Propel Morning Briefing Mast Head Propel Hospitaliity website Paul's Twitter Link Subscribe Unsubscribe Web Version Forward Email Swifty Banner Morning Briefing Strap Line
Fri 27th Mar 2020 - Friday Opinion
Subjects: Lessons from history, furlough pay, start thinking about supply, and future of public health
Authors: Victoria Searl, Richard Hartley, David Read and Paul Chase

Lessons from history by Victoria Searl

I have no idea who said, “when times are good you should advertise, when times are bad you must advertise”, but it’s a quote often unearthed during times of economic crisis. 

I’ve frequently noted marketing is the first pot to be plundered when savings have to be made and it’s understandable businesses fighting for their lives since this outbreak began would cut marketing to try to stay afloat in the short term.

However, true marketing is as much about influencing the behaviour of the future as it is about driving people through the door today. There are a number of studies going back more than 100 years that underline the advantages of maintaining or even increasing marketing spend during a weaker economy. In fact, studies by research company Meldrum & Fewsmith revealed companies that maintain advertising during a recession enjoy measurably higher gains not only during the recession but even more in the two years after. This trend has held true for every recession or downturn since the Second World War.

I know what you’re thinking, “if only we were dealing with recession”, but we can learn something from these lessons whatever the nature of our economic crisis.

Here are nine reasons why we should maintain (at least elements of) our marketing, even in these worrying times.

Business not as usual allows you to reposition a brand or introduce a new product
We’ve seen some incredible and awe-inspiring diversification during these past few days, from businesses of all sizes. Each brand’s reaction to this crisis will stay in people’s hearts and minds for months and years to come, no matter what went before. In many ways, we can wipe the slate of market perception clean.

Brands can project corporate stability and much-needed customer reassurance. By spending light but maintaining a strong social and online presence, brands can position themselves in people’s minds as places to trust when restrictions start to lift because of their stability and presence amid a chaotic environment.

You could calm shareholder nerves
Bond markets don’t seem alarmed at the prospect of the government writing large cheques to keep the economy afloat. Merchant banker Close Brothers has said a “backlash is more likely to occur if the government is judged to be spending too little to protect the economy, not too much”. Could this approach to your own brands buy precious time from investors?

Healthy budgets = healthy brands
Maintaining social presence and advertising can imply healthy budgets – has anyone ever questioned whether McDonald’s or Coca-Cola are doing ok? – but the perception of health and brand well-being can have a positive impact on perceptions of teams and restaurants too, which will be essential after a major public health crisis.

The cost of advertising falls, whether a full-on Google or Facebook campaign or maintaining your own social media channels. The CPA (cost per acquisition) of a new database sign-up or online order will be a fraction of what it was a few weeks ago. Judging by the tone of talk in my marketing WhatsApp group (drop me a message to be added) the sheer love of our industry has inspired many agencies and freelancers, including myself, to offer help at a fraction of their usual fee and, in some instances, free.

Increased ‘share of voice’
When advertising and social are maintained, “share of voice” grows – and this can be further amplified when people use social media in the volumes they are doing during this lock-down. Share of voice typically leads to an increase in share of market, whether that’s now, online or when restrictions lift and consumers are desperate to dine out again.

Push the boundaries of your brand and get creative
Amanda-Jane Doran, an expert on Victorian publishing and illustration, noted the majority of brands that advertised through the First World War were still in business today thanks to the boldness of the art they used. As Amanda says: “Those ads worked.”

A crisis is an ideal time to communicate your purpose, values and ideals
It is understandable many brands will go into survival or panic mode during a crisis of this scale. Some will stop advertising or marketing completely, others will go hard on sales. In these ever-changing conditions, tactics and strategies should evolve as needs dictate but the emotional base of a brand must remain.

Emotion is one of the pillars of marketing and, historically, emotion has worked well. According to the Harvard Business Review, the stock prices of companies with strong brands built through emotional campaigns such as Colgate-Palmolive and Johnson & Johnson held up better in recessions than those without strong brand recognition or engagement.

