CEO & President Member Newsletters

Assessing 2020’s Damage and Forecasting 2021’s Business Recovery

Dear Colleague:

Rarely have so many been so glad to say good riddance to the old year and shout a hearty welcome to the new year.  I join them in that and wish you a happy, healthy and prosperous 2021.  We can finally see light at the end of the pandemic tunnel and the focus now shifts to planning for the recovery.

But first, a look back.  The year that just passed left a lot of economic damage in its wake, though not as much as many had feared.  That at least is the finding of a recent ARF scan of business research and results for the four key constituencies served by the ARF.  Among the highlights:

  • Despite the pandemic and the severity of the recession, latest forecasts from MAGNA show that total U.S. advertising revenue for 2020 fell by just -1% to $221 billion in 2020 and is expected to grow by +4.0% in 2021, excluding cyclical events. The U.S. advertising market fared better than the global average (-4.4% vs. 2019) (Létang, 2020).
    • This was mainly due to the stronger-than-expected digital media spend (+10% vs. 2019) and a huge influx of political spending ($8.5 billion) that partly offset the budget cuts of other verticals in TV, radio and digital (Létang, 2020, Homonoff, 2020). Anecdotally, some of our media members commented that high levels of political spending had helped recovery from otherwise disastrous spending levels in 2Q of 2020.  From that perspective, a 1% overall spending decline for the year looks like victory.
  • GroupM predicts that national TV advertising will see a decline of 7.9% during 2020 and a rebound to grow by 6.6% during 2021 before returning to a flat or slightly declining longer-term trend. At this pace, national TV is faring better than every other category of media other than digital (Wieser, 2020).
  • According to Dentsu’s 2020 CMO Survey, the top challenge for both U.S. and global marketers in the next 6-12 months is understanding which consumer behavior shifts will be permanent. Even if they do gain an understanding, over one-third are challenged to align their brands around changing sentiment (Keane, 2020).
  • McKinsey observes that the lockdowns and a shift in consumer priorities toward health and safety due to COVID-19 condensed five years of e-commerce growth into three months, dramatically reshaping both the consumer path to purchase for CPG products and the actual points of purchase (Brodherson, Jacobs, Jojart, & Wong, 2020).
    • CPG manufacturers saw a 277% increase in retail sales via e-commerce channels for food & beverage and health & personal care companies in 2Q of 2020 (Wieser, 2020).
  • Agencies have suffered layoffs and furloughs this year largely due to COVID-19, which spurred many brands to cut, reduce or delay marketing spend, especially in the beginning of the pandemic. Forrester estimates that a total of 35,000 agency jobs were cut in 2020 in the U.S., and that 17,000 more will be gone in 2021. COVID-19 has also accelerated the move towards brands bringing marketing in-house (ANA, 2020), as well as increasing adoption of automation in agencies — which is likely to lead to “fewer people in smaller agencies” (Smiley, 2020).
  • COVID-19 also accelerated the digital transformation in market research. As in-person research basically stopped altogether in favor of digital and/or online equivalents, market research companies are redirecting savings into investments in new technology, such as automation, machine learning, artificial intelligence and systems that can make better use of customer data to help drive marketing efficiencies (Qualtrics, 2020).

So, it has been a very mixed picture with widely differing business results across different verticals, reflecting COVID-19’s disparate impact on demand and supply, and on the tactical adaptations available to different sectors.  (For the full ARF report, click here).

Throughout the year, the ARF continued to field questions from members about how to market during the pandemic, how to navigate the cultural crosscurrents occasioned by political polarization, and how to meet consumer and stakeholder expectations of both price/value and of brand values.  As it has done in past recessions, the ARF plans to track marketer responses to the 2020 challenges and analyze market share changes over the next 3-5 years in light of those responses.

Of course, we also fielded many questions about non-COVID topics — especially about the continued shift toward CTV, the implications of cookie deprecation for digital marketing and attribution, and the numerous proposed approaches to (supposedly) privacy-safe identity resolution.  All of these issues will be with us in 2021 and continue to claim their place on our agenda.

But taming the pandemic continues to be THE prerequisite for economic recovery, so public health forecasts are still paramount.  Indeed, the dialogue between epidemiology and business forecasting that started last March continues apace.  That dialogue was a key topic at December’s DATAxSCIENCE virtual conference on forecasting where Rex Briggs, who did so much last spring to push our thinking about the interplay between epidemiological and marketing models, presented his updated forecast for the timing of the pandemic’s end – along with the working model components that fed the forecast.  Rex’s full paper on the subject is now available on the ARF website here in the “COVID Corner” that we established last spring to feature important work by ARF members on the pandemic and its effects on businesses.  Rex updates his forecast each week in response to new data and new learnings, and those updates will be posted on the website as they come in.

What goes up must come down.  Viruses with exponential growth curves invite modelers to anticipate not just the steep growth at the outset, but also the steep decline at the end of the epidemic.  That more optimistic prospect will be the subject of an increasing share of forecasting work in the months ahead, including forecasts by members of the ARF community.

Given that so many ARF members contributed to the COVID Corner when the pandemic was first spreading, we hope to see a similar number of contributions studying the happier side, the recovery side of the cycle – the one that we think will emerge in the 2nd half of 2021.

We also think that this is an opportune time to support deeper thinking about the art and science of forecasting — beyond the discussions we have hosted at DATAxSCIENCE about what epidemiologists and econometricians can learn from each other.  Accordingly, we plan to launch a new ARF Council devoted to improving market forecasting methods and focused initially on forecasting the shape and pace of business recovery.  It’s a complex topic with such varied inputs as vaccination uptake, local public health measures and restrictions, consumer preferences that may have changed in the pandemic, and a host of sector-specific variables.

Complex yes, but Topic A for business planners and executives trying to decide how to allocate capital and lead organizations.  It is a perfect opportunity for smart research and analytics professionals to show their value.  Members interested in tackling this specialized topic should keep an eye out for the new council’s organizing notice or contact Jay Mattlin at jmattlin@thearf.org.

Let me close by thanking each and every one of you for your continued support of the ARF, its mission and its values.  As I said at the opening, I wish you a happy, healthy and prosperous new year.

All best,

Scott