09 Aug 20 Insights into actions and strategies to fight the Covid-19 crisis
A recent survey of senior executives at companies around the world found very similar reactions – regardless of company size or geographical location. The immediate and obvious response has been to cut costs and ensure liquidity, even while maintaining operations as best possible.
Cost cutting has taken several forms especially laying off workers or cutting salaries, and slashing discretionary spends. Interestingly, more than half the companies surveyed have substantially reduced marketing spend in the last quarter.
This appears logical given that demand has dried up in most sectors, thanks to the lockdowns and economic slowdown in all major economies. After all, why spend on marketing if no one is ready to buy?
These extreme measures are a result of the significant uncertainty that surrounds the pandemic. In our survey, barely 15% of respondents believe that we will return to normalcy before 2021. And this runs across sectors and industries.
It’s likely that uncertainty has further increased since our survey was conducted (in June and July), given the recent spikes in Covid-19 cases that several countries have witnessed. Governments have been forced to (again) curtail economic activity after attempts to open up led to rapid increases in cases. All this does not help businesses plan for the future – and will probably lead to more of the same cost cutting measures.
Yet, this might not be the best thing to do. Cutting marketing spend even further might imperil future prospects – companies need to start thinking of the future, and how they will go beyond mere survival.
Interestingly, CXOs overwhelmingly believe they have to re-think and transform their businesses over the next few quarters. For some, this involves re-jigging supply chains – to ensure more reliable supply and lower costs. We might see lower dependence on China (accentuated by the negative mood over China trade in several countries), more diversified supplier bases and local sourcing. Forward thinking companies will start spending on procurement research and supplier diligence.
The other big need is around technology or digitalization. In a world that has been forced to curtail physical interactions, the importance of digital customer interfaces or automation or more robust logistics and supply chains, has been accentuated and accelerated.
However, the most important priority for CXOs is to understand changing customer needs. This is true of B2B and B2C companies, as well as those in manufacturing and services. Many of the old assumptions will no longer hold true. Customers are not only changing what they buy; but how they buy, how they make choices and how they choose suppliers.
Companies that invest in understanding post-Covid-19 customer needs will gain market share and have a chance of coming out stronger. And the sooner the better – as the results of this research might well require a complete overhaul of products or services, supply chains and delivery mechanisms.
So even as it’s understandable that businesses cut marketing costs to conserve cash, some parts of the marketing budget – especially on better understanding of customers and their evolving needs, may turn out to be money well spent.