It lifts an industry
When one brand shouts loudly it becomes a rallying cry for the sector. Customers won’t see us as competitors when this is over, they’ll see us as the thing they want to do with loved ones first. Even a few voices keeping the home fires burning can spark a huge movement, which benefits us all when restrictions lift.

I may be a marketer but with a strong interest in data I tend to be naturally suspicious of anecdotal or “positively spun” evidence. However, after hearing the brands that advertised during the war bounced back faster when it ended, I felt compelled to seek evidence that suggests brands should advertise during times of economic and cultural crisis. Happily, there are loads of examples. 

In the 1920s, Post was the biggest-selling cereal brand in the US. During the Great Depression, Post slashed its advertising budget while rival Kellogg’s doubled its spend, investing heavily in radio. It even introduced a new cereal, Rice Krispies, featuring the Snap, Crackle and Pop characters. Kellogg’s profits grew 30% and the company became category leader, a position it has maintained for decades.

In the recession of the early 1990s, Pizza Hut and Taco Bell took advantage of McDonald’s decision to drop its advertising and promotion budget. As a result, Pizza Hut increased sales by 61% and Taco Bell’s sales grew 40%, while McDonald’s declined 28%.

Amazon grew its sales 28% in the last recession. It innovated throughout and even launched a Kindle. On Christmas Day 2009, Amazon customers bought more e-books than printed books for the first time, cementing Amazon’s position as a company on the side of cash-strapped consumers.

While this crisis is proving far graver for hospitality than a recession or even war, it’s worth bearing in mind the thoughts of the Telegraph’s deputy economics editor Tim Wallace, who wrote: “Although the plague and Great Fire of London (1665-66) temporarily brought London to its knees, the capital enjoyed a huge boom in growth soon after.”

It’s good to know the economic pain of pandemics can be followed by the quick recovery we’re all hoping for”.
Victoria Searl is an industry marketing director and founder of Data Hawks, a hospitality data consultancy that finds and joins up your data, turning it into sales, loyalty and ROI. Email victoria@wearedatahawks.com

Furlough pay by Richard Hartley 

The government released new guidelines yesterday on how to handle furlough pay (see link below for full details).

We are creating a furlough pay type for S4labour to support our customers through this challenging time but I wanted to write and share how we’re calculating this so others have the information to do so.

The government has said for employees it will pay a grant of 80% of earnings up to £2,500. This will be based on the higher of the average earnings in the whole previous 12 months (or fewer if they have worked for less time than this, including a part-month calculation if they were taken on in February) or the earnings in the same pay period in the previous year. 

This is helpful for salaried staff but much more complicated for weekly paid employees on variable-hours contracts. We are therefore required to interpret how to calculate the above earnings for our weekly paid employees. We are going to apply the following logic:

We will calculate their average monthly earnings for the previous 12 months from the date they were furloughed. For example, if they were furloughed from 21 March we would reference 21/03/19 to 20/03/20 and work out a monthly average.

We will recalculate the last year’s monthly earnings every week based on the month that starts on the same date as the week last year. For example, for the week that runs 23/03/20 to 29/03/20, we’ll look at the monthly earnings from 23/03/19 to 22/03/19.

We will then take the higher of these monthly earnings and use this to calculate the weekly pay for the employee. This is good news for our teams whose earnings typically increase as we head into the summer months as they will benefit from this uplift.

All employees are eligible as long as they were employed by the organisation on 28 February. 

We were pleased to see the government will additionally cover the National Insurance contributions and pension contributions for employers.

Employers are also able to top up their employees’ pay and we will support this functionality, although NI and pension contributions on the top-up aren’t covered by the scheme.

