There was the GFC, which hardly dented Australia and from which the world recovered quickly), all sunshine, and flowers and then in a matter of weeks, everything and I mean everything, went to hell in a handcart. Whilst the focus is on Covid, not many people have looked up to the see the huge tsunami building behind it. And it keeps on building- the government will have to turn off the money taps at some stage. Those wonderful banks, who are about more than just money, are going to have the audacity to want their money to be paid back. (How rude!)

It is like a set of dominos, as a large group of people lose their jobs (even Deloitte put off around 800 people in the past week), they don’t have the money to spend on things they usually do – cars (whose sales have already fallen through the floor), restaurants, holidays. It won’t matter if travel is allowed as so many people won’t have the money to travel anywhere

The IMF forecast the world economy is going to shrink by levels not seen since the Great Depression. (Why is it called Great? Nothing great about it, not even good.)

A genuinely terrifying concern is these huge falls can reach a point where social order breaks down. (Western democracies are already suffering large divisions).

And Covid isn’t going anywhere Have a look at the world news (this may be a good time to stop just getting news from your social media), the pandemic is running riot.

Even if a vaccine is developed in the next couple of months (most unlikely), it will take a long time to manufacture and distribute worldwide. And the damage will have been done.

There is one significant benefit to this pandemic that will help us try and stay afloat when that tsunami comes barrelling through. Many businesses did become fat, dumb and lazy over the past 30 years. Yes, many industry sectors had their margins squeezed, but there were many new businesses in the tech sector who didn’t.

Since the pandemic hit, businesses have cut costs across the board. It is not all bad news for Alan Joyce. He has been wanting to trim down QANTAS for years. Though I do think he wanted to trim, not go full anorexic as he has had to.

So, clever marketers, how do you survive? (forget prospering unless you are an accountant in administration, insolvency, and liquidation).

Bob Miller, the former Director of Marketing at Toyota, has a great definition of marketing – “ensuring long term positive cash flow”.

We don’t talk much about Profit & Loss and cash flow. We are advertisers and marketers, not accountants. Making a profit is certainly a good thing, but it doesn’t mean jack shit until the money is in your bank account.

If a huge depression does wash over us, then there will be many instances where profit “evaporates”. In very tough times, one of your distributers may go belly up with not only your profit, but a decent chunk of your operational money.

In nature, only the strong survive. The individual is irrelevant. Survival of the species is all important and only the strongest individuals survive to pass on their genes to the next generation.

If a huge depression does hit us, the basic law (and savagery) of nature will play out in business and some brands and companies will not survive, no matter how clever they become at marketing and advertising. (Some have already gone to the wall, but this will only be the tip of the iceberg).

The brands that have focused most on brand strength and integrity will have the best chance. But that will not be enough, cash flow will be critical for survival.

I have never been through a full- on depression. (No one in marketing and advertising today has). There are 5 success stories from the Great Depression in the US that are still relevant today:

  • Floyd Bostwick Odlum: WTF are the they? Not they, who. A lawyer who believed the Depression was inevitable, sold everything he could to raise capital to invest in shares that fell to well below their asset value. He turned $39,000 into over $100 million in 15 years. In technical terms, that is a shit load of money even today, let alone back then. Not too late – you need assets to liquidate and still get good money and be a savvy investor. But picking stocks has not been part of our core skills set.
  • Movies: Escapism. Not so simple as just running movies – theatres had to run all sorts of promotions such as 2 seats for the price of 1, cut ticket prices by 50% and loads of promotions. Dish night is my favourite – every woman who attended was given a free dinner plate. There were cash door prizes, silver wear giveaways and probably the first time points (flybys were used) – each visit accrued points for a larger “prize”. It was a series of never- ending promotions, the Hollywood studios produced cheaper movies faster, and the industry got through’
  • P&G. They knew that even in tough times, people still need soap, washing powder etc. They scaled up their advertising and soap operas were born. Content, such a buzz word today, helped P&G through the Great Depression. In 1933 they produced their first radio “serial” and by 1939 they were producing 21 radio show, and they were TV pioneers – in 1950 they produced the first TV soap “The First Hundred Years”.
  • Martin Guitars. If you are a musician, the name will be more than familiar. (Kurt Cobain, Nirvana. His ‘59 Martin recently sold for $9 million) They cut costs, bringing in a 3 – day working week. They did NOT give high volume discounts, maintaining a strong relationship with the myriad of smaller dealers. (The 3rd P) They introduced new “less expensive” product but did not compromise on quality. No wood was wasted. Costing bugger all, they ventured into making violins and even wooden jewellery. Though mostly, high quality product (guitars) at “reasonable” prices and close to 100% of distributors, got them through.
  • Brewers: Production diversification. Prohibition was still in place during the Depression, which resulted in a drop of beer from 300 million gallons in 1921 to 86 million gallons in 1932. “Root Beer” was a result. Brewers started selling products as diverse as meat and milk and one brewer even opened a dance hall.

In 2020, the execution would differ, but these 5 approaches cover a fair spectrum of survival strategies.

Maybe that tsunami won’t hit, but if it does, the Chief Financial Officer will play at least an equal, in most cases a bigger role, in a company’s survival.

Brand purpose has come in for a fair shar of criticism – particularly on “political” or “Identity Politics” issues.

But if the big one does come, it is a fair bet that brands who are genuinely pursuing a purpose to help the many that would be negatively impacted, will benefit. Every little bit will help.

 

 

 

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Robert Strohfeldt

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