The industry was projecting potentially double-digit price increases depending on the market and channel. Then came the coronavirus.
Agencies are now looking at the possibility of lowering pricing forecasts as the market reacts to the uncertainty of brands’ ad commitments. Total ad revenue is predicted to decline in the mid-teens in percentage points this quarter, with digital advertising revenue expected to shrink 10%, according to the WSJ.
Coronavirus Impact On The Media Landscape
All media types are expected to be impacted by the news and anxiety surrounding the coronavirus. Advertisers face uncertainty in consumer behavior and the resulting impact on business. Hit hardest were companies with a presence or large ties to China and companies that deal with more discretionary or luxury items. The looming question is what to do with ad budgets and media campaigns and what will become of pricing predictions and selling seasons.
National advertisers are looking at an uncertain upfront selling season, one that’s poised to be a wild ride. What was originally predicted to be a strong upfront with across-the-board double-digit price increases could turn out to be more of a buyer’s market if skepticism continues and key categories pull back ad spend. This move could send the scatter marketplace into certain pricing volatility dependent on consumer confidence.
Travel companies, such as airlines and cruise lines, have already begun to cut back on spending and more industries are predicted to follow suit. Pharmaceutical and technology companies, typically big players in the upfront, could likely be next as well as companies dependent on China for their supply chain. And the longer the uncertainty of the coronavirus lingers, consumer behavior may begin to take a toll on brands across all categories.
Digital channels are already feeling the impact of early ad spend softening, particularly from travel and tourism. The travel industry is the 6th largest online ad category and the most search-heavy ad vertical with 54% of total digital ad spend on search, according to MediaPost.
Outdoor advertising may see an impact in the long term as a result of potential loss of foot traffic for brick and mortar stores.
What Should Advertisers Do To Prepare?
Bottom line, there is tremendous uncertainty on the impact from the coronavirus and it’s too early to make firm predictions on the impact to media landscape. That being said, there are ways to be actionable. As the old retail adage goes, “hope for the best, but prepare for the worst.” Here are some preparations and moves to consider during these uncertain times:
- Evolving Shopping Behaviors – If consumers get too scared to go out, an influx of ecommerce activity is likely. Retailers with physical stores may need to pivot their focus on ecommerce and direct consumers to that buying opportunity. Make mobile shopping easy and enjoyable to drive traffic and sales. Don’t waste customers’ time, offer ways to keep your buyers informed as to what’s in stock, delays or any incentives to buy online vs. in-store. They have enough to worry about, chasing down their purchase shouldn’t be one of them.
- Flexible Media Spend – Leverage flexibility to stop or pivot messaging as needed, especially for discretionary items. If people aren’t interested in your product right now, you can save or redeploy your investments. The same holds true for geography and an understanding of areas that have been hit hardest. Investigate ways to be flexible and stop advertising in these areas or change your message to one of support instead of a hard sell.
- Firm Media Investments – In some cases, advertisers may have commitments that they are locked into. Think about these as opportunities to breakthrough, especially if competitors are pulling out. A simple messaging shift to show support can pay off in the long run. If the consumers can’t purchase your product or visit your store, what can you do for them? Is there a way to connect with them while they are homebound with entertaining or engaging content? Think about how your brand and products can help consumers and build a relationship which will pay back when things are back to normal.
- Focus on High Valued Customers First – They generally make up a large portion of your sales and are most loyal. New customers may not be ready to adopt new brands right now.
- Take Note of Competitors – Are there any instances where your position and supply chain are stronger? Capitalize. People will still need to buy certain items, and if you are able to get into their consideration or purchase set, that increases the likelihood of it happening again down the road.
Act calmly, but always monitor the situation and be prepared with plan scenarios to take advantage of the changing market and business conditions. There might even be an opportunity to take advantage of favorable pricing.
Only time will tell what impact COVID-19 will have in the U.S., and while we hope it’s minimal, it’s important to be vigilant, flexible and ready for anything. Empower is ready with recommendations to assist our clients.