02 Apr How should you respond to coronavirus, and how will it change the global mountain economy?
Since the impact of the coronavirus pandemic began to become truly apparent in it’s scale and ferocity, there has been a huge amount of commentary and content published about how businesses and organisations should respond to this crisis, and what the impact might be in the immediate and longer term on different industries.
We have studied much of this content and looked to what is based in data rather than pure opinion, and what insights can be drawn specifically relevant to the mountain economy.
We certainly don’t claim to have all the answers, and much will depend on how long this crisis lasts, but we hope some of the below might help in the critical decision making which will shape all our organisations and our industry over the next few months and into 2021.
How to respond – consider the phases
It’s helpful to try and understand the likely sequence of events that will play out from this situation. We can consider there to be three main phases that our mountain economy, and the wider world, will pass through
Crisis – where we are now. How long this phase will last is very hard to predict and will vary from country to country. But let’s assume a 6 month timescale. How do you respond and act in the crisis phase? This is the question you must answer quickly to survive.
Recovery – there will be a recovery phase that immediately follows the removal (whether sudden or gradual) of lockdown measures and enables businesses that have been able to survive to start trading again to a consumer market that will in part be easer to spend. Preparing for this is key to maximising the opportunity it presents, because for many it will be an opportunity, if they are ready.
Recession – regardless of the short term recovery there will be a recession, the sheer economic impact of the measures that have been introduced is so great that no matter how sharp the recovery is, there is no way for it to make up the lost ground of the unprecedented reduction in economic activity we are seeing right now. In addition, overall consumer spending power will have been significantly reduced, as those who have lost their jobs or their businesses focus on the immediate needs of paying the bills, and we see the inevitable rise in taxes that must surely come to refill national coffers across the world that have been depleted through the bailouts due to this situation. Add in the almost inevitable drop in consumer confidence, especially if a second wave of Covid-19 cannot be ruled out, and the result is most likely a deep and prolonged recession.
So if we can understand and recognise these phases, we can at least try and respond in the first phase, and prepare for the second and third phases.
Right now we are in the crisis phase and adjusting quickly to this new situation is critical to managing the impact.
Don’t stop marketing and selling
It’s very tempting to view marketing as a cost that can be easily cut, and whilst few consumers are actively booking ski holidays, why spend money trying to convince them to do so? Marketing should always be viewed as an investment not a cost, and if you can track your return on marketing investment you will be able to see what the true impact is of scaling down, or up.
Communications needn’t be just about sales, though we would urge every company to not consider trying to sell something as somehow the ‘wrong thing to do’ right now. Yes there are far more important issues at stake than skiing and other mountain sports right now, but as we come out of this situation, consumers will still want to travel (more on that later) and we will need a functioning economy to help us all after this event.
Clearly the impact on organisations and businesses varies across both different industries but also different types of business. There are three categories a business could find itself in at this time:
Businesses in Flex are having to adapt to increased demand – supermarkets, some online retailers, online networking tools such as zoom. These businesses have a business model suited to the current situation, but are having to rapidly re-organise operationally to cope with increased, and differentiated demand.
Business in Fix are those for whom their existing business model no longer works properly in this environment, or doesn’t serve a large proportion of their customers. An example would be garden centres, who normally at this time of year (in the northern hemisphere at least) would be selling bedding plants and other perishable items to customers walking in the door. They still have demand for their products – perhaps even increased demand as so many people are at home and in their gardens – but are having to rapidly fix their marketing and selling to fulfill this demand in other ways and convince their customers these ways are still providing what they want.
Businesses in Freeze are sadly unable to make changes to their business model or their operating model that will allow them to continue trading in the current situation. In many cases this is because of restrictions that directly impact their market, or because of almost total lack of demand currently for their products and services, or in some cases – both.
It would be very easy to put almost all businesses in the mountain economy into the Freeze category, and sadly many do only fit here. But consider if there is an opportunity to consider your business in Fix. Firstly, consider demand – does it currently exist for your product or service? If the answer is yes, how do the restrictions stop you from meeting that demand, and are there alternatives that navigate the current restrictions? For some there are options. Restaurants offering delivery, instructors offering online lessons. For many there aren’t – airlines can’t offer virtual travel and have no option but to freeze. Those offering a summer mountain product cannot in good faith sell their products right now.
But demand hasn’t vanished for these products and services, consumers just aren’t able to purchase right now. So should you still be communicating with customers? Absolutely. Whilst search volumes for many products and services are down, in some cases significantly, there are still many customers out of there, searching for your products and services. Do you really not want to be appearing for them? You may not be able to make a sale right now, but you can still become a factor in that customers consideration phase. Your communications must change, the content is more important than ever, consider the phase those customers are in, they are considering what to do when they are allowed to purchase their favourite products and services again. Think about what they need now, inspiration, information, guidance and especially in our industry, escapism.
