Scott Moorhead, CEO of marketing agency Aperto One, looks at the challenges and opportunities in marketing and advertising for the rest of the year.
Marketing and advertising, like all industries, is facing a number of unique challenges as a result of COVID-19. We walk through several considerations that different brands are encountering in the UK and beyond.
First and foremost, advertising spend has been dramatically cut. Q2 was down over 90% in some sectors and 2020 is forecast to be around 50% down YoY. There are many factors that have contributed to this, including:
- cost saving (marketing often goes first)
- uncertainty of how to message (what is appropriate in the current environment?)
- differing strategic approaches (spend through a crisis and maintain brand share of voice versus 'cut cut cut')
- supply chain issues (can products be supplied?), and
- availability and quality of content (eg no football).
In 'normal' times, the amount of money spent on advertising in all its forms is only a small percentage of the average marketing director's priorities. However, when cuts are demanded, it changes everything – not just in how consumer communication needs to adapt, but also how this new focus on efficiencies results in far more interest from the CFO and procurement teams. Marketing must always justify its role, and ironically, the less money in the department's budget, the more eyes focus on that team. There are few organisations in which marketing is sacred.
The budget fluctuations also reach further into the supply chain and impact key suppliers (creative agencies, media agencies and the media owners). A major issue that we are currently helping our clients with is how to work with these suppliers over the next six months. Most are reviewing their contracts, their commercial relationships, and the role they will play in the near future.
There is a balance to be found between passing on cost saving in this area and maintaining key partnerships. It is a sensitive area that even the most seasoned procurement teams are struggling with. This service industry has always been hard to quantify, and the calculation is often more complex than the hard goods or even time-based work from other suppliers.
However, it is certainly a sensible time to revisit all these areas, explore more progressive partnerships, and put in place advanced service agreements and remunerations models that most accurately reflect the work and support that is required both now and in the future.
So how are different brands reacting?
Obviously, there is little consistency. In early March 2020, the majority of brands did look to pause and adopt a 'wait and see' approach. However, as the situation progresses, it is unlikely that marketers are best advised to keep waiting. It is a time for decisive actions. While it is not just about bravery, acting quickly will be beneficial. Marketing teams need to engage their senior leadership, including the CFO, and make a case for their strategy.
The money
Due to the way that TV is traded in the UK, Q2 pricing has reduced to its lowest price for many years and those who are investing have found great value. However, ITV and Channel 4 have seen their revenues dip by 50%+ in May 2020. This is frustrating for those concerned, as audiences are dramatically up on TV, as well as across other mediums. Obviously, cinema, print and out-of-home have suffered most, but nobody is winning.
We do not expect that Q3 will bounce back too much. It is traditionally the quietest quarter in advertising and, strange times or not, it is not a period during which products tend to receive a lot of marketing support.
Q4, on the other hand, could be the most interesting last quarter for over a decade. A possible scenario is that money will return as brands attempt to recover or panic. This alone is not a bad thing, but we may end up in a cluttered market in which we see supply issues for key advertising inventory resulting in pockets of price inflation.
Getting your brand message right will be difficult. The purist argues that all brands need to stay true to their position and voice, but the context is so different and will continue to be so for some time yet. Some will go wrong, but we should expect others to demonstrate the true power of advertising by getting it right.
For now, we advise all brands to get their house in order as soon as they can. Creativity is built from the foundations of the right contracts and commercials. These need to provide both hygiene through trust and transparency, as well as arrangements that drive reward and the right behaviours.
Aperto One helps marketers build smarter partnerships with their media agencies. We are proud to support clients in the following areas:
- agency relationship reviews and management
- media agency pitches
- in-house media (talent, systems, and structures)
- commercials and contracts
- learning and development
- digital and technology
- agency model development, and
- media trading and audit.
We have worked alongside Taylor Wessing on numerous projects over the last four years; please get in touch if you would like to discuss how Aperto One can support your business.
