With stay-at-home orders lifting across the country, Americans are slowly emerging from isolation. But the return to public life is charged with uncertainty, as consumers, businesses, and the market face a rapidly evolving recession.
In the first quarter of 2020, the G.D.P. fell 4.8 percent — the worst quarterly decline since the Great Recession. While some investors are banking on a swift recovery, the resounding stance among economists is that it’s too soon to forecast the future. Still, looking at the course of past recessions, it is possible to imagine — and prepare for — three possible growth patterns:
The V-shaped economy, defined by a steep decline (the first half of the “V”) and then a quick upward slope (the second half), is the best-case scenario, but also a highly unlikely one, according to a recent poll by Reuters that surveyed 45 economists in the US and Europe.
The U-shaped economy, the most popular prediction in the Reuters poll, is marked by an extended plateau of minimal activity and then a gradual recovery.
The W-shaped economy — also referred to as a “double-dip” recession — charts a mercurial course from recession to recovery and back again; it is the worst-case scenario, but few experts believe it will come to fruition.
All three predictions are circumscribed by a fundamental uncertainty: over a century has passed since the last global pandemic, and many of today’s economic and political leaders have no precedent for a health crisis at the scale of the novel coronavirus.
The paucity of consensus from the government, news media, and economic pundits is putting consumers in a holding pattern as they wait and see what transpires. In the meantime, an overwhelming majority of Americans are cutting their spending in response to the volatile economic conditions. In FIG’s recent survey of a diverse group of 1,200 Americans, a staggering 68 percent of respondents reported they are spending less; other reports by McKinsey and the personal finance service Bankrate show similar results. When people are shopping, they are prioritizing essential goods and services like groceries, takeout and delivery meals, and household cleaning supplies, and they are making the lion’s share of their purchases online. The dramatic rise in online shopping reflects just how deeply Americans have internalized social distancing: more than just a way of moving through public spaces, it has become the standard protocol for commercial activity.
Based on research that new behaviors generally take two to three months to form into habits, and assuming that social distancing mandates will be in effect for at least that long, low- or no-contact shopping is here for the long haul. Even as restrictions gradually lift, businesses are adopting precautionary safety measures, like limiting the number of customers allowed at a time, staggering staff hours, and taping the floors to indicate a 6-foot distance between customers. The enduring imperative for socially distanced transactions will inevitably hurt in-store sales, as businesses will not be able to reach the capacity they once had. To stay viable for the long term, brands need to prioritize touch-free transactions and seamless digital experiences.
Barred from countless leisure activities of their pre-pandemic social lives, consumers have filled the void with new forms of home entertainment. Streaming services are booming, from audio and gaming to movies and music. Over half of the respondents in our study have subscribed to more streaming services, and 60 percent of them plan to keep paying for the new plans once restrictions lift. Linear TV is seeing similar usage spikes, especially in primetime programming and local news broadcasts; however, as workers return to their commutes and the urgency for live coronavirus coverage softens, we expect the demand for cable to wane. To capitalize on current viewing patterns, brands should roll out laser-focused targeting on both OTT and addressable platforms, keeping a constant eye on impressions, to adjust if and when linear usage declines.
Beyond TV, the pandemic has prompted notable consumption shifts across the media landscape. At the height of the pandemic, people flooded search engines for immediate information and advice. As restrictions lift, we expect that paid search will continue to be an important messaging channel, as consumers navigate an uncertain economy and manage vestigial anxiety over social-gathering practices. To ensure optimal reach, brands should embrace programmatic display advertising, as the nature of the bidding algorithm allows for nimble, hyper-responsive targeting.
A 360-degree media plan would not be complete without a comprehensive social media strategy. As consumers recoup their in-person social lives, online social networks will forge a crucial bridge from pandemic isolation to post-pandemic public engagement. Facebook groups will offer resources for social reintegration, LinkedIn will connect job seekers with prospective employers, and Instagram will once again become a beacon for aspirational influencer marketing. Overall, social media usage will remain steady as consumers tentatively emerge from isolation and continue to rely on the digital dependencies of their quarantine lifestyles.
While the pandemic is spurring new spending and media habits across demographic lines, distinct consumer segments are emerging, based on differing levels of financial strain. To resonate with consumers as the public health crisis abates, it is crucial to tailor brand messaging according to the nation’s stratified economic realities. Our proprietary study reveals three nascent consumer segments — Recoverers, Modifiers, and Optimists — who exhibit unique financial mindsets:
Recoverers (26 percent)
This segment has been dealt the worst hand: they’ve lost income, depleted their savings, and are generally discouraged about what the future holds. In other words, the Recoverers are in dire need of a break. To reach this subgroup, brands need to play the role of caregiver, offering concrete help and sources of security and safety.
Modifiers (47 percent)
This group has suffered minimal financial damage during the pandemic. Some may have been furloughed or taken pay cuts during the lockdown, but they are poised to re-establish steady income flows as soon as the recession ends. To engage Modifiers, brands should send messages of encouragement, share strategies for returning to normalcy, and facilitate a sense of community.
Optimists (27 percent)
This fortunate subset of the population has maintained pre-pandemic income levels and perhaps even benefited from the current situation. After weeks spent working from home, barred from their usual opportunities to spend money, members of this group are eager to make use of their quarantine savings and take advantage of deals in a bear market. Brands looking to resonate with Optimists will do well with inspiring campaigns that appeal to their excitement to emerge from isolation and long-overdue urge to indulge.
FIG COVID Segmentation Study. May 2020.
For more detailed strategies on reaching each group, see our triad of concise analyses:
Consumers are returning to public life, but their transition is slow, staggered, and cautious. And when they do finally reach a semblance of “normal,” it won’t look like it used to. The novel coronavirus is etching indelible marks on consumer psyches; to resonate with post-pandemic audiences, brands need to not only accommodate, but celebrate, the new patterns. As people emerge from weeks of isolation and fear, now is the time to proffer clear messages of solidarity, support, and prudent optimism.