It’s no surprise that travel as an industry has been hit harder than most. Search volumes for travel related terms on google began to decline steeply on a global basis from mid March. And worse, the proportion of those searches that included terms such as delays, cancellations and refunds soared at the same time.
But this is not the only shift in online search. Mobile traffic is down 25% yoy, as you would expect as more people stay at home. And whilst search is down almost 20% across the internet, internet usage overall is up almost 50%. YouTube alone is seeing increases of over 20%, and the Google Display Network is up 14%. What does this mean? If you are still advertising (and see above for why there are some very good reasons you should be) change up the mix, focus less on mobile, consider swapping some search budget for display, and consider increasing your presence on YouTube or getting started with YouTube advertising if you aren’t already.
Cash flow of course is a consideration for almost all businesses right now, and it may seem madness to be spending anything now on marketing when you know customers cannot currently buy. But if you think about the customer journey from awareness to consideration to purchase, fundamentally nothing has changed, that journey has just become longer than usual. If you can spend something on marketing to grow awareness and consideration right now, there’s a very strong argument for doing so.
There is also an opportunity now to make use of what might be a quieter time than usual to plan for the future. Whilst that future may be very uncertain right now, those organisations with a clear strategy that they are ready to execute when this crisis passes will be far more likely to prosper. Consider your market, are you clear on who you are targeting? Do you really know and understand enough about them to be able to communicate with them as effectively as possible? Are there opportunities you are missing, perhaps products to develop that have always been waiting for the time to be available to bring them to market? Is your pricing strategy ready to respond to what might be a very different market, at least in the short term? Is your brand as strong as it could, is it clear for your target markets? And is your communications plan as effective and efficient as possible, do you know what your return on investment is? Are you ready for the shifting channels? Use the time wisely to be as prepared and effective as possible, because what is not in doubt is we will emerge into a more competitive and complex market than ever before once this is over.
Be ready for the recovery
The recovery phase will come, and with it pent up demand for products and services that have been unobtainable for many consumers. This will causes a demand peak that will be very different from the normal peaks we are used to in our industry, and how long it will last is also something of an unknown. So how can you prepare?
Get your house in order. In simple terms, be ready to make the sale. Ensure e-commerce sites work, have a your sales team if you have one prepped and ready for a sudden peak in demand. Be ready with your products. Consumers preferences may have changed, the crisis will still be very much in mind and even those ready to buy may well want more assurances in terms of the safety of your product, so think about how to address those concerns.
Pricing will be absolutely critical to succeed in this phase. Some consumers will be looking for bargains, but many will just be looking for fairness. They know you have been waiting for this time, but if you hike your prices because of a sudden spike in demand you may do very significant damage to the relationship with your customers (and remember the recession is coming, so having customers loyalty really matters). Remember too that supply will not be at it’s usual levels if sales have been virtually frozen for months, so consumers may still have plenty of choice.
Don’t price too low either, the last thing our industry needs is a price race to the bottom as everyone tries to make up ground. Formulate a fair pricing policy based on many of the factors that would normally determine your pricing and is consistent with your brand and offering.
Consider lower deposits, or ‘cooling off’ periods, we know that confidence will be one of the key factors in consumer decision making in the recovery phase, especially for those who saw their holidays cancelled during the crisis. Lower deposits or other mechanisms that take some of the risk and uncertainty from consumers will be very powerful pricing levers you can pull.
Above all, use this period to really try and build a stronger relationship with your customers. Like all of us they will have been suffering, and you can provide an escapism they crave. Do everything you can to show you appreciate their faith in spending with you again and make them feel valued, and you stand a much better chance of continuing to keep them as customers during the forthcoming recession.
Thriving in a recession?
Whether we enjoy a bounceback style recovery initially or a slower return to a ‘more normal’ economic situation, what is unfortunately without question is that we will enter a more prolonged period of recession. The sheer numbers of people who have lost their jobs, or their businesses, coupled with the inevitable rises in taxes and cost of living that must surely be coming to refill government coffers emptied by the huge bailout and stimulus programmes put in place across the globe will squeeze disposable consumer income overall, possibly to a level beyond that seen after 2008. It’s a frightening prospect for an industry like ours which depends on discretionary spending.
But recessions are at least something we have experienced before, and there are a number of lessons learnt from previous recessions that can be employed now to help get through this.
Firstly, we know from numerous market research studies that skiers are famously resilient. Many will give up their summer holiday before their ski holiday which may see this sector of our industry fare better than other sectors of travel.
Secondly, they are an affluent consumer, and whilst affluent consumers will be in no way immune to the impact of recession, it does provide something of a buffer.
