Life After Lockdown: Transforming to the New Normal
Defining the Landscape/Environment (Present and Evolving)
Now that the COVID-19 pandemic in the US has officially passed the seven-month mark, it seems perfectly natural to begin thinking about and planning for the next “normal.” However, in doing so it is critical to understand that any recovery or reemergence from this unprecedented crisis will be as fluid and diverse as the effects of the pandemic itself.
Looking at recent and trended data, the severity of the outbreak and the resultant economic impact has varied considerably from region to region, state to state, and even county to county. As many people know, the number of daily reported COVID-19 cases peaked much sooner in states like New York and New Jersey (see graph below), while other states like Texas and Florida experienced spikes several months later. Still other areas such as Pennsylvania, Ohio and Maryland have seen reported cases remain at relatively steady levels throughout most of the outbreak period.
Similarly, the economic impact of pandemic lockdowns has varied considerably from region to region with stark differences evident in the higher unemployment levels reported for states like Hawaii and California, which are more heavily dependent on the hard-hit travel and hospitality industries, compared to states such as Maine, Nebraska or South Dakota (see graph below).
Consumer spending during the pandemic has also fluctuated widely, with expenditures being driven by factors such as overall consumer sentiment and the specific demographic makeup of a given area (see graph below). While it is true that lower-income households have felt more of the impact from the COVID-induced recession due to greater vulnerability of job losses and smaller emergency savings, more affluent households have made the biggest spending cuts by severely reducing discretionary purchases.
Looking at overall consumer sentiment, multiple research sources indicate that most Americans still believe that it will take some time – more than six months – for the U.S. economy to recover, and a majority feel that a rebound will occur gradually over time even after coronavirus restrictions are lifted. But the restrictions have already had a clear impact on consumers. The extended duration of the quarantine has upended lives and livelihoods, altering people’s daily routines and challenging ingrained behaviors – with some of these changes likely to become permanent. In fact, McKinsey & Company has identified five key ways that the COVID-19 pandemic has affected consumer behavior for the long term.
1. Shift to Value and Essentials
An increased focus on value can be traced directly back to consumers’ expectations about the duration of the pandemic’s impact, and the slower pace of the eventual recovery. Faced with declines in incomes and savings, many Americans remain uncomfortable making major purchases, choosing instead to just buy the essentials. Furthermore, even many stimulus payment recipients indicated that they had spent that money on necessities such as food, rent/mortgage payments, health/wellness products, or simply added the funds to savings.
2. Flight to Digital and Omnichannel
While growing steadily before the pandemic, the COVID lockdown became the underwater earthquake causing a tsunami-like wave toward online shopping across nearly all product categories. First-time shoppers flocked to eCommerce options out of necessity, while experienced online customers increased their spending and purchase frequency. But the ‘flight to digital’ was not turbulence-free as consumers did encounter product availability and timing issues with online and home-delivery shopping providers. Despite these bumps, most shoppers considered their online shopping experiences in very positive terms, boding well for repeat usage and continued growth.
3. Shock to Loyalty
Consumers are making changes to a variety of shopping behaviors at an incredible rate. McKinsey’s COVID-19 US Consumer Pulse Survey from August indicates that three in four Americans have experimented with a new/digital shopping method, a different brand, or a different retailer during the crisis. Brand loyalty is particularly threatened with nearly 40% of consumers saying they have used a different brand. When switching, shoppers have shown a preference for familiar, trusted brands as much or more than trading down to private label or stores brands, with availability and value being the top reasons triggering the change in recent purchase decisions.
4. Health and ‘Caring’ Economy
Even as restrictions have been lifted allowing more businesses and public spaces to reopen, consumers remain cautious and health-conscious in their behaviors. Data from an ENGINE Insights survey from the last week of August indicated that nearly three-quarters of all people wear a mask without fail while out in public. When choosing where to shop in person, enhanced cleaning and hygiene practices, the installation of protective shields, and the availability of contactless payments and pick-up or delivery options have become important considerations. Consumers also want to know that companies are taking steps to help their employees remain healthy and cared for as well.
5. Homebody Economy
The home has become the center of the universe for many people during the lockdown. As a result, people are spending more time on domestic activities including cooking, baking and home care/improvement. Home is now where people play and exercise as well, and they have invested in purchases – fitness equipment and online entertainment platforms – that allow them to engage in these activities without the need to leave their house.
