A stark look at the reality of job losses
Jan Gooding offers strategic planning advice for brands looking to navigate their way through the disruption
You don’t have to be an economist to have worked out that we are about to enter a period of high unemployment, the likes of which the UK has not experienced for 40 years. We are already being numbed by the daily roll call of job losses, replacing the rhythmic recording of deaths from COVID-19 we have endured since March. After the shock of a national lockdown, and in spite of the well-received intervention of furlough, the economy is now entering a period of massive recalibration.
The Bank of England forecast predicts 2.5 million people (7.5%) unemployed by the end of the year, although their own poll of business leaders predicts 3.5 million people (11%). That means the number of people out of work will at least double, and possibly treble, by Christmas time. That is a massive jump in a short timeframe.
Unemployment provoked by a health crisis is new
There will be many people in marketing today who have never experienced such a shock to the economy. And whilst it’s useful to look back at previous recessions for clues and inspiration, this period is going to be unlike any other. We are where we are not because of any economic cycle, or financial crisis, but uniquely because a health crisis led to the brakes being slammed on, hard.
The impact has caused all sorts of distortions, with simultaneous shortages of supply and both excessive or collapsed demand; and certain sectors being almost wiped out overnight whilst others have grown and prospered.
The divide between those with and without jobs will be stark
The UK is experiencing a ‘K-shaped’ recovery as we emerge from lockdown, something not perhaps seen as starkly since the Great Depression one hundred years ago. Those fortunate enough to remain employed, whilst anxious about the uncertainty, are likely to continue to see their fortunes improve. For instance, they are able to build up cash in the bank, thanks to restrictions on the supply of goods and services they can spend money on and saving money on the daily commute.
Whilst in stark contrast, those who lose their jobs will find themselves plunged into economic hardship and quickly wondering how they will pay the rent and buy food. They will be forced to draw upon their savings and find ways to economise.
It’s a complex picture for brands
On the one hand, the higher levels of savings and pent up frustrations in spending opportunities of those still employed will provide opportunities for brand growth. However, on the other hand, the realities of joblessness and continued uncertainty in other parts of the economy will cause inevitable contraction in spending and subsequent sales decline.
Brands will be compelled to revisit the way they currently segment their customer base and work out what adjustments to make to their offering.
Annual plans have limited value
For brand owners, this is unique and uncharted territory. The dynamics of each sector will be firmly placing them on different parts of the ‘K’ shaped recovery curve. For some industries, such as pharmaceutical, supermarkets, home delivery and online entertainment services, marketing plans can be set with sales growth targets. Many others, such as those in transport, manufacturing, retail and hospitality, will be faced with various levels of inevitable volatility and continued sales decline.
Given these circumstances, the notion of an ‘annual plan’ seems more ludicrous than ever. Dynamic planning, using a rolling twelve monthly view, must surely be the order of the day for the foreseeable future, with quarterly adjustments being made as the trading picture emerges.
Determination to grow market share
Brand affinity, consideration and loyalty will be part of the dynamic to help retention, but consumers will be far more alert to the price they pay and looking for reassurance on value."
The mindset of marketing leaders and strategists should remain one of trying to increase market share, even if sales demand is falling. There will come a time when the shock of lockdown and the adjustments of a re-structuring economy will work its way through the system, and growth will return.
Those brands who have managed to win a bigger share of the available customers will be in the best position coming out of recession to capitalise on that strong franchise.
The price of everything will be scrutinised
Price sensitivity will be acute whether in business to business customer relationships or amongst consumers, and margins will be under pressure. Many customers will be looking to take control of their finances, whether they have a job or not, and will be more easily persuaded to switch brands for small gains in cost efficiency.
Brand affinity, consideration and loyalty will be part of the dynamic to help retention, but consumers will be far more alert to the price they pay and looking for reassurance on value.
Helping customers to control their outgoings
I was working at British Gas in 2009 when the financial crisis and subsequent recession hit home. We had the extraordinary challenge of presiding over a rapidly rising wholesale market, which resulted in a 34% increase in retail gas prices. Energy is a big part of household spending, and at the time British Gas was the market leader with the most to lose.
Extensive consumer research revealed that at a time of great uncertainty, with other commodities like fuel also rising, people were looking for ways to take control. British Gas making two year ‘fixed price’ contracts available to their existing customers was instrumental in reducing churn.
If ever there was a time for experimenting with different propositions and being open to changing course quickly, this will be it.
Empathy without substance is a waste of time
Tone of voice will be important for every brand. People will be worried, but they still want to enjoy and appreciate the good things in life, be entertained and have the opportunity for treats and moments of escape from the harsh economic realities.
But brands won’t get away with simply sending messages of empathy and understanding, they will need to be matched with real actions to demonstrate it.
Escaping the internal noise
One of the most consistent challenges for the marketing function will be the distraction of internal restructuring and a general air of pessimism within their own companies. It is hard to see colleagues lose their jobs. It is disheartening for management to find so much of their time and energy necessarily focussed internally on reshaping the business, rather than externally on market dynamics and brand equity. This time it will be even tougher, because so many people are isolated and working from home, away from the support and encouragement of colleagues.
It’s going to be a bumpy ride ahead. Even as we learn to live with the pandemic, there is the Brexit transition still to navigate. Maintaining a mindset of optimism and flexibility is a choice we can each try to make as we work our way through this extraordinary time.
Jan Gooding is one of the UK's best-known brand marketers, having worked with the likes of Aviva, BT, British Gas, Diageo, and Unilever. She is an executive coach, the chair of PAMCo, Given (London), the president of the Market Research Society, and the former chair of Stonewall. She writes for Mediatel News each month.