Being ‘radically uncertain’ in a certain recession

Being open to both past and new data is vital for a medium-term strategy.

IPA Effectiveness Editor Carlos Grande asks what uncertainty around the Coronavirus pandemic means for advertisers in the short, medium and long-term.

If you think the future is hard to predict, try anticipating how the recent past will look a year from now.

In just four months, the COVID-19 global pandemic has re-written medical history, forcing experts to revise previous advice on an almost weekly basis.

It has led governments to introduce unprecedented peacetime restrictions on people and businesses, whilst vowing to lift such measures as soon as practicable.

The impact of these restrictions means that the UK economy will inevitably enter recession in 2020 – defined as at least two consecutive quarters of decline in gross domestic product.

Yet current forecasts for this downturn vary widely, and are liable to be serially re-written as actual economic data from the first and seconds quarter is published retrospectively.

In such volatile circumstances, one of the most difficult business challenges for marketers, as has been well argued, is whether and how marketers should try to plan for the medium term.

The short term clearly demands that brands play their role in meeting the immediate needs of people, businesses and society in a medical emergency, and do so with empathy and generosity.

People look to the familiar and the trusted, including brands, for reassurance during times of stress, and brands' behaviour will be under unusual scrutiny.

Equally, it isn’t clear that brands would yet have enough information to warrant re-writing long-term plans unless their very survival is under threat, in which case long-term plans are largely irrelevant.

The difficult terrain is the medium term. This is usually defined in IPA Effectiveness Databank reports and IPA Effectiveness Awards cases as anywhere between six months and three years.

Historically, this middle timescale has attracted less discussion, in part because the effectiveness of two main types of advertising – activation and brand building – is most clearly seen at opposite ends of a time spectrum running from zero to three years.

As IPA research has consistently shown, activations typically work best for a short period but leave few enduring effects. Brand building, on the other hand, takes time to create its effects, but can then accumulate benefits the longer it runs.

If the fact UK recessions have typically lasted about a year is any guide, developing a medium-term brand strategy would currently mean in practice equipping a brand to cope effectively with both a downturn and a recovery.

Even if, as some argue, we are in a 'black swan' moment – the term for an unexpected development, of high impact that renders accepted explanatory frameworks meaningless – it isn’t clear how you would identify we were living in such an unprecedented phenomenon, except by first showing how dramatically we had departed from historic patterns.

After all, even scientists working directly on the Coronavirus have analysed the disease in the context of their accumulated knowledge about previous viruses, and while working on a vaccine have continued to test whether existing drugs could also be used to treat COVID-19 patients.

However, simply pointing to historical precedents also doesn’t seem to be an adequate response to the present situation in which so many unknown medical and social factors are combined.

One possible way of addressing the problem is suggested by Radical Uncertainty, a new book by the Mervyn King, former Governor of the Bank of England, and the economist John Kay.

In the book, the authors distinguish between a mystery, which cannot be explained and isn’t always capable of resolution, and a puzzle, which has a clear solution, if and when, the right information becomes available.

During their pre-lockdown book launch events, they described the COVID-19 pandemic as more likely to be a puzzle (solved when the information for a mass vaccine is available) than a mystery.

They advocate that when business leaders face uncertainties which could prove to be either mysteries or puzzles, they should start by simply asking ‘What’s really going on?’ and be willing to answer 'I don’t know'.

They should then collate relevant new and existing information and use this to form ‘good narratives’ about how they plan to deal with the unexpected rather than seek the comforting but potentially false security of trying to quantifying certainties by specific numbers and models.

In this context, a brand strategy can be seen as a kind of 'good narrative'. It communicates how a brand imagines itself resolving the challenges to its future performance.

It should be open to combining the best of historic and new data, and but be flexible to be revised in the light of relevant new developments.

Indeed, a lesson of the COVID-19 outbreak may not just be that even the past can be ‘unpredictable’ - with what seemed a credible official response one week often discredited by the next.

It may be that the usual meanings of the terms 'short', 'medium' and 'long' term are shortened in a crisis, with medium-term counted in months rather than years.

In a world of few certainties, we seem set to find out.

Carlos Grande is Effectiveness Editor at The IPA. For more learnings on adveristing effectiveness visit effworks.co.uk

Last updated 21 September 2020