The Day After Coronavirus:What Will and Will Not Change in Business

The Day After Coronavirus:
What Will and Will Not Change in Business

Countless marketing pundits have been proclaiming that the coronavirus and resulting global shutdown will change everything in the industry forever. But if the 1918 influenza epidemic’s trend repeats itself today, the economy will recover and return to pre-crisis normal quickly.

That result will surprise many. Hannes Weissensteiner, a managing partner at Artefact, wrote that “traditional marketing will finally die.” eMarketer principal analyst Victoria Petrock thinks businesses will use virtual reality to hold events and conferences.

In the greater business and academic worlds, Scott Galloway predicted that dozens or hundreds of universities in the United States may never reopen. A Fast Company headline bluntly stated that “the office is dead”.

Martin Lindstrom wrote that “when we’re released, everything will be different. We’re not going to travel, eat, shop, or exercise the same way… perhaps forever.” Of course, someone had to write about “the Covid generation”. Lastly, a New York Times headline summarised the situation with “it’s the end of the world economy as we know it”.

But we should feel fine. The predictions will almost certainly not come to pass. The coronavirus will not – as the World Federation of Advertisers wondered last week – “change marketing forever”.

How the Spanish flu affected the economy

In 2007, Thomas Garrett, assistant vice president at the Federal Reserve Bank of St. Louis, published a paper (PDF here) looking at how the 1918-1919 global influenza epidemic affected business in the US.

First, the bad news. In one city, merchants in Little Rock, Arkansas, saw their total business decline from between 40% and 70% because of the mass shutdowns. Those companies together lost $10,000 a day ($133,500 per day in 2006 dollars).

Now, the good news. The US saw a “V-shaped” or “U-shaped” recovery when everything opened following the Spanish flu as soon as it was safe – it just took a while to get through the several waves of infections. There was not a long-term economic depression then, so there will likely not be an “L-shaped” economy today.

“Most of the evidence indicates that the economic effects of the 1918 influenza pandemic were short-term,” Garrett writes. “The influenza of 1918 was short-lived and had a permanent influence not on the collectivities but on the atoms of human society – individuals. Society as a whole recovered from the 1918 influenza quickly, but individuals who were affected by the influenza had their lives changed forever.”

Others agree. According to an analysis in April by Efraim Benmelech and Carola Frydman, two professors at the Kellogg School of Management at Northwestern University in Illinois, the Spanish flu had no long-term economic effects in the United States.

“The Spanish flu left almost no discernible mark on the aggregate US economy,” they write. “The coronavirus arrived to the US at a time of booming stock market values. By contrast, the influenza outbreak in the spring of 1918 occurred right after a downturn: the Dow Jones Industrial Average had actually declined 21.7% in 1917. Yet the stock market recovered substantially during the pandemic, with the Dow index increasing by 10.5% in 1918 and by 30.5% in 1919.”

“It is useful to remember that a global pandemic doesn’t inevitably lead to a grave economic recession or depression,” they add. “More specifically, a large expansion in government demand can go a long way in softening the economic impact of a crisis that clearly threatens to reduce consumption and private investment.”

The findings are even more encouraging because the Spanish flu’s estimated 675,000 US deaths were disproportionately young and middle-aged people in the prime of their working lives. Today, the coronavirus seems most harmful to the elderly. And do not forget that the US recovered quickly from the influenza epidemic even at the end of a world war.

Today, there is no such calamity – and the death toll has been far less. (Touch wood on both accounts.) Plus, the current contraction is not the result of fundamental economic issues as during the 1929 and 2008 US stock market crashes. It is an artificial, forced and likely temporary decline.

Human behaviour does not change quickly

The US economy recovered easily from the 1918 flu because humans do not fundamentally change quickly. In any scenario, people want to return to their pre-crisis lives as soon as possible – even during once-in-a-century pandemics or twice-in-a-century global conflicts.

In the second world war – which had far greater societal effects than the coronavirus today – the US sent 16 million soldiers to fight. One million were black, and they served in segregated units while defeating and then democratising post-Nazi Germany and expunging all types of racism there. Back at home, women went into offices and factories to replace the men who had volunteered or had been drafted.

If many of today’s business thinkers had lived at that time, they would have likely proclaimed that “everything is going to change” while pointing to black soldiers fighting and former housewives working. They would have stated that discrimination and sexism would surely disappear as a result of everyone’s new experiences during the crisis.

Of course, that did not happen. We should remember history whenever people predict today that the coronavirus outbreak and economic shutdown will “change everything forever”.

The four years of US WWII involvement from 1941 to 1945 did lead to remarkable societal change, but it was brief. Day-to-day life returned to pre-war form for the simple reason that basic human nature (and human beings individually) does not (and do not) change that much over short periods of time.

As Swedish strategist JP Catlin (né Hanson) recently tweeted, people lined up for a McDonald’s drive-through in the UK the moment that it reopened. Here in Tel Aviv, people packed bars and pubs the night that they reopened after 11 weeks. University students want everything as it was. 82% of festival attendees in Europe want to go to live events again. In the US, restaurant bookings are up.

