Covid-19 Impact Report: One year later

Summary

The pandemic has permanently changed the buying habits of consumers. Causal IQ focuses on four industries currently experiencing these changes firsthand: Retail, Finance, Travel and CPG.

• Retail: While ecommerce has been fast-tracked this past year, brick-and-mortar isn’t going anywhere. The future of retail will be forged by digital innovation from leading retailers and brands. Shopping experiences that are more immersive and interactive will be a key strategy for engaging consumers in the future.
• Finance: Radical changes in consumer behavior caused the financial institutions to transform digitally.  It is vital for financial service providers and banks to focus on ways of improving digital customer experiences. Now is the time to increase ad spend: programmatic buying can make media more efficient, and effective, as consumers spend increasing amounts of time online.
• Travel: With mass vaccine roll-outs underway travel is picking back up- travelers will be more likely to take trips from April-September 2021, and by Q3 2021. Digital advertising is as important as ever as travelers are going online to book trips. Messaging around hygiene measures and pandemic protocols should be at the forefront of brand communications, supported by reservation flexibility or full refunds to provide travelers with peace of mind. 
• CPG: Grocery ecommerce continues to rise in popularity as grocery stores will see a continued boost in sales through Covid-19 and beyond. Fresh quality, speed and convenience is at the top of consumer’s needs. Ensuring ecommerce strategies are prepared for this accelerated growth and sustained demand must become a business priority.

 

Over one year ago, the World Health Organization officially declared the global Covid-19 outbreak a pandemic and everything seemed to come to a sudden halt. Non-essential businesses were closed, people were asked to work from home, toilet paper flew off the shelves and sourdough took over ovens everywhere.

While several industries have suffered extensive losses, positive news comes in the form of mass-vaccine rollouts in the coming months. The impact to the global advertising market has been significant, but research from IAB suggests a strong rebound in 2021. The increase in ad spend complements rising consumer confidence in the U.S., reaching the highest its been, after a modest increase in February according to the Conference Board Consumer Confidence Index®. Despite the uptick, consumer spending remains muted and we can expect permanent changes in consumer buying habits even after the crisis is behind us. Causal IQ previously reported on the impact Covid-19 had on several industries in the beginning of the pandemic. Let’s check back in to see how these industries have fared over the past year.

Retail and the ecommerce uprising 

Last year, Covid-19 caused retail brands to reimagine and alter their marketing strategies to align with altered shopping habits. Several brands focused on strengthening their ecommerce strategies in order to reach consumers safely at home. Jon Moeller, P&G’s chief financial officer, confirmed that the company would boost media spend, rather than pulling back: “We need to work hard to ensure that we maintain mental and physical availability to the greatest extent possible, so that those consumers return to their beloved and trusted brands.”

Even as total worldwide retail sales declined by 3.0% and recessionary conditions set in, ecommerce managed to perform above pre-pandemic expectations in 2020. eMarketer recently projected worldwide retail ecommerce sales posted a 27.6% growth rate for the year, with total US retail sales expected to grow 2.3% to $5.630 trillion in 2021. This aligns with a report by Ipsos which noted 92% of Americans bought something online during the pandemic, while 65% of this segment said they did more online shopping in 2020 compared to the previous year. 

Is retail ecommerce here to stay or was this a temporary shift due to the pandemic? While ecommerce has been fast-tracked this past year, brick-and-mortar isn’t going anywhere. As eMarketer notes, “though retail ecommerce sales jumped from 11.0% of total retail sales in 2019 to 14.4% in 2020, it’s still a minority percentage and may not be able to sustain these gains as the pendulum swings back to brick-and-mortar. But the pandemic has likely permanently realigned consumer shopping expectations around a digital-first mindset. Click and collect, cashierless checkout, contactless payment, and digital signage will streamline in-store transactions.”

Additionally, physical stores will have to take on a different role in the purchase journey. Increased emphasis on atmosphere and community-driven experiences will make retail more inviting. Shoppers are looking for an interactive and engaging experience while they are out of the house. Think about integrating art, events, music and more into a modern shopping experience. The future of retail will be forged by digital innovation from leading retailers and brands. Shopping experiences that are more immersive and interactive will be a key strategy for engaging consumers in the future.

