How to mitigate the impact of the pandemic on brand value? Lessons from the pandemic in the Middle East
But this risk is not uniform for all sectors and all brands. There are three types of risks that affect brands during a crisis:
- Sectorial (the range of impact depends on the type of product or service or category where the brand operates)
- Own (the impact also depends on the company´s own culture, appetite for risk, orientation to innovation and flexibility)
- Association with the country of origin
Based on this impact on Business Value, Brand Finance estimated the sectorial risk and classified sectors into 3 categories based on the severity of Business Value loss observed in the period between 1st Jan 2020 and 18th March 2020:
- Limited impact (0% brand value loss)
- Moderate impact (up to 10% brand value loss)
- High impact (up to 20% brand value loss)
Among those sectors with Limited Impact, we find categories whose demand hasn´t diminished due to the lockdown, like Utilities, Food & Drink, Household products, Telecoms.
Among those categories highly impacted, we find restaurants, travel, airlines, holidays and other categories where delayed consumption is not possible. International lockdown has made consumption barely possible and once restrictions are lifted, consumption will not be made up for. Figure 1 shows the sectors that fall in each one of the three categories.
Figure 1. Estimated Brand Value at Risk by Sector
Source: Brand Finance
But within categories and sectors, not all brands are impacted in the same way. This depends on their own risk. Analyzing individual impact, we have identified 3 ways brands across categories have been impacted (see Figure 2):
Figure 2. Own risk: There are 3 ways brands across categories have been impacted
Source: Brand Finance
Some companies are now thriving: well placed to cater to our changed lifestyles but how they act now can shape future trajectory. Zoom, STC, Etilasat and Amazon are good examples of brands that fit into this category. But the surge won’t be forever, and these examples illustrate that managing brand reputation through scrutiny is key to maximising long-term profitability. For this, brands need to undertake a multi-stakeholder approach. Etisalat granted free mobile data allowances to certain households and STC offered free internet to a wide range of clients, all measures thought to alleviate the burden of the crisis among clients and society.
A second group of brands are striving, adapting and reacting rapidly, either by adapting business plans, products, and services to maximise changing opportunities and stay current or adapting the production to cater for urgent social needs. For example, Emirates proved its operational agiliy by pivoting to cargo only as passenger network shut down. They also used their passenger planes to deliver medial supplies and other goods around the globe. Similarly, LVMH decided in mid March, they would dedicate three of their perfume manufacturing premises to produce hand sanitizer.
A third group of companies is merely surviving, as they are unable to transition online or have come to a standstill. Apparel and airline brands could lose up to 20% of their brand value and are good examples of companies in this third cluster.
But in addition to sector and own risk, corporate brands will be impacted both by how their governments handle the crisis and diplomatic relations in this period. This crisis is also a matter of public diplomacy. Headlines in newspapers have referred to the use of “mask diplomacy” by several countries as a tool to build soft power.
The stronger the association with the country of origin, the harder the impact. In fact, analyzing our Global Soft Power Index database, we found that a one percentage point increase in a nation's Soft Power Index has a positive impact of US$ 3.6 billion on the net flow of Direct Foreign Investment. Improving Soft Power pillars such as Education & Science, Business & Trade and Governance helps attract larger amounts of foreign direct investment. Soft Power also speaks of cooperation and collaboration on the global stage which reduces perceived risk of investing in a foreign country.
How to mitigate the impact of the pandemic and leverage long-term brand profitablity
There are no universal recipes, but some ingredients must always be present in our "crisis mix":
- Keep investing in communications, but avoid meaningless messages: Find the right content and tone. It's not about how much you invest, but how you invest. It´s all about the right content and tone. With very different approaches, Emirates, Etihad and Qatar Airways, have continued investing in communication during the pandemic.
- Adjust all the elements of your “marketing mix” and not just your promotion: Ask yourself what you can do to improve the lives of your customers. STC and Etisalat are good examples of brands that have adjusted their products and offers temporarily to help clients during these trying times
- Consider whether taking short-term losses can generate long-term profitability: In particular, when it comes to protecting employees. DP World provided accommodation for certain employees and their families closer to the ports to avoid the need for public transport.
- Consider how you can collaborate with other stakeholders and share your resources to alleviate the impact of the pandemic in your community: Today, brands are expected to provide collaboration, protection and security, placing collective interest on short-term gains. Again, DP World worked closely with companies that provide essential services to ensure critical supply chains remained open.
Ultimately, to manage all these risks, it is essential to monitor the key metrics linked to brand value creation. And this measurement must be aligned with the new concept of brand leadership, which puts facts over words, people above profit and the collective above the individual.