The historic COVID-19 crisis has the consumer packaged goods industry reprioritizing the present and bracing for a ‘new normal’
A promotional shelf sign is pretty pointless when there are no products on the shelf.
That was one of the obvious lessons learned in March, when the COVID-19 pandemic rapidly shifted from a mild annoyance to a full-scale health and economic crisis here in the U.S., putting retailers and consumer packaged goods manufacturers on the front lines of defense.
With the societal impact of the COVID-19 outbreak spreading faster than the virus itself, consumer packaged goods manufacturers were scrambling to keep up with escalating product demand not only for items directly related to combating the COVID-19 threat but for items in most other packaged goods categories. In more than a few cases, the increased demand was beginning to stretch supply capabilities.
“We are making all of the product that we can make,” Georgia-Pacific spokesperson Kelly Ferguson said, in reference to the national run on toilet paper that quickly went from laughable to no joking matter. “We’re working directly with our retailers to get product onto the store shelves just as quickly as we can.”
Retailers in the CPG space were confronted with a dramatic escalation of shopping trips that approached near chaos at times, with throngs of shoppers stocking up for the possibility of quarantine by emptying store shelves in response to the increasingly dire developments surrounding the pandemic. (Meanwhile, retailers in most other consumer goods categories began closing their brick-and-mortar locations.)
And they quickly sprang into action, altering standard operations as needed to meet changing shopper behavior. By most reports, they’ve done an exemplary job not only providing solutions but in helping calm the worries of consumers. (See “Walgreens Lives Up to Its Tagline" below.)
Who Needs Promotions?
The intensifying challenges have largely made planned shopper marketing activity a distraction, and in more than a few cases an obstacle to efficient store operations. A number of retailers have responded by telling CPG partners to halt all near-term promotional plans; at least one brand marketer has already scrapped all programming it had scheduled for the second quarter.
The reasons are simple: When you’re hiring additional employees to help restock shelves at night (as many supermarkets have), you don’t have time to place shelf labels or set up displays. And when you’re running out of inventory daily, price promotions aren’t as critical as they usually are. (That thinking might be a bit off-base, however, according to a shopper study conducted by the Institute last month. See Related Content below.)
“Retailers don’t have the logistical wherewithal right now” to manage promotional execution, said Olga Yurovski, CEO of Shopperations Research & Technology. “And they also don’t really need price promotions at the moment. The whole equation of incremental vs. base has gone right out the window.”
“We’re trying to manage the programming that was already in-store while working with our retail partners on the best path to take going forward,” said one shopper marketing veteran, who stayed off the record given current sensitivities. “Everything is being evaluated given the crisis.”
Brand marketers are also dealing with the shutdown of the sports properties and entertainment events that drive some of their promotional activity and media schedules; the National Collegiate Athletic Association’s March Madness basketball tournament was the first major casualty. And they also need to reconsider advertising themes and messages that now may seem insensitive or even offensive given the current climate; Hershey pulled an ad campaign depicting a celebrity blogger handing out hugs and candy bars to pedestrians.
Some retailers are already looking beyond the second quarter. Walmart, for one, has told CPGs that it needs to approve all brand messaging for summer programs. According to several shopper marketing executives, the retailer has decided that even overtly celebratory language around the Fourth of July holiday could be insensitive depending on what happens over the next few months.
“We need to make sure that we’re respectful of what’s going on right now and how people are struggling,” agreed the CPG vet.
Walgreens Lives Up to Its Tagline
Steps taken by the “Trusted Since 1901” drugstore chain illustrate the ways in which many retailers have responded to the crisis.
• Placed purchase limits on certain products to improve inventory flow and keep them available for more shoppers.
• Offered free delivery for all online orders, with no minimum purchase required. Also waived delivery fees for all eligible prescriptions.
• Dedicated temporary space outside select stores for COVID-19 testing.
• Changed store hours to 9 a.m. until 9 p.m. (local times) to allow more time for restocking and cleaning. Made order pickup of select products available via pharmacy drive-thru windows.
• Created a dedicated COVID-19 landing page on Walgreens.com: “We’re in this together - Helping you and your family through COVID-19.”
• Sent emails to registered consumers communicating its COVID-19-related efforts.
• Posted supporting videos from pharmacists about various relevant topics on YouTube.
• Otherwise proceeded with standard practices: the March 22 circular invited shoppers to “Hop into Easter Savings!”
Compounding all of these challenges is the fact that CPGs are simultaneously dealing with the pandemic’s impact on their own ways of doing business. Travel bans and work-from-home mandates have forced companies to set up new communication systems and workflows even as they’re responding to the demands of the marketplace.
“What’s top of mind right now across our entire organization is ensuring that we properly service our customers while also keeping our employees safe,” said the vet.
What’s a CPG to Do?
Therefore, the to-do list for brand marketers is exceptionally daunting, especially since the pandemic’s impact continued to intensify throughout last month: on March 19, California became the first in a stream of states to issue a statewide “shelter in place” order.
“Right now, it’s a short-term scramble just to figure things out,” says Yurovski. “The trick later will be what to do with your time and your marketing dollars.”
Shopper agency MarketingLab analyzed a variety of research sources last month to help the Institute identify several key steps to consider as marketers reassess activity:
Keep a close eye on consumer sentiment and adjust communications accordingly. “Brands must be flexible, adapt to the change and attempt to add value,” says Michael La Kier, MarketingLab’s digital strategist. Rethink plans for potentially weak upcoming holidays (Mother’s Day, Memorial Day, Graduation), especially since family gatherings likely won’t be part of the equation anymore.
Place a greater focus on digital and social communication. In-store options will be limited anyway, but the pandemic is driving an increase in both digital commerce and digital media consumption as consumers increasingly stay at home. “Prepare for a dramatic increase in online demand, particularly within pure-play and home delivery,” La Kier says. “This may have a lasting effect post-crisis.”
Continue helping retailers respond to changing shopper behavior. Crisis-mode conditions might last longer than anyone wants – or even worsen. The agility to respond quickly will be critical.
Maintain an active presence. While brands don’t want to come across as exploiting the crisis, they can play an important role in helping consumers adjust. “Brands can earn trust by delivering relevant value in a fluid period of heightened anxiety,” says La Kier. “We must show empathy and give comfort using tone-appropriate messages.”
Being prepared for whatever lies ahead will be the most important step to take. The (hopefully) shorter-term turmoil caused by the pandemic now seems almost certain to evolve into an economic recession that will have an even longer-term impact on shoppers, retailers and brands.
The readiness will be all.