COVID-19: how to shape the next normal

Dennis Spillecke
- Leadership - May 07, 2020

Dennis Spillecke, Senior Partner, co-leader of Marketing & Sales Practice, Western Europe,  McKinsey, explores how industries can shape the new normal.

First and foremost, the COVID-19 crisis is an unimaginable human tragedy. As the pandemic continues to threaten millions of lives around the world, global economic realities are significantly impacting every aspect of our lives, from how we work and communicate, to how and what we buy. In this unprecedented new reality, the massive changes in customer behaviour and business outlook have put growth officers and Chief Marketing & Sales Officers (CMSOs) on the front lines. 

To chart a path forward, leaders must anchor on what matters and do multiple things well simultaneously by taking on a three-horizon approach – navigate the now, plan for recovery, and shape the next normal. 

This means, first and foremost, they must lead with purpose by putting the needs and well-being of their employees and customers first. Managing the human element is paramount, and you need to show that you are there for your people and loyalists. It’s also imperative that marketing and sales meet the moment with empathy to shape their response and be on-tone. 

Second, leaders need to act decisively with speed and agility by thinking about the next horizon, so they are ready to address demand when the recovery returns. We have found that the best business leaders have the agility to proactively shape the future of their organisations. 

Lastly, leaders have a unique opportunity to start reimagining the future using deeper insights and foresight by keeping a tight pulse on the demand signals to inform their longer-term strategy. 

Navigate the now

We are in uncharted territory, forcing CMSOs to simultaneously address both the immediate COVID-19 crisis and the resulting economic downturn. Among the many levers they need to utilise, we believe they should prioritise the following:

1. Lead with purpose

In a time when people are frightened, unsure, and facing dire economic conditions, brands have an outsized role to play in their communities. This includes corporate social-responsibility initiatives designed to meaningfully support your customers and the community. While any assistance is important, we believe that those contributions that are authentic, brand appropriate, and truly helpful are more likely to not only be appreciated but also to have a positive and lasting impact on customers. 

2. Take care of employees and customers

Safeguarding the well-being and safety of employees and customers is a top priority. Companies such as Domino’s and DoorDash have invested in employees’ safety by creating contactless delivery, while Apple, Bank of America, and Patagonia have committed to a no-layoff policy, despite temporary store closures. One CMO personally flew hand sanitiser and masks to employees to ensure their safety and security. 

3. Build up cash reserves

The sharp declines in demand that we’re seeing in many sectors may last for an extended period of time. That’s why it’s important to be strategic in looking for ways to make cuts through, for example, marketing-spend efficiency, optimizing markdowns, and better managing inventory. Managing pricing in particular is crucial to avoiding discounting that destroys value.

At the same time, CMSOs can go beyond making cuts to generate cash by reallocating spending to programmes that deliver “stacked wins” in both savings and revenue. Targeted personalisation and customer experience initiatives can also fuel growth while improving customer loyalty and building long-term trust. 

Plan for the recovery

Leaders need to be ready to capture mindshare and demand from the old game board when the recovery starts. Effective spending in marketing and sales, however, means not just pulling out the old playbook, but rethinking how to better use tools and capabilities to connect with customers. 

1. Accelerate digital ambition and analytics engines 

E-commerce is already proving its importance and will likely retain it through the recovery. For B2B customers, the use of digital channels when ordering from suppliers has increased in importance from 2019 to 2020. 

CMSOs will need to make urgent investments in digital tools and capabilities and upgrade analytics engines. Investing in data and analytics operations, in particular—predictive analytics, virtual sales, pricing and promo thresholds, sales effectiveness—along with raising ambitions for digital, have the potential to substantially improve the ability to personalise offers to customers, prioritise sales pipelines, and improve sales activities. This includes rethinking omnichannel and redesigning frontline sales-force processes for today’s remote-work environment.

2. Be ready to capture early demand 

We see small indications in some categories of possible demand pickup. To be ready for this, CMSOs will need to zero-base their marketing and sales strategies and develop a clear view of what their customers value. B2B customers, for example, have indicated that they value the ability to use a mobile app when ordering from suppliers.

Unbundling products and services to tailor them more closely to customer needs or restructuring payments—by moving to a recurring revenue or subscription model or lowering up-front fees to better reduce customers’ near-term outflows—can help win customers. Investing in value-selling capabilities as well as continuous reviews of sales incentives and pricing targets will be crucial to making sure companies are both relevant—and sensitive—to their customers.

Past behaviours and habits won’t necessarily be what consumers and customers want when the crisis ends, so developing a clear perspective on which habits will stick, which won’t, and for which segments will be crucial. That reality is particularly important to consider with algorithms and advanced analytics that generally rely on past behaviours. Those will need to be retrained on new behaviours and patterns to help give CMSOs a more accurate picture of developing demand. Market price tests can become obsolete after just a few months in volatile markets, for example, so pricing-sensitivity research and tests need to run frequently when setting price points.

Lead in the next normal

No one can predict what the next normal will look like, but the size and speed of the coronavirus disruption hints at big changes ahead. We have seen tantalizing glimpses of the contours of that change in the use of AI to better predict the spread of COVID-19, in the spirit of innovation unleashed to find a cure, and in the remarkable advances in telemedicine. To succeed in this world, CMSOs will need to think through new capabilities, processes, and ways of working. 

1. Rethink ecosystems

Connected ecosystems through trusted outsourcing and partnerships can rapidly scale capabilities and ensure more integrated, seamless customer experiences. Leaders must take a wide view of profit pools to re-engineer value chains for flexibility, near- and on-shoring, inventory pooling, and rebalancing across channels. Building a resilient ecosystem with clear visibility into which parts and products will be affected by new behaviours and business models can minimise risk to your brand as well as disturbances to your customers.

2. Virtualization

As customers have become more comfortable with virtual platforms, from visiting properties to “trialling” cars, their behaviour suggests potential new business models. New ways of ways of working, connecting (virtual trial, virtual sales), and accessing and consuming information in connected homes and AI-enabled services will require fundamental business-system redesign.

While there are many unknowns about the full implications of COVID-19, one thing is clear: we are in a generation-shaping moment from which a significantly different world will emerge. CMSOs have a defining role in determining whether their businesses can succeed in it.

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