Thirdly, we know that winter and summer mountain sports compete for time and spend with a multitude of other leisure activities that also call for consumers attention and cash. We can, and must, do better as an industry to compete. It’s a well documented fact that advertising and marketing spend fall in a recession across the board. This offers an opportunity for those brands able, and brave enough to maintain or even increase their advertising spend over the same period to gain market share by growing their share of voice. But the concept is equally valid across industries, if activity and spend falls across the industries we compete with have an opportunity to gain share of consumers leisure time and spend.
But if every company in the mountain economy is just competing for those same remaining consumers, the market will inevitably shrink. There needs to be a focus on growing our mountain economy by competing for that discretionary time and spend. How? Through collaboration, a constructive effort to market mountain sports as a whole, even in a time of recession, as the opportunity exists then due to the reduction and potential panic that could ensue in competing industries. It may seem counter intuitive to see recessions as a time to grow, but again history shows that it’s absolutely not.
How will things change in the post coronavirus world?
Google ‘the world after coronavirus’ and you will find 1000’s of articles, most hypothesising on how things will never be the same again. But these are just a view, no-one really knows whether change will be significant, or long lasting. It’s fair to say that this pandemic will accelerate changes in areas that were already growing – the rise of home working, virtual conferencing, home delivery, e-commerce in all forms and the adoption of technology generally. These are all trends that existed though and for which any industry should have been preparing for. So what changes will occur purely as a result of this crisis?
In the absence of a crystal ball, we can only look back to guide us to what may happen. And looking back at the impact of previous crisis and recessions suggests that actually maybe not much will change at all.
Although this situation is unprecedented, we can look at previous global events – such as the financial crisis of 2008, or the 9/11 attacks, to make some predictions about what might happen when this is over.
We can draw comparisons with 9/11 in the fact that it was a sudden and unexpected event that had an immediate impact on global consumer behaviour, particularly with regard to travel. Coronavirus similarly has had a very immediate impact, especially the action of lockdowns which created an instant change in consumer behaviour. The immediate impact of 9/11 is eerily familiar to recent events. Travel search fell off a cliff, travel itself dropped by almost 60% in some areas from the month before 9/11 to the month after. And even more strikingly, there was a huge and fairly sustained drop in business travel and a corresponding rise in the use of virtual conferencing. Of course 9/11 differed from Coronavirus in that few travel restrictions came into being, the behavioural change was based on consumer fear. But whilst the immediate impact on travel from coronavirus was driven by lockdowns, it can be seen now that it is again fear that is the main driver of changing consumer behaviour, very few people would choose to travel right now regardless of restrictions.
But, recovery from 9/11 was both relatively swift and unexpected. Even in the US which was most significantly impacted, the recovery began as quickly as 2002, less than a year after the attacks. Why? Some cite the measures that were brought in post 9/11 such as enhanced screening and restrictions on liquids in hand luggage. But the more compelling evidence is simply that consumer’s concerns evaporated relatively quickly when no further attacks surfaced, and there was general agreement that governments and the travel industry has responded to mitigate the threat.
History suggests that human behaviour is slow to change. Yes the tools we choose and the way we engage with each other and with companies can change quickly, but what drives our needs, preferences and desires ultimately seems to mostly stay the same. So bear this mind as you shape your communications with customers as this crisis eases and we enter the post coronavirus world, don’t assume they will be fundamentally different in their core needs to how they were before once the fear that impacted their short term behaviour has passed.
Whilst it’s very easy to feel events are totally beyond our control right now, how we respond as an industry and beyond post this crisis will almost certainly have a significant impact on consumer behaviour, and if confidence can be quickly restored a fast ‘bounceback’ style recovery period, even if short lived, could very possibly lie ahead. Be ready. If that bounceback happens there could be a surge of demand that is unlike anything experienced in recent years. For companies that have cut back significantly in all areas this could provide a significant challenge. So remaining agile, being ready for a very fast change in circumstances could result in a clear distinction between winner and losers based on their preparedness.
There is an opportunity even with the looming recession, to grow our industry over the coming months and years. But it will take a willingness to continue to invest in product, and in communications, and above all a willingness to collaborate as an industry, not to compete with each other, but to compete with other industries who may well retreat from their own growth plans leaving an opportunity for our industry.
Your customers are still out there, and they are still interested in your offering, even if they can’t buy from you right now. They are also behaving differently in terms of where they are spending their time online, so make the changes to reach them. As ever, consider what your customers need right now, and think how about how you can create content to help them (hopefully this is what we are doing right now with this post – but let us know in the comments below). This, like all things, will pass. And the world may not be so different when it does, much of what holds true about sales and marketing (and people) before this crisis will absolutely hold true after it passes.
And the mountains will still be there which for many, ourselves included, will be reason enough to visit.