Each part of 2021 will be a distinctive marketplace with a discrete set of opportunities. Brands must plan accordingly.
The ‘More COVID’ Part Of The Year will be a continuation of 2020 into the first half of 2021. Last year’s business priorities will roll over. Home will continue to dominate lifestyles and consumption styles, and this will be a long-term shift as many businesses lock in working from home. New occasions and rituals will be the challenge and the opportunity for brands.
Only significant innovation will be possible, and this, too, will persist. Retailers are simplifying assortments while rethinking logistics more broadly, so there will be no place for minor brands or new flavors and line extensions. Consumers have been looking to bigger concepts that offer a sense of connection and security.
A confluence of dynamics will create an opportunity early in the year. Consumers are readying themselves for the end of COVID-related restrictions, so anticipation is building. At the same time, consumers feel the walls closing in on them. Everything about people’s lives has gotten smaller: More time at home and less, if any, anywhere else. Less travel. Less spending and more saving. More mental health issues. More interest in all things local. All of this adds up to smaller horizons. Consumers want to get back out, but remain closed in. Soon enough, consumers will get back to bigger lives, but brands can tap into the tension of this moment with something innovative that delivers a big life even within the smaller horizons closing people in for the time being.
The ‘Less COVID’ Part Of The Year will be a transition period as limited physical proximity becomes safer. Vulnerable groups, mostly older consumers, will be the first to benefit, so most of the transitional opportunities will be tied to activities related to these groups. This will be the moment at which COVID bubbles begin to pop.
Extended family will be a central part of this transitional period as young and old are able to gather again. Reconnection will be a moment to observe milestones and holidays missed in person or to pay tribute to loved ones who have passed. There will be a revival of time at home beyond immediate family, especially a flurry of celebrations, many to be commemorated. Restaurants will see bigger parties at the door and travel will pick up for destinations where family groups can spend time together. More churches will go back to live services and other venues may relax some restrictions.
Most restrictions, though, will remain in place during this transitional period. New modeling by Columbia University researchers shows that the disease has become so widespread that the continuation of social distancing and masks is needed through July to prevent millions of infections that would otherwise occur as people wait to get vaccinated. The marketplace will not be completely free from COVID-related restrictions before the end of this transitional period.
The ‘Post-COVID’ Part Of The Year will happen abruptly. A point in time will be reached when, officially or unofficially, an announcement is made that herd immunity has been achieved. This will flip the switch on a surge of spending in the marketplace. Past experience suggests to some observers that revelry like the Roaring Twenties will erupt. Such prognoses overlook all of the other things that came together during that decade, but there is no doubt that there will be an exuberant outpouring of reengagement with the marketplace.
Social connection is sure to make a big comeback. Social connection has deep cultural resonance, which means that the relevant principle to guide planning is one that anticipates more of the old normal than anything new. Renewed social connection will even go to licentious extremes, but mostly it will be seen in travel, tourism, restaurants, bars, arenas, festivals, concerts, sports events, brick-and-mortar retail and other family and religious gatherings. There will be an opportunity for brands to offer innovative ways of social engagement by wrapping in social as a product benefit. Everything dependent on physical proximity will be back in play.
Virtual technologies and e-commerce will not fade away. But these technologies will have to migrate from wholesale substitutes for physical engagement to enriching enhancements of physical engagement. It means digital paired with physical, like omnichannel or click-and-collect. It means the addition of AR and/or VR to physical experiences. It means embedding digital systems into physical infrastructure like home automation or smart cities.
Consumers will look to make a fresh start and will be open to brands that help them. It will be impossible for consumers to return completely to pre-pandemic habits and behaviors. Too much has changed, both in the ways that consumers have moved on and in the ways that the world around them has changed. There will be things to pick up again, but everything will sit in the context of a different environment.
Confidence is the help that consumers will need most. Economists have observed in past economic disruptions that consumers can be ‘scarred’ by the experience to such an extent that for years afterwards they overestimate the probability of another such event occurring in the future. Consumers protect themselves from the risks they imagine by playing it safe and pulling back on spending. Economists with the Federal Reserve of St. Louis, New York University and Columbia University have estimated that because of the scarring caused by the pandemic, for several years, baseline GDP could be 5 percent or more below than the pre-COVID-19 steady state level. This can be addressed, though. This is a psychological effect, so it is something that businesses can influence and perhaps reverse with communications and support to reassure and even inspire consumers.