There’s still no announcement on how to treat holiday while staff are furloughed. In the short term, we’re going to maintain their accruals so we have an accurate picture of holiday entitlement as we come out of the pandemic but will amend this if further advice from government suggests we need to. Our thoughts are that the government is delaying making an announcement on holiday as it’s unsure how long the pandemic will last and to commit to any specific stance in the short term could have longer-term consequences.

We will continue to do what we can to support our customers and the wider industry. If anyone has any specific questions, email richard@s4labour.co.uk and I will do my best to answer. Click here to view the new government guidelines in full.
Richard Hartley is chief product officer of Catton Hospitality
Catton Hospitality is a member of our BeatTheVirus campaign

Start thinking about supply by David Read

No-one reading this needs any confirmation this is a deep crisis indeed. I spoke to one of our key City contacts this morning who, unsurprisingly, suggested we’re heading towards a particularly bad UK GDP in the second quarter. He said: “Normally we speculate whether it will be 0.1 or 0.2 different to expectations. This time it’s a case of whether the fall will be 5% or 10%.”

All sector leaders are straining every sinew to get back in control of their business after weeks of deeply negative news. Most are taking measures to remove cost and shore-up balance sheets.

The same is true in the essential supply chains our operations rely on. We have been in constant communication with leading suppliers in recent days, many of them operating at less than 5% of pre-crisis turnover and grappling with the same challenges as operators. Some can rely on public sector contracts, some are setting up direct-to-consumer services, and the larger players have been diverting capacity to supply a stretched supermarket sector.

However, it’s inevitable when social-distancing restrictions are lifted – probably gradually – the operator and supplier landscape alike will be materially different in three critical ways:

– Many operators and suppliers won’t survive this crisis and, depending on how this plays out, the supply/demand balance is likely to be significantly disturbed, which may lead to suppliers being much more discerning about who they choose to trade with

– It’s likely cash and risk will become much more critical as suppliers and operators alike will be carrying lower levels of cash and higher debt

– A sudden surge in demand created by lifted restrictions will cause major availability issues

As an operator, why should supply chain be in your thinking as early as possible, even though it’s unlikely you’re trading? Here are five critical reasons:

Relationship
The lowest risk route to re-establishing a suspended supply chain is to do so with existing suppliers. If you treat them well during the crisis this will pay back in spades later. A big part of that is keeping lines of communication well and truly open.

Product availability
It would be unwise in the extreme to assume it will be easy to turn the supply chain back on that you had when you closed. Distributors, wholesalers, producers and manufacturers you used previously may not exist and, if they do, may be unable to supply the specific products you used previously and at the price you need.

Planning
On return, the commercial environment will be different. Suppliers will be hungry for business but highly risk-averse. Operators need to be well prepared and dialogue with suppliers should be ongoing throughout closure to ensure sourcing and commercial challenges are resolved in advance of what you will want to be a fast remobilisation when restrictions are lifted.

Impact/risk
As the crisis develops, suppliers will monitor their suspended contracts and may wish to re-enter on different commercial terms – encompassing important factors such as price, payment, wholesale/upstream mix, and service levels. It’s important to understand this in advance of a reopening.

Broader supply issues
The immediate supply chain isn’t the only place where change is happening fast. Other issues such as labour-driven production problems, transport restrictions, and food and drink commodity markets (to name a few) are in major flux and likely to have an impact on availability and product price during a period of reopening.

It’s stating the obvious that when a business has zero revenues the number-one priority must be planning to survive that period. But, just because you’re closed, your supply chain hasn’t gone away and it will need significant attention if you’re to get the fast start you’ll need when the pandemic recedes.

With the country in lock-down, we would like to reiterate our offer of support at this difficult time. We know how incredibly hard it is for you right now and want to do all we can to support the industry. Our sector is in an extremely difficult period and we’re offering free advice to all operators so please call David Read, Shaun Allen or David Kelleher direct on the numbers on our website. We are here to help. 
David Read is chairman of Prestige Purchasing – www.prestige-purchasing.com
Prestige Purchasing is a member of our BeatTheVirus campaign

Future of public health by Paul Chase

Faced with the current crisis I have struggled to think of anything relevant, let alone comforting, to write as I’ve watched the licensed retail sector and wider hospitality industry fall apart in front of my eyes.