The home has also become the virtual office for many more people. Data gathered by Stanford University in July estimates that a staggering 42% of the US labor force is working from home full time. More significantly, there are indications that this shift may become permanent for a sizable portion of this audience moving forward. In their Survey of Business Uncertainty conducted in May, the Federal Reserve Bank of Atlanta, Stanford University, and University of Chicago Booth School of Business is predicting that the time, or number of days spent working from home, will triple after the pandemic ends, and the share of full-time employees operating entirely from home will grow from just 3% to more than 10%.
When choosing to venture away from their homes, consumers remain somewhat concerned and even downright unwilling to engage in certain public or outdoor activities. Research conducted in September by ENGINE Insights indicates that just 17% of people are willing to use public transportation, while only about 20% feel comfortable visiting fitness centers or movie theaters. That same study shows that less than one-third (30%) of people would be willing to attend a large outside event such as a sporting event, concert, or festival. And even fewer, just 17% would be willing to attend those same type of events at an indoor facility.
Impact on Media and Marketing Conditions and Decisions
So, what do these changed (and still evolving) consumer behaviors mean for advertisers? What is the impact of these adjustments in lifestyle on the day-to-day consumption of media? And perhaps most importantly, what challenges and opportunities do these changes present for brands, advertisers, and agencies? To answer these difficult questions, we find it is helpful to break down and group these daily patterns of behavior. Doing that, we see most shifts in media consumption can be linked back to one or more of three simple changes in daily routines or behavior: People are commuting to work less, people are engaging in out-of-home activities less (and differently), and, as a direct result, people are home more.
People are commuting less
Let us start with the concept of the daily work commute. Whether due to temporary layoffs, long-term unemployment, or a shift to a work-from-home (WFH) model, many people simply no longer have a separate physical workplace to go to during the day. As referenced earlier, over 40% of the US labor force was working from home full time at the height of the pandemic, and sources are estimating that permanent WFH figures could either triple or quadruple as a result of the COVID-19 pandemic. While these are incredibly large and important estimates, do they translate into corresponding material changes in commuter patterns?
According to Geopath, daily automobile travel in the United States has mostly rebounded from the huge drops seen in March and April, with miles driven per day plateauing at around 90% of the numbers observed prior to COVID-19 restrictions. However, mobility estimates vary considerably by region, and remains much lower in major metropolitan areas. Studies show that rebounds in traffic volume for many cities have not been met with comparable increases in travel times. For example, in an analysis on post-COVID commuter growth, INRIX found that during typical evening commutes in New York City, travel times on interstates and expressways increased only 9% even as total trips grew by roughly 40% in the summer period. Additionally, they also reported increases in travel speeds in MSAs across the country – an indication of fewer vehicles on the road and less miles traveled (VMT) during peak drive periods. During AM commute periods, San Francisco and Los Angeles continue to see the largest speed gains, while during the evening rush hour, Houston, Philadelphia, Tampa and, again, San Francisco each show a substantial increase in speeds at 5:00PM.
These altered commuter patterns translate directly into fewer potential consumer eyeballs for many types of out-of-home (OOH) ads. In fact, data from Geopath’s Impression Variation analyses indicates audience delivery is down approximately 10-20% in most regions, with figures varying considerably by market and location. For example, as of 8/31, bulletins and posters in the Philadelphia MSA were delivering 85.7% and 86.3% of impressions, respectively, while nearby metros Harrisburg and Pittsburgh were much closer to normal impression delivery at an estimated 95% variation index. Like Philadelphia, Boston and New York both had an 85% variation index; while Miami, Omaha and Los Angeles were all lower, ranging from 75-80% of normal weekly impressions.
Outdoor is not the only media channel impacted by a decrease in commuter traffic. With nearly 70% of radio listening occurring outside the home and primarily within cars, less time spent commuting has meant less of an opportunity for listening to terrestrial radio stations. At the height of the lockdowns in April, AM/FM radio listening had dipped to nearly 70% of pre-pandemic norms. However, as cars continued their return to roads throughout the summer months, radio audiences have risen to about 90% of pre-COVID levels, with weekly reach hovering around 97% of March survey levels (Nielsen, 10/15/20).
However, like the travel mobility data, market recovery indices for radio listening also show significant variations by market. Estimates range from a high of 102 for Milwaukee to a low of 77 for West Palm Beach based on Nielsen data released in October, demonstrating once again that media behaviors in a post-COVID world are best analyzed at a market level rather than nationally.
Stepping out of the car, what about media connected to other forms of commuter transportation? Automobile travel is not the only means of transportation impacted by COVID, and thus OOH and radio are not the only media impacted by these changes in daily commute. Public transportation has taken a major hit in cities across America, as people work from home and reduce their metropolitan leisure activities. In their most recent Transit Ridership Report, The American Public Transportation Association (APTA) reported that transit passenger trips dropped nearly 41% year over year during the early days of COVID, then fell to 76% down during 2Q 2020, declining most in April and May before recovering modestly in June. Not surprisingly, these trends have been mirrored on a local level, with individual transit systems reporting sustained declines well into the summer. In Philadelphia, for example, SEPTA ridership fell 90% during the first months of COVID, before climbing back slightly after the city’s stay-at-home orders were lifted. However, as cited earlier survey data shows that less than 15% of people have stated they are currently willing to use public transportation (ENGINE Insights survey fielded Sept. 11th – 13th).
People are engaging in out-of-home activities less (and differently)
In addition to the obvious day-to-day activity covered above, people are simply engaging in out-of-home activities less often and are acting differently when they do venture out. In the new ‘homebody’ economy, people are not going to concerts or sporting events, they are eating out less and going to gyms less frequently or not at all. The impact of this on many forms of on-location event and sports marketing opportunities is pretty cut and dry; there simply are none. In-arena signage, in-game/event sponsorships, on-field or on-court promotions – these simply cannot exist without events to center around or people in the stands. Fortunately, the return of major sports has brought back with it the opportunity for TV and radio (if not physical fans), allowing brands – local and national alike – to extend reach and connect with consumers again in this crucial area. However, for many advertisers, that personal connection with the local team or community event is a big part of their marketing and media approach. For those brands, in-person options are limited, but opportunities do exist via local TV and radio sports sponsorships and spot schedules, brand presence in virtual events, and other face-to-face executions like gas station screens and other POS/in-store messaging.
People are home more
We have talked a lot about what people are doing LESS of during COVID-19, but what are people doing MORE of because of the pandemic?
Let us start with audio. Just as changes in commuting patterns triggered declines in AM/FM radio listening, the increase in time spent at home has had the opposite effect on streaming audio. With people stuck in their homes looking for things to do, and easy access to audio content through digital devices such as smart speakers, smart phones or even gaming consoles, streaming audio content of all types saw increases in both first-time sampling, as well as total time spent listening. Consequently, listening to podcasts, custom playlists on Spotify and Pandora, or even local AM/FM stations’ content streaming through a smart device all experienced significant increases during the lockdown period.
Unlike audio where some forms of usage took a dip as others grew, video viewing went up across the board in the first few months of the quarantine period (Nielsen National TV Panel, May 2020). A lot of this growth was driven by surges in OTT viewing across providers like Netflix, Hulu, and YouTube where, according to self-reported OTT provider insights, people often sought to escape through binging, self-help and comfort programming. However, traditional linear TV also saw viewing spikes in usage during this time, driven by broadcast, cable and local news along with increased viewing in dayparts generally associated with 9AM-5PM work hours (Nielsen; MRI Simmons, May 2020). During these early days of quarantine and uncertainty, it seems people were turning to video in all its forms, for both information and as a distraction. In the months since, Nielsen data indicates that linear TV viewing has returned close to pre-COVID levels, while streaming TV remains significantly higher YoY (+35-40%). In fact, OTT or streaming content is now roughly 20-25% of total weekly TV viewing, up from an established norm of 15-16% in 2019 and early 2020.
We’ve talked a lot about the realities consumers face during COVID, and how this is changing their daily behaviors and media usage, and some short-term indicators and opportunities advertisers can use to inform their immediate decision-making. But what about the long-term, big picture impact of COVID on marketing? How should brands look to position themselves to meet the needs of consumers during this (hopeful) final stretch of the pandemic, and transform as we head into what comes next?