While retail brands and shoppers alike are seeking the knowledge of how things will look in the mid to long-term, it is important to move along with the changes, accepting that – at least for now – ‘No Normal’ is the new ‘New Normal’. There is no linear path back to what we knew to be normal. Retail brands need to be armed with a hybrid plan. They must review their shopper journey maps in the context of on- and off-line worlds coming together and the evolving path to purchase.

For marketers, implement a successful digital advertising plan now to maximize omnichannel sales and rethink your brand’s message to command greater customer loyalty. Strengthening ecommerce capabilities requires careful end-to-end strategy, and in a period of agility and flexibility, are more important than ever.

One thing that is consistent in today’s ever-changing marketing landscape: consumers rely on trusted family and friends to help them make purchase decisions. A McKinsey study described word of mouth as "the primary factor behind 20 to 50% of all purchasing decisions” and is a great way for brands to increase reach and to widen their targeting to include people connected to those targeted. Since people are more likely to trust and buy from a brand recommended by someone in their trusted circle, then marketers need to make sure the people that surround key targets are recommending their products to their social networks. Causal IQ considers the effects that everyday influencers have on the consumer’s path to purchase. Causal IQ’s RYPL platform integrates household, workplace, and social data, in addition to standard audience data, to create an audience graph that generates a viral impact gets people talking about your brand.

As a result, advertising on major platforms is a requirement for a brand's ecommerce success. To succeed, advertisers need to consider the context the consumer will be in when receiving a shoppable ad.

Finance & banking go digital

Prior to Covid-19, the financial services industry was evolving at a rapid pace, accelerated by changing customer experiences, heightened competition and advancements in technology. A digital transformation was underway in the form of increased digital channels and tools. Even with these emerging trends, digital adoption remained inconsistent across the board. But the pandemic quickly upended these conventions. Within a matter of weeks, radical changes in consumer behavior caused the financial institutions to transform digitally.  

Despite the overall drop in ad sales caused by the pandemic, the US financial services industry increased digital ad spend. The pandemic prompted many consumers to reassess their personal finances and change how they bank, leading the industry to continue spending on digital ads. With economic uncertainty accelerating digital banking adoption and placing greater importance on personal finance among consumers, advertisers are capitalizing on that interest. eMarketer reported digital ad spending in the US financial services industry increased 9.7% in 2020, reaching $19.62 billion. Mobile ad spending grew 13.0% to $13.91 billion in 2020, accounting for 70.9% of all digital ad spending in financial services.

Why focus on mobile ad spend? Consumer banks closed a significant number of branches, both temporarily and permanently. Without a physical location to visit, many consumers shifted to online banking. As a result, financial services firms are looking to promote themselves to potential customers, particularly on mobile devices. Brand penetration plays a mediating role in the relationship between advertising and brand loyalty: enter Double Jeopardy.  The theory of Double Jeopardy argues that brand performance, in relation to consumer loyalty and repeat buying, is directly tied to market share. Market share growth depends significantly on growing the size of a brand's customer base, but consumers have less exposure to and familiarity with smaller or emerging brands. Brands starting out need often need to spend more than they bring in to acquire new customers, but as the brand increases in penetration, they’ll have an easier time recruiting new customers.

Brands need to be both mentally available and physically available though, and with more and more consumers shopping online – brands need to consider how they are going to reach consumers digitally, in their homes. Programmatic buying can make media more efficient, and effective, as consumers spend increasing amounts of time online.

With this shift, it is also vital for financial service providers and banks to focus on ways of improving digital customer experiences- the biggest differentiator in creating value for consumers. Deloitte advises, “...digital account opening and onboarding, straight-through lending, remote claims - will soon become table stakes, and investing in these areas will likely be essential for FIs to attract and retain customers.” 

Covid-19 will have several lasting implications for the future of financial services. In these uncertain times, it is increasingly important to clearly communicate with customers. Financial services marketers should implement display, particularly video (specifically CTV), for brand awareness and communication.