This quote from the online blog CapX, dated 20 March 2020: “Some crises overwhelm everything. They make each controversy that went before them seem small indeed and draw a line in the calendar between ‘before’ and ‘after’. We could be living through one of those fundamental historical break-points right now. So much in the future will be at least coloured by this spring and early summer – healthcare, housing, welfare systems, travel and tourism, economic policy. You name it, things are moving.”

The author of that quote, Glen O’Hara, didn’t mention the phoney “epidemics” and “time bombs” conjured up by so-called “public health” and backed up by shoddy science that have generated moral panics around alcohol and food in recent years. It seems to me public health has become complacent in recent years regarding infectious diseases, believing prosperous countries in the west have largely overcome the mass societal epidemics that decimated our populations in the past. They have shifted focus to those aspects of personal lifestyles that increase the risk factors for non-communicable diseases such as liver disease and diabetes.

The key transition in our perception of the next steps forward in public health has been the rise of epidemiology. American epidemiologist Abdel Omran offered a history of humanity in three ages – pestilence and famine (life expectancy 20 to 40 years); receding pandemics (30 to 50 years); and degenerative and man-made diseases (more than 50 years). The receding pandemics of infectious diseases receded for three main reasons – sanitation, vaccination and medication (antibiotics) – but modern medicine has seemed powerless when dealing with the so-called man-made diseases such as cancer, strokes, diabetes and dementia.

However, it seems pandemics aren’t receding. New viruses such as covid 19 are appearing while known viruses are mutating and becoming antibiotic-resistant. We’re waking up to the realisation we can’t regard infectious diseases as only affecting poor countries with rudimentary healthcare systems – the whole world is reeling from the current pandemic.

When we get to the other side of this crisis I hope the government reviews the focus of Public Health England to ensure more of its £6bn a year budget is focused on infectious disease control – the sort of thing public health has historically done well in this country. I suspect no-one will take references to people drinking too much as a “binge-drinking epidemic” seriously or references to the non-existent “childhood obesity epidemic” either, let alone the proposition knife crime is a “public health emergency”. Not after this. Not after covid 19.

My heart goes out to all those struggling in our sector – the operators, suppliers and those living from one pay packet to the next. I hope the government tears up the rule book, gets the chequebook out and puts the flamin’ fire out.
Paul Chase is director of Chase Consultancy and a leading industry commentator on alcohol and health

Return to Archive Click Here to Return to the Archive Listing
 
Punch Taverns Link
Return to Archive Click Here to Return to the Archive Listing
Propel Premium
 
Weston's Banner
 
Ei Group Banner
 
OrderPay Banner
 
TipJar Banner
 
Wi5 Banner
 
Weston's Banner
 
Menu Connect Banner
 
Trail Banner
 
Odamo Banner
 
Arla Foods Banner
 
Nestle Waters Banner
 
Yumpingo Banner
 
Swifty Banner
 
Camile Banner
 
Eagle Eye Banner
 
Pepper Banner
 
Carlsberg Banner
 
Ten Kites Banner
 
The Leisure and Hospitality Collective Banner
 
LunchMate Banner
 
Biff's Banner
 
Zonal Banner
 
Orderbee Banner
 
McCain Banner
 
Matthew Clark Banner
 
Deliverect Banner
 
A2Z Masks Banner
 
Sintuitive Banner
 
Yoello Banner
 
Boxpark Banner
 
Prestige Purchasing Banner
 
Access Banner
 
IOL Banner
 
COREcruitment Banner
 
Startle Banner
 
Venners Banner
 
Pago Banner
 
Punch Taverns Link Punch Taverns Link
Wi5 Banner
ALMR Web Link Web Version Unsubscribe Subscribe Propel Info website