Everyone has heard of the word “marketing” at least once in their lives. The images of brands that we can see passing by department stores, leaflets that we can easily receive on the street, advertisements tailored to us on our phones. This is all a kind of marketing. Like this, marketing is closely related to our lives. Marketing is changing as our daily lives change due to COVID-19. Currently, most people choose to stay at home rather than spend time outdoors to avoid contact with others as much as possible. From a marketing point of view, offline consumption has naturally decreased. People began to consume products or services at home. Most companies that focused on face-to-face marketing suffered heavily. This situation immediately caused a decline in sales and profits, and even began to pose a risk to the existence of some companies. Companies are now seeking and implementing new marketing methods to escape the crisis caused by COVID-19. Providing products and services to consumers by minimizing contact, or marketing using entirely new contents, is the key to the crisis. This Cover Story will deal with breakthroughs found by companies hit by COVID-19 and analyze change and limitations in marketing changes.
1. About Marketing
Before taking a look at various examples, we need to check the definition of marketing first. This is because marketing in management is slightly different from what we commonly consider to be marketing. Marketing refers to all activities a company does to ensure that its products or services are chosen first by consumers over competitors. Marketing is often understood as the same concept as sales or promotion. However, strictly speaking,
these are not the same concepts. Marketing is a superordinate concept that includes sales and promotion.
It is easier to understand marketing when you get to know the marketing strategy 4C. 4C is a concept consisting of Customer value, Cost, Convenience, and Communication. Customer value means meeting customer needs. It is not to make products from the perspective of sellers, but to sell products that consumers want. Cost is pricing from the consumer's point of view. It is a concept that deviates from simply thinking of the price of a product as manufacturing costs and profits. Convenience is to consider how convenient it is for consumers to receive products or services. Convenience is a new interpretation of distribution from the perspective of consumers. Communication means that the seller interacts with the consumer. By communicating with each other, Communication is to understand consumers' needs and inform them of their products or services. 4C is the basic concept of marketing. Considering 4C, you can understand that product promotion is not
the only part of marketing. Marketing means all activities to sell goods to consumers, including creating products, pricing, determining distribution methods, and promoting products.
2. Changes in marketing across industries
Cosmetic
The cosmetic market has been hit hard by the pandemic. Sales in 2020 declined by 13 percent since the emergence of COVID-19. This is because people were restricted from going out. Also, even though people wear makeup, more than half of the face is covered by a mask. People feel uncomfortable and unsanitary because they have a cosmetic stain on their masks. Furthermore, when people buy cosmetics, most people test them first. However, because of COVID-19, people are reluctant to go to crowded shopping malls. In addition, there are concerns about hygiene problems to use cosmetic testers in stores.
Therefore, cosmetic companies are looking for various breakthroughs in marketing. Cosmetic companies have begun marketing with the phrase "no smear on masks” that have not been seen before COVID-19. For example, Chanel's lipstick "Rouge Allure Velvet Le Lion de Chanel" was promoted to be released with a low-staining texture,
while Giorgio Armani’s "New Neo Nude Foundation" appealed to consumers because the texture is light and less likely to be smeared on masks. Companies sometimes upload videos testing to show much of the cosmetics gets on the mask to emphasize the characteristics of their products. Examples include Espoir's "Be Powder Cushion" and
Etude's "Fixing Tint".
In addition, companies started to use digital marketing. To overcome the difficulty of testing products in stores, cosmetic companies develop videos and programs to show consumers the color and texture of their products. Especially, Estee Lauder has converted its experiential marketing, which was originally used in stores, into digital mode. It provided consumers with virtual makeup experiences through augmented reality (AR). The system showed customers how they look when they use a particular product. The AR service, which started shortly after the virus appeared, has more than one million users recently.
Also, Cosmetic companies use “live commerce” marketing. Live commerce refers to the way products are sold through live broadcast. Most broadcasts are conducted with advertising models, brand ambassadors, or beauty influencers. In particular, beauty influencers are more effective in promoting products because they can maximize product's strengths and are good at explaining how to use them. Since it is literally "live", an immediate conversation and feedback about the product are made
between the viewers and the hosts. Through that feedback, people can feel the use of the product without having to use it themselves. It is true that companies have previously used influencers and star marketing, which borrows the power of celebrities and idols. Sponsorship and unilateral advertising were the main marketing in the past, butthese days, they are using social media, so interactive communication is possible. Most cosmetic brands are using this method. It ranges from domestic brands such as Etude and Olive Young to foreign brands such as Yves Saint Laurent and Estee Lauder.
As offline consumption becomes difficult, cosmetic brands use digital marketing as a key method. However, no matter how much the screen shows both color and texture, there is a clear difference from real testing. This is an inevitable limitation in digital marketing, where direct experience is not possible.
Tip Box: Changes in people's consumption of cosmetics.
People have to wear masks every day, so it irritates their skin a lot. Therefore, interest in basic cosmetics has increased rather than color cosmetics. Sales of color cosmetics in the overall cosmetics market decreased, but sales of toner increased by eight percent and sales of cream increased by 13 percent. Also, people are more interested in eye makeup products than lip makeup products because they only show their eyes because of the mask, and if they wear a mask after wearing lip product, it gets smeared on the mask.
Perfume has seen an unexpected change. The increase in sales despite not being able to test perfumes stems from changes in consumer confidence. Instead of putting on makