Richard Kirk, Zenith UK Chief Strategy Officer explains how clients can continue to advertise despite empty shelves and supply issues.
Empty shelves are now a common sight at supermarkets across the UK. Be it through supply issues, or outsized demand, this problem will likely persist through 2020, posing a rare problem for some FMCG brands:
What should our communications strategy be when the shelves are bare?
In many cases, product shortfalls have elicited the same reaction seen amongst advertisers in the 70s: “why leave a flame under a boiling pot?” After all, cutting ad spend in the short terms whilst marketing, customer and product mixes are re-evaluated may be prudent. A sharp change in the landscape like Covid-19 may mean continuity in advertising is bad for business.
Large brands can afford this break; “going dark” will likely have little effect on base demand built up over decades. However, even for market leading brands, demand and market share will deteriorate with increasing speed the longer they remain off air or off the shelf. To ‘go dark’ on both fronts for a significant period would be near-suicidal.
Shortages have not been a major feature of recent recessions, which have been driven by demand shortfalls rather than supply-side shocks. Advice from 2008 or the dotcom crash will not help FMCG marketers today. We need to go back to the 1970s, when sugar, petrol, bread and toilet roll were all hard to come by. There is plenty to learn from the theory of this period, lessons that can be coupled with recent marketing science.
Brands grow by being available – both physically and mentally
In the 1970s, Kotler, the pre-eminent marketing academic of the time, stated brands and businesses struggling to keep their products on the shelves shouldn’t sacrifice advertising.
In 2010 Ehrenberg Bass proved Kotler right. How Brands Grow showed that building – and maintaining- physical and mental availability amongst all buyers was key to success. Brands must be present where customers purchase, and top of mind when they shop in the category.
For FMCG brands seeing physical availability hampered by shortages, ensuring the brand remains at the front of people’s minds via advertising grows in importance.
Compounding factors: disloyalty and the attention gap between buyers and non-buyers
Customers are fundamentally disloyal. As Byron Sharp says; “Your customers are really other people’s customers who occasionally buy from you.” This promiscuity goes into overdrive in periods of change and flux. Zenith research has shown that major life events (leaving uni, having a child, moving house, changing job etc.) make people 2-4x more likely to try new brands.
For FMCG brands today, shelf shortages, people’s desire for a change, and changes to who does the shopping mean lots of new choices are being made.
This brings opportunity and risk for brands: Zenith Touchpoints data shows that across categories and demographics; buyers, particularly recent buyers, take more notice of communications from the brand they purchased. For household goods the non-buyer to buyer uplift is 2.9x, for food it is 3.3x. This is because people like to have their purchasing decisions reinforced.
A brand’s advertising reassures their new customers that they made a great choice, and prompts light buyers to re-purchase. A brand turning off advertising amidst product shortages doesn’t benefit from that virtuous cycle. They risk losing relevance with their buyers and not getting their fair share of non-buyers who are making new product choices.
Advertising solutions can be reached through the agile use of data and transparent discussion of risk
So brands still need to communicate with consumers despite potentially being off-shelf when they visit a store. 70s advertisers were guided by Kotler to reinvest budgets in three ways, which still hold true today:
The first two suggestions were 1) advertise products in oversupply, or 2) build demand for new products with low awareness. Both suggestions seek to promote products that will respond most efficiently to advertising.
Portfolio analysis would normally identify these products. However, things are not normal; pre-March data feels hopelessly out of date. Fortunately, “morphing”, a nimble data science technique, allows us to credibly transpose old analyses into future scenarios. Using actual data or proxies for pricing, consumer demand and market size, it is possible to re-engineer a pre-Covid portfolio analysis for today or an imagined future scenario.
But this technique has its drawbacks. As each variable is “morphed” into a new scenario, we add risk into the model; and so the confidence intervals around our predictions grow. At this point marketers must begin to practice Modern Portfolio Theory – a discipline borrowed from finance, in which the forecast return on advertising spend is balanced against the risk built into the model. Senior marketers should be leading this risk vs return debate in the boardroom over the coming months, backed by relevant, robust data.
So, for brands affected by shortages, the business must first acknowledge the need to keep speaking to customers, then use nimble but credible techniques to locate where to refocus investment and build a forecast for potential return. Finally, marketing should lead a discussion about the appropriate risk level, given the business outlook.
Solutions exist even if shortages can’t be overcome
A final suggestion for ad spend also holds true in the current climate; switch to showing consumers how they can use a scarce product more economically – of particular benefit to brands who cannot get around supply issues. If executed well, these campaigns can lower demand pressure, ensuring product availability on shelves for longer, whilst generating significant good-will.
Taking inspiration from Kotler, Publicis UK have created a “Shop Responsibly” campaign for brands to reference in their advertising this summer. Groupe clients such as RB, Essity and L’Oréal are partnering with us on this initiative and all client brands are welcome to join.