And do not forget that armed protestors stormed Michigan’s state capitol building in the US to demand an end to the lockdown. Experiences in the real world are always more powerful and more important to people than what appears on computer screens.

My point is not to state that economies should or should not open right now – that is for the medical experts in individual countries to decide. My argument is that people will joyfully return to their routines as soon as they can. So, if 1918-1919 repeats itself, economies should rise just as quickly as they plummeted. This artificial and forced downturn should stop when the pandemic does.

A temporary pandemic cannot change human beings overnight.

For as much as many marketers say our lives will move online, UBS analysts found that 15% of retail sales happened online before the epidemic. During isolation, that amount has risen to 25%. I will put it another way. Even when faced with the risk of a painful Covid-19 death and with the ease of ordering online, people still bought 75% of their stuff in physical stores.

During the 11 weeks that I spent in isolation here in Tel Aviv, I bought nearly everything online and had it delivered. But I am not the market. Marketers are not the average person.

Overall media consumption does not change quickly either

Change in consumer media consumption also occurs slowly. Just compare the Nielsen US Total Audience reports from Q3 2013 to Q3 2019 showing the average media consumption among all 18+ people in the country.

A former colleague in her late 20s once told me that people her age no longer go out – they just sit at home and watch Netflix. Plus, people can do multiple things at once. We can go on the internet on our computers while listening to the radio. We can use our smartphones while watching live television.

And if we subtract eight hours for sleep, people can potentially consume 16 hours (960 minutes) every day. Therefore, producers of entertainment programming – and the advertisers who use that method – need to think not only about increasing their slices of the market but also about how to grow the entire market.

Second, we can see that average consumer behaviour changes little on a year-to-year basis but can change significantly over a long period of time. US adults still spend roughly half of their media time with live television and radio – they have simply added a lot of smartphone activity on top of that. Human beings do not change quickly, and media consumption is just another human activity.

No, television has not been dying – and the same is true for radio. What we call ‘traditional’ TV and radio might not exist in their current forms in 10 or 20 years, but that means little to marketers who need to sell stuff today. After all, television has always often been the best way to build a long-term brand among a mass consumer audience.

So, what happened after the coronavirus outbreak in March? We do not have a lot of concrete, official data yet. But Nielsen referred me to some information that the company has so far.

After isolation began in the US, streaming on internet-connected devices and smart TVs increased. 83% are listening to as much or more radio. Local television networks are the most popular source of news and information. Staying home in general leads to a 60% increase in overall media consumption.

Comscore has also reported the following changes in device usage.

How human beings do change

People change little in the short term, but they can change a lot in the long term if the seeds are planted at the beginning.

America did not magically desegregate after the heroic efforts of black soldiers in the second world war, but the experience of de-Nazifying Germany did lead many to join the civil rights movement in the 1950s and 1960s. Women returned to their traditional roles after working during the conflict, but those experiences directly inspired the feminist movement years later.

In a similar way, some seeds have been planted in the business world. Most likely, we will see small- to moderate-sized adaptations and modifications to daily life – but not too much that is earth-shattering.

Airports are starting to implement a new layer of security checks that include thermal cameras to check body temperature. Turkish Airlines, the airline I usually use to fly to speaking events, is going to downgrade its famous business class catering as well as board planes one-by-one from back to front and ban carry-on luggage.

When US universities open in the autumn, many students will see smaller classroom sizes, dormitories at far below capacity, strict social distancing measures and mandatory testing. Companies will likely abandon soul-destroying open-plan offices and use specially designed cubicles and offices.

Still, the world will likely return to mostly pre-coronavirus normal once the crisis has passed. After all, remember that the advertising industry has consistently averaged 1.0% to 1.5% of US GDP for a century – through growth and decline and through war and peace.

The Drum’s readers, especially in this time, want information that is immediately useful. So, in this regular column, I will now offer concrete suggestions as relevant.

Do not succumb to business hysteria. Ignore the false Cassandras who claim that everything will change simply because they want to be thought leaders or to sell something to marketers. Think calmly and rationally to determine what exactly the coronavirus pandemic will change in the context of your general industry and specific business. However long the downturn will persist, I do have specific marketing-in-a-recession recommendations here.

Make adjustments only as truly necessary. Most likely, little of significance will change. Most things will continue with minor or moderate adjustments, usually to adapt to new health codes and regulations.

Do not obsess about “going digital” unless absolutely needed. Online marcom is often merely a cheaper but less-effective version of offline marcom. Besides, “digital” is a useless term today.

In the meantime, wear a mask, wash your hands and do not leave home unless absolutely necessary. The warm, sunny beaches in Tel Aviv opened last week only because Israel shut down quickly and completely a long time ago. I hope all of you will see such freedom again soon.

Thanks for reading! Follow me on Twitter and see my marketing speaker page to have me visit your conference or company.

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