In a few short weeks, many changes have rocked the way businesses operate, and few can claim to have been unaffected by the coronavirus crisis. While in the world of private equity, deal processes have mostly been put on hold due to the new uncertainty in the market, there is a lot to be observed in the way many companies are facing, and adapting to the challenges, and the new behavioural shifts that are occurring among customers. Not everyone is negatively impacted by the crisis, and while sectors such as Travel are undergoing major difficulties, others like Entertainment (video streaming, gaming) are thriving. Winners are repurposing their services to stay relevant, some even altruistically, and with social distancing keeping people at home, catering for online users has become the key to retaining a customer base. In turn, the changes have required a new way to market to customers digitally, and those changes are likely to redefine the landscape in the long term.
Many brands are adapting their offering to stay afloat
The crisis has meant new critical products and services are needed. While pubs and restaurants have been forced to close in the UK since the lockdown, regulations around the right to operate as takeaway have been relaxed, prompting many to go down this new avenue to keep income steady. The sudden demand for hand sanitizers has caused brands such as LVMH or L’Oreal to shift their production to cater for this new product, with even BrewDog repurposing its distillery in Scotland for a similar aim. Other brands are bidding on a reputation boost via charitable actions: Burberry is delivering free surgical masks to NHS workers and funding research for a vaccine. These good actions, although providing no financial gain, raise brand awareness and carve a positive image in the mind of consumers, therefore setting the brand for success once the crisis is over.
But the principal method of action for surviving the crisis is being able to go online. While businesses such as Primark, not having a transactional website, are suffering from a sudden complete loss of income, others are riding the wave.
Several event-based institutions are launching virtual events over the lockdown period, with the examples of the Royal Albert Home, a free series of Royal Albert Hall performances available on streaming, The Shows Must Go On, a similar endeavour from West End and Broadway musicals, or #NationalTheatreAtHome, broadcasting theatre performances on YouTube.
The fitness world is hit particularly heavily, with all gyms closing. However many brands have successfully engaged their customers online: ClassPass has frozen accounts and given access to home workout videos, Peloton is capitalising on its homeworkout app and extended its free trial to 90 days, and Barry’s Bootcamp is still delivering classes, albeit through IGTV. Indeed, the increase in social media usage (+45% in social media app usage in the week of March 22 compared to average of January and February) has meant that influencer content has become a key channel to engage customers: the Body Coach Joe Wicks is holding live PE sessions for children out of school, and many fitness Instagrammers are now providing home workout ideas that are now more relevant than ever. This new online jump is requiring an update on ecommerce channels, and forcing companies everywhere to get comfortable with a new digital way of doing things.
New demand means new marketing
While for many, the goal is to stay relevant in the midst of the coronavirus crisis, for others, the sudden demand is welcome yet presents the challenge of coping. Indeed, pre-existing health and fitness apps have witnessed a growth in downloads of 65% in the UK for the week of March 22 compared to the average of January and February, while educational apps such as Duolingo or Google Classrooms have respectively witnessed increases of 105% and 1,400%. Of course, major winners are entertainment providers, such as Netflix or Disney+, as people look to escapism while stuck at home.
But this new demand surge is sometimes problematic. Grocery store Ocado had to temporarily shut down its app after online delivery services witnessed a sudden growth in requests which the brand could not service, in terms of supply and technological infrastructure. Similarly, Amazon has struggled to cope with the large increase in demand for its products. However, it has managed to respond accordingly via its emarketing technique. Mid March, the company halted its spending on Google Ads to counterbalance the new demand, and also saving costs in that channel which is now of no use for them. This has allowed other players to take over in paid search, with the likes of eBay or Gumtree.
Paid advertisement has also become a channel to exploit in the entertainment sector. The gaming sector (mobile, esports etc) is observing a mass increase in traffic and app usage, and many companies can monetize the interest, through mobile adverts for example.
In the field of organic search, easy wins can be made. With the virus emphasising the need for hygiene, and the lockdown forcing everyone to stay home, usually low demand products are now booming in Google searches. This is the case of words related to “hand sanitizer”, “freezer” (as people stock food), “dumbbells” (for home workouts), or “monitor” (as people need several screens to work from home). Brands such as boots are already capitalising on this new demand, by optimising and driving traffic via keywords such as “braun thermometer” for instance. Additionally, app store optimisation is an often forgotten strategy, yet it is now becoming crucial: in the March 22 week, 8 of 10 of the most downloaded Health and Fitness apps used the words “home workouts” or “at home” in their name or description, therefore targeting the right consumer at this precise moment in time.
Businesses should use the opportunity of the crisis to become agile and prepare for delivering to the future customer. While the crisis will go away, new habits die hard, and the observed shifts and behaviour may determine which companies thrive and which are simply not fit for the long run. The sudden mass use of education apps may introduce a radical change in how education is delivered, the use of conferencing apps may transform the way business is done, and the uptake in food deliveries may cause drones and robots to appear sooner than expected. Being an online business, and being efficient at it, is now becoming paramount, with emarketing playing a key role in deciding who will come on top today, and in any other challenging situation. Whilst PE investments may for now largely be at a standstill, Private Equity’s role in kick-starting the economy once the crisis has passed is undeniable, By then, there may be new defining criteria in what success looks like.