Observations from the front line

Retailers are typically in a state of demand shock, either positively or negatively. In both scenarios, COVID has acted as a catalyst for a new energy, driving a refocus on priorities and an examination of supply chains, operational structures, procurement and commercial arrangements. The emerging retail trends and consumer shopping behavior brought on by the pandemic has challenged the status quo.

We have seen this new energy trigger some amazing things – we only have to look at the examples of vacuum cleaner manufactures and F1 teams designing and building ventilators in record time. Complex supply chains repurposed to produce PPE or field hospitals being built in a matter of weeks. But procurement functions within retail businesses need to adapt to this rhythm too, ensuring they are nimble and agile enough to support retail businesses at this unprecedented time, as they redefine their brand and marketing approach.

History books show us that brands that ‘go dark’ during a downturn will lose ground and struggle during the recovery phase. Industry reports show that 80% of brands intend to reduce their advertising budgets in response to the crisis, with more than half planning to cut budgets by more than 20%. This will clearly vary depending on which type of demand shock is being experienced. Either way, it has meant that brands have quickly had to adapt to this new drum beat, which puts an increased focus on optimizing every marketing pound invested, working, or non-working.

Annual ad agency SOW’s look considerably different now than they did at the start of the year. Gone are the activations around the Olympics and Euros in what would have been a bumper summer for advertisers. Brands have also had to reexamine creative campaigns and content based on the tone, ensuring it’s appropriate and sensitive to the current climate. Negotiating revised scopes of work can be challenging in any circumstances, add in the pressures and threats that this crisis brings, and it adds a further level of focus and sensitivity.

Along with creative scopes, 2020 production plans and schedules were ripped up long ago now. With live actions shoots off the agenda for the foreseeable, brands have quickly had to get to grips with how they produce content in the new normal. There have been great examples of how existing content has been repurposed, the archive vaults being raided, and bringing a cost-effective solution to filling content gaps. Then there’s the use of CGI, animation/design, user-generated content, and the production of simpler executions using only graphics.

Rewriting the brand playbook

Requirements have changed, and with this, brands should be reviewing their production supply base. We’ve been reviewing our clients’ current production partners and processes, evaluating whether they have the right relationships and structures in place to produce content in this new environment. It’s unlikely that existing production suppliers and methods for big TV spots will be the optimal solution for the needed responsive and dynamic content.

Now more than ever, understanding what activity is moving the dial and driving business outcomes is critical. As a result, we’ve seen an acceleration and re-prioritization of marketing and media measurement focused initiatives within our client base – CMOs were already under increasing pressure to justify marketing investments and channel selections to their Board, the current climate bringing a sharper focus given the pressures and reductions on budgets.

We’ve been supporting our clients in evaluating their marketing mix evaluation tools and advanced analytics solutions, ensuring they have robust measurement and optimization processes in place to reach the right consumer, with the right message, in the right channel to drive the right outcomes.

The marketing agency sector is in the brace position. In the face of declining/disappearing budgets, the marketing services industry is on red alert and preparing itself for the road ahead. The global holding companies have acted swiftly with pay cuts, redundancies, deferred dividends, and cancellation of share buybacks – all measures to improve their liquidity to weather the storm. The independent SME agencies are likely to be those hit hardest, without the umbrella of a network to help shield them. There will be consolidation, acquisitions, and there will be casualties.

Those marketing functions which work with their procurement colleagues to have robust relationship management governance and processes in place will be best prepared to identify risks and opportunities in their marketing services supply base – allowing them to plan, react and minimize impact. A simple measure like a temporary shift in payment terms to a small agency in the current climate could make all the difference.

We’ve supported many of our clients take the opportunity to prioritize a review of their agency ecosystem, ensuring they are in the best possible shape with the right operational structures and agency partners on-board, with optimal commercial models in place. This is reflected through the recent WFA survey of global marketers, which showed that 92% agree that this crisis will have a long-term impact on the way they operate, with 84% agreeing that this is an opportunity to ‘rethink everything in terms of our marketing organization’.

Keeping up the tempo in the future

This crisis has tested the resilience of supply chains like no other event. When businesses are reviewing their supply chains, and when marketing is pushing investments to online channels, they should take the opportunity to expand this review to their media investments. The issue of transparency in digital media trading has been on the agenda for some time. It’s something we’ve been supporting clients on for many years – now is the time to reassess practices across the board and ensure the end-to-end brand is resilient

Marketing procurement functions need to ensure they are aligned with new brand priorities and evolving industry landscapes, as in the retail environment, making sure they are in step with their marketing stakeholders to face the challenges ahead together.

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