With the DOW down 30% and the majority of the population self-isolating, many brands are focused on adjusting their messaging and pulling back or postponing media spend. It’s always critical to have messaging that reflects culture, and we applaud some of the great ideas already in-market. The media portion is more tricky, however. Do we cut? Do we push back? Do we rebalance the mix? Let us guide you through these choppy waters!
Media Consumption Patterns & Media Mix Decisions
Overall, media consumption is soaring. A high-level view of people’s current habits while at home shows substantive lift in many media-related activities.
The implications for overall media strategy right now:
TV: Higher audience numbers will help pricing, which may already be favorable due to pull-backs, making now a great time to be investing. This includes OTT / CTV.
Digital & Social: High audience availability but programmatic may be scaled back due to brands wanting to avoid contextually sensitive environments. Unlikely to be much change in pricing. Hold the line.
OOH: Entertainment spends twice as much on OOH than the average category, and restaurants spend three times. Because these two categories have scaled back due to the current climate, there will be plenty of inventory — but we don’t recommend this channel right now.
With regard to Radio and Podcast, first let’s turn to radio. The most up-to-the-minute research (below) shows that 35% of people are listening to radio for local coronavirus news, and about 30% are reporting more radio listening overall.
However, this is likely offset by reduced drive times. Our outlook for the immediate future of radio is neutral, and should be judged on a case-by-case basis.
For Podcast, as usual, the data is a little murkier. The listening seems to depend very much on genre. Some in the categories of general interest, leisure, and entertainment are reporting reductions in the 10% – 20% range. News, however, is doing unsurprisingly well. Other categories that also seem to be doing ok are health and fitness, wellness, and even some sports (we gotta get our fix somehow.)
But how are these channels working from a performance standpoint? Below is an analysis of recent performance on Radio and Podcast across a representative sample of our client base.
You can see that as the coronavirus outbreak grew in seriousness, radio and podcast performance was not impacted, with strong overall client performance the weeks of 2/24 and 3/2. It did dip down the week of 3/9, but to no lower than it had been in February. It dipped again last week as social restrictions came into fullest force, but by no means to an unprecedented level. (At Oxford Road, we have acted promptly across our client base to refresh messaging in alignment with the current climate).
In summary: performance is still holding up well among DTC companies as far as we can see. Of course, essential goods are seeing greater success than luxury, and supply chain challenges are preventing some otherwise viable businesses from benefiting in this moment. Much of radio (including streaming), TV, and many podcasts are seeing significantly higher audience numbers than usual right now. There is no reason to overreact to current conditions. What’s more, many networks have excess inventory and are cutting unprecedented deals, creating a counter-balance for consumers’ hesitation to spend on non-essential makers’ goods and services. These advantages compound, of course, for advertisers still in the game — better pricing x higher audiences = more effectiveness.
Spending the Right Amount
How much should you be spending overall? Much of the budget-setting question depends on your time horizon. If you are just looking at next week or this month, of course you’ll want to cut deeply. Your conversion rates for non-essential product sales are probably low. However, setting your budget requires thinking about marketing’s contribution to your business in the medium and long-term, not just the short-term.
What do we know about how budgets impact business performance beyond the immediate future? The best approach is to think about budget in terms of share-of-voice (SOV) rather than a dollar figure. How much your competitors are spending clearly has a large impact on how much advertising can grow your business, and SOV is best understood in terms of its relationship to your market share. The chart below demonstrates the essence of growth as it relates to SOV, a principle which has been demonstrated by hundreds of case studies stretching back decades:
Reducing your budget means you are more likely to lose share in the medium to long-term (defined as 6 months plus) future. It also means you will have lower awareness, recall, and top-of-mind consideration when the market bounces back, making it harder for you to regain traction quickly.
Even maintaining your budget at a time when others are cutting can be a very effective strategy. This is simply a mathematical truth — if the rest of the market cuts budgets by 20%, your SOV will increase 25% without you taking any action at all. If you also consider the extra efficiency you can get with your media dollars when deals are available, these advantages are even greater.
Also consider that maintaining a presence in the market helps project an image of corporate stability and confidence at a time when it’s sorely needed. You also have less noise among your competitive set, making it easier to distinguish or (re)position yourself in the market. Zigging while others zag is a horribly overused and cliched expression, but when applied to your media thinking, it could set you up for meaningful success in the future.
The father of brand planning, Stephen King (not the one who predicted our current crisis in a fiction novel), conducted an extensive analysis of advertisers’ response to difficult economic times by tracking increases, decreases, and stability in advertising budgets. In ALL cases, there was a decline in short-term ROI. At Oxford Road, we believe this cannot be avoided in most categories. The main difference between these cases was that those who decreased their investment saw subsequent market share loss, while those that maintained or increased budgets increased market share (i.e. the latter group were in a stronger position when markets recovered).
The key takeaways here: channels like TV and certain pockets of audio are positioned to perform strongly at this time, and advertisers that can stay in the market will take advantage of great deals, consolidate their position, and drive more meaningful mid-to-long term growth than they’d be able to do at any other time. Of course, these are difficult decisions to make, and we want to be sure to focus our clients’ thinking on the needs and imperatives of the business, not just momentary panic. Our job is to ensure they are getting the best possible advice to navigate these times and come out ahead on the other side.