Travel, tourism & hospitality take off

In our previous Covid-19 impact report, we reported the travel, tourism and hospitality industries were experiencing substantial economic losses due to the pandemic. Airlines, cruises and lodging were among those sectors that suffered the most. With time, people started to warm up to the idea of traveling. In terms of destinations, domestic travel fared better than international travel as we experienced the return of the good old American road trip. But persistent fears of infection, uncertainty over their personal finances and governmental measures kept many at (or close to) home. As consumers canceled and postponed their trips, many advertisers did the same with their campaigns. Messaging shifted and emphasized empathy, safety and flexibility. 

With the recent rollout of Covid-19 vaccinations, the possibility of safe travel is opening up once again. Recent data from Expedia Group Media Solutions shows travelers will be more likely to take trips from April-September 2021, and by Q3 2021, the majority of respondents in all markets but Japan said they were likely to travel. Given this timeline, while the recovery may be slow, the travel industry can look forward to a rebound later in the year.

Even though people are looking to book vacations this year, there are many important attributes travelers value from brands. Consumers are looking for safe travel experiences, especially regarding new health and safety protocols like social distancing measures, contactless check-in, strict use and enforcement of masks, reduced capacity and cleanliness standards. Providing information upfront on health, safety, and hygiene will play a big role in future destination decisions.

If your ad spend dipped, it’s time to pick it back up. According to Expedia Group Media Solutions, travelers are increasingly turning to online travel sources for trip planning – now, even more so than pre-pandemic: 

• 24% more Online Travel Agencies (OTAs) 
• 20% more Destination Sites 
• 16% more Travel Advertising

Messaging around hygiene measures and pandemic protocols should be at the forefront of brand communications, supported by reservation flexibility or full refunds to provide travelers with peace of mind. 

CPG’s digital evolution

Similar to other industries, Covid-19 placed deep strains on the CPG industry with effects lasting well into 2021. Thanks in part to panic buying alongside a hospitality sector shutdown, CPG companies and retailers in North America faced a challenging physical environment with supply-chain disruptions and unprecedented volatility in demand—all while businesses remain under pressure to get products onto shelves and keep employees and customers safe. By the end of the year demand stabilized, but it is clear the pandemic has changed the way Americans shop for consumer-packaged goods, especially food and beverage.

When money is tight, consumers quickly re-evaluate which brands they know and trust, and which brands can be substituted. Research also shows that when people go through life changes, as they are now, they’re much more likely to switch brands.

With less people going in-store, brands have fewer opportunities to get in front of consumers. Look for opportunities to engage consumers in their homes to build long-term brand affinity and engagement. Reach is still the foundation of media effectiveness, but media proliferation also means that achieving effective reach requires additional exposure beyond historical modus operandi of 3-10x.  New research indicates that consumers who saw an advertisement 10 or more times had greater purchase intent than consumers with less exposure.

For brands like P&G, propensity modeling has also become a much larger focus. “Performance marketing is how we reinvent brand building. We’re moving from mass marketing to brand building with greater precision,” said Marc Pritchard, Procter & Gamble’s chief brand officer.

Brands have an opportunity to ramp up delivery efforts and improve customer experience, both in-store and online. Fresh quality, speed and convenience is at the top of consumer’s needs. Meet demand by increasing delivery windows, offering express delivery services and expanding online grocery selections. This is the time for grocery ecommerce to shine. According to eMarketer, online grocery sales in the US grew by nearly 53% in 2020, reaching $89.22 billion in sales. By 2023, online grocery sales will account for nearly 10% of total grocery sales.

For marketers and advertisers, it remains as important as ever to recognize changing shopper attitudes and behaviors and adapt quickly to meet their needs. Ecommerce continues to rise in popularity as grocery stores will see a continued boost in sales through Covid-19 and beyond.

Ensuring ecommerce strategies are prepared for this accelerated growth and sustained demand must become a business priority. The shift to ecommerce is putting an emphasis on direct response advertising, but branding should remain top-of-mind.