Five Critical Areas
While each part of 2021 will be different and distinct, there are a handful of critical issues that will be important to every part of the year, albeit in different ways. These are issues tied to the ways in which the pandemic has upended business models.
Not everything will be different in the post-pandemic marketplace, nor will there be a wholesale return to the pre-pandemic marketplace. But there will be big changes. As discussed earlier on Branding Strategy Insider, significant change will be found where business models are disrupted. The pandemic has meant more business model disruption than the financial crisis, during which trouble came from over-extended balance sheets not from lockdowns prohibiting certain ways or models of doing business. While many of these business models will come back once COVID-19 is under control, the landscape will be different. Lack of cash flow combined with limited cash reserves has bankrupted many competitors. In their place new competitors with new types of business models have staked out a position. This creates challenges and opportunities across five critical areas.
1. Fewer, bigger brands: Culling of competition will increase concentration within categories.
Cash will continue to be king. Big companies with solid balance sheets and affordable access to capital investment will continue to pick off the growing number of ailing mid-cap and small-cap companies handicapped by limited cash reserves and by growing numbers of retail outlets unwilling or unable to stock smaller brands. The push to assortment simplification will favor the biggest brands, and this resonates with consumers who are looking for stability and comfort in the form of familiarity, convenience and routine. The associated imperative is to overhaul high fixed-cost business models. Capital-light companies will be in a much better position to manage assets in innovative ways.
Companies will need to concentrate resources behind a smaller number of bigger brands. The primary focus should be on brand scale rather than breadth of portfolio, particularly brands that cut across consumer groups.
2. Brand Loyalty: The continued flux within the marketplace has put brand loyalty into play.
Everything about lifestyles has been upended. New solutions are needed. Simplification of shelf assortments has untethered consumers of smaller brands. The surge in e-commerce has exposed consumers to new brands. Brands that have grown their customer base during the pandemic now face the happy yet unexpected challenge of retaining these new buyers. Brands should aggressively target consumers lost by competitors.
The near-term importance of brand loyalty reverses the trend of recent years during which penetration has been top priority.
3. Home: At-home solutions and services will grow and permanently displace out-of-home offerings.
The acceleration of digital and virtual is recentering life on distance, delivery and decentralization. Work-from-home will leapfrog as companies see that productivity is unaffected or improved, thus enabling them to lock in real estate cost savings. Virtual systems are sure to improve. Innovative offerings will make work-at-home, distance learning and home entertainment better and easier.
Brands will have to remap home-based needs, occasions, rituals and media. The needs-gaps found now at home are new and thus they are open areas of growth for first-movers.
4. Hygiene: Antimicrobial protection will be a cardinal operating requirement in every category.
Health has become hygiene. Masks, distancing and handwashing are here to stay. Additionally, consumers have learned that every category, not just traditional health care, can help or hurt health. So every category can now plausibly treat health as a benefit.
Signaling hygiene will be critical to a brand’s value proposition. This means innovating around hygiene solutions as well as pushing past old category boundaries of health and wellbeing.
5. Sustainability: Businesses will have to build back in sustainable ways.
The confluence of worsening natural events, a shift at the top in U.S. politics and growing protests, particularly among younger people, have given unstoppable momentum to sustainability. Consumers want more corporate involvement in the public sphere, starting with sustainability. The competition for talent will keep companies focused on sustainability. Investors are also demanding better pricing of risks while looking for sustainable innovations in which to invest.
Brands must create competitive advantage from sustainable practices and not just with communications campaigns but with logistics, production, materials and energy. Companies must formulate a long-term transformation plan to put the entire business on sustainable footing.
The year ahead will unfold with a staccato beat. It is the precursor to a new normal of disruptions. The pandemic has exposed the need for more robustness—the ability to absorb shocks—and resiliency—the ability to recover from shocks. Companies must pivot to models and practices that provide stability in the face of uncertainty. In this pivot, brands will succeed by transforming the threats from disruption into new opportunities for growth and innovation.
Contributed to Branding Strategy Insider By: Walker Smith, Chief Knowledge Officer, Brand & Marketing at Kantar
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