The hardest part of any major negative event is predicting when things will “go back to normal.” This is a classic example of flawed logic called regression fallacy. To sum it up, regression fallacy is the belief that after corrective measures have been taken, society will return to its previous state ignoring all the information and adjustments that were made throughout the event. In particular, the longer an event goes on, the more difficult it would be to expect life to go back to the way it was. Our current pandemic event is likely to continue for at least several more months, ebbing and flowing across the United States and the world. This reality indicates that the go-forward strategy for many businesses, across multiple categories and verticals, lies not in how they can get back to normal but rather in how nimble they are in adjusting their business to the new normal, and how they can correctly position themselves to a transformed consumer base going forward.
That is a tall task for any business to undertake, and doubly so when consumers are still worried and very uncertain about their future. As noted earlier, most consumers believe it will take some time for a true economic recovery to take root. In fact, McKinsey data shows positive consumer sentiment toward an economic recovery sits at around 25% in the United States even after the pandemic ends. The more uncertainty consumers feel, the more they are going to react in a way that makes them try to lessen their personal cognitive dissonance and anxiety. In general, when put into stressful situations people look for ways to decrease their stress and feel more secure in their surroundings. However, not all people are alike, with some feeling more insecurity due to greater economic vulnerabilities such as lower incomes, less savings, or an unstable job environment. As a result, different consumer behavioral segments can and do often emerge. Several research companies and consulting firms have developed and named their own post-COVID consumer segmentations. One specific example comes from EY. In their analysis consumers tend to fall into four major groups when pressure is applied in an economic sense:
Save & Stockpile (35%): Not so concerned about the pandemic but pessimistic about long-term effects
Cut Deep (27%): Hardest hit by the pandemic; most pessimistic; spending less across all categories
Stay Calm, Carry On (26%): Not changing their spending habits; not directly impacted by the pandemic
Hibernate & Spend (11%): Most concerned about the pandemic, but best positioned to deal with it; optimistic for the future; spending more across the board
The level of economic stress on consumers is directly related to which of these four groups people fall into. Additionally, consumers’ perception of value is altered in these heightened states. Someone who viewed a brand one way prior to the pandemic may no longer see the same value because their perception of value has fundamentally changed. This is critical to businesses as they try to remain relevant to their customers both during the pandemic and into the future. They must discover what value means to their key audiences and how their perception of value may have shifted in the last six months.
Consumers are not static entities. They are people, and people are driven by their emotions. Understanding how you can help them decrease their stress by speaking to their changed perception of value will not only keep prior customers engaged in your brand, it will likely bring new customers into the fold as well. As Einstein once said, “In the middle of difficulty lies opportunity.” Taking the time to really understand and appreciate these shifts in value, perception, and emotion will sustain brands going forward.
Typical of major events, these consumer segments will not remain static. They are expected to change as we reemerge. However, they will not automatically shift back to their original “normal” state. Remember, consumers have gone through a traumatic event. Their changed perceptions and habits are going to last, and in some cases, may never return to where they were.
So, what could that look like? As they did with their current or active COVID segmentation, EY also forecast how these segments could morph in the future.
About a third of consumers will attempt to get back to the normal they remember prior to the pandemic. There are no guarantees that they will ever be able to fully “go back,” but they will try. The rest of consumers, around 70% of the population, will have longer lasting changes to their consumer behavior. About 34% (Cautiously Extravagant & Back with a Bang) are going to be ready and willing to spend money… but only if it speaks to their new view of value, which is directly tied to the economic impact of the pandemic and/or the health concerns of the pandemic itself. Another 35% (Stay Frugal & Keep Cutting) will continue to cut their spending and their perception of value is now intimately tied to their bank account.
When will the shift toward these new audiences occur? That is the hardest question of all to answer. What we know is that reemergence will be regional and will not be static, which means consumers may drift back and forth between their “pandemic state” and their “post-pandemic state.” As mentioned before, brands that are committed to being flexible and willing to reinvent the way they discuss values with consumers are going to be the ones that emerge in a stronger position in the new post-pandemic world.
