Plural Strategy looks beyond Covid-19 to assess the likely near-term impact and long-term fundamental shifts affecting marketing businesses, and to identify key investment opportunities and strategic considerations.
How has Covid-19 impacted marketing businesses?
Before Covid-19, digitisation, marketing efficiency and data privacy were key themes driving marketing activity and spend. These marketing trends will be accelerated due to changes in consumer behaviour and the economic pressures created by Covid-19.
The decline in marketing spend, but mostly at the expense of traditional formats
The impact of Covid-19 has been severe across marketing spend, including a decline in digital media spend for the first time. Furthermore, many advertisers have paused spending across all channels.
As lockdown measures begin to ease and the vaccine roll-out takes effect, it is expected that digital will rebound rapidly. However, this will be at the expense of traditional media formats. A Covid-19-induced recession will have an amplified impact on marketing spend, albeit with some mitigating factors relative to 2007-10.
Accelerated digital transformation
We can expect continued growth across digital platforms, and accelerated digital transformation of the marketing function. So which operators are likely to succeed in the post Covid-19 era? Those who are digital first, data and insight enabled and can support client transformation.
Incumbent agencies will need to reconfigure their value proposition, capabilities and operations, as specialist technology-enabled providers emerge. In the near-term, those focused on traditional media and operating methods will need to consolidate and/or accelerate their reconfiguration to remain relevant.
Change in customer expectations
Covid-19 is likely to reshape brand expectations, media consumption and purchasing behaviour in the mid-term above forced lockdown adaptations. Marketing businesses need to focus on the customer, now more than ever.
Where are the opportunities?
Winning business models
Marketing businesses which are digital-first, efficient, data-driven and customer-centric will win in the mid-term. In addition, paid media, marketing services and marketing technology are important areas of focus.
Investment opportunities
Investment opportunities in each segment will depend on the immediate and structural impact of Covid-19 and its pre-pandemic digital starting point.
Plural Strategy has identified four potential investment strategies for the marketing, media and information industries post Covid-19:
- Invest in high-growth segments
- Buy and build to accelerate digital transformation
- Consolidate for scale
- Target undervalued assets
Strategic issues to consider
There are also strategic issues that arise from a more digitised society. This includes how digital assets are valued in M&A, increased competition for digital talent and changes in customer needs. Companies need to be flexible to adapt to these behavioural changes. For companies with the capability, monitoring customer needs will be a source of competitive advantage.
In summary, Covid-19 will cause a significant leap towards a more digitised future in marketing services. Operators will need to adapt to win in the post-pandemic era.