Marketers should not let their brand get sucked into the regression fallacy that the world, and your business, will go back to normal. About 70% of consumers do not expect their view of value or their perception of spending to go back to normal. And as was discussed earlier, value is not the only attitude or behavior that has undergone transformative change. Life at home, at work, shopping and communicating preferences, travel and mobility, and views of health and well-being have all been fundamentally altered. That means marketers need to understand the realities that different consumers are facing on a market-by-market basis, and meet them where they are, rethinking how best to communicate and engage with them in a more personalized and impactful manner.
Epilogue: Planning (Media) for a New Normal
Dr. Anthony Fauci, Director of the National Institute for Allergy and Infectious Diseases, has said it’s unlikely life in the US will go back to normal by the end of 2020, saying pre-coronavirus conditions may not return until “well into 2021, maybe even towards the end of 2021.” Additional reports predict vaccines emerging towards the end of 2020 or early next year, with widespread availability by late spring 2021 in the US and other developed nations. Adding to this unpredictability, according to a Pew Research Center study released in mid-September, the share of Americans who say they would get vaccinated for the coronavirus has declined sharply since earlier this year, with only roughly half of U.S. adults (51%) now saying they would definitely or probably get a vaccine to prevent COVID-19 if it were available today versus 72% who answered affirmative in May. Similarly, ENGINE Insights (10/5/20) found that 49% of people indicate they would hold off on taking a vaccine until more research on safety and effectiveness is available.
Across the spectrum, indicators are that we will not truly emerge as a country from COVID-19 until well into 2021, and that even then, it will not be a “return to normal.” Life will be different in many ways from what we knew before COVID in terms of economic realities, consumer behaviors, and media usage, much of which has been deeply changed by the pandemic.
For brands, aligning objectives with these realities is crucial, and for advertisers, understanding client goals, and the dynamic nature in which they will change throughout the year, has never been more important.
With all this in mind, here are some ways to think about doing business next year that are also different from the norm – that is, our quick hits for planners and marketing decisionmakers as they prepare for 2021.
Stay Close to Your Client’s Business
- Understand the specifics about how your client’s business has been impacted by the pandemic. Different industries have been damaged much more severely (travel and hospitality), while others have achieved some gains (grocery, eCommerce).
- Avoid a sweeping, uniform/national approach to media and marketing:
- Embrace regionality in terms of targeting and delivery
- Evaluate and address markets uniquely – conditions will vary greatly by area
- Embrace audience diversity in your planning:
- Avoid wide-net “demo approach” in defining audiences
- Identify and address consumer segments uniquely – consumers will be influenced by distinctly different values, perceptions, and financial situations
- Explore enhanced data-collection/intelligence opportunities, maximizing the ability to measure and interpret results in a timely manner.
Be Prepared to Move Quickly and be Nimble
- Position yourself to take advantage of dynamic negotiation opportunities
- Place early for better rates
- Be prepared to go to market quickly, and to have to make changes in-flight
- Consider shorter-term contracts in lieu of annual contracts
- Consider slush fund for emerging opportunities or shifts in priority
- Avoid media with long lead times
- Be prepared for quick pivots in creative and messaging to reflect shifting consumer sentiment and a dynamic business environment
Keep Ahead of Consumer Behavior and Media Consumption
- Increase emphasis on new customer acquisition and competitive conquesting to capitalize on shifts in consumer loyalties
- Regardless of category, convenience services are crucial – if the brand has them, promote them; if they do not, strongly encourage development
- Convenience services: mobile ordering, curbside pick-up, contactless delivery, telemedicine, online scheduling, eCommerce, CPG subscription services, etc.
- While promoting safety and cleanliness will remain important, heavy messaging around convenience (above) and value will be key to retaining current customers and capturing new ones
- Plan for a new normal:
- Some consumer routines will return to a reasonable semblance of their pre-COVID selves in 2021, some routines will have evolved or been altered completely
- Gradual Rebound: OOH, transit, AM/FM radio –plan for two-phase pricing next year, with current (often reduced) COVID-impacted usage levels sustained in the early months of 2021, followed by rising impression levels as the year progresses
- New Norms: OTT, social video, streaming audio, podcasts, eCommerce – Plan for COVID-accelerated usage or share increases to sustain in 2021
- Understand how different parts of your target audiences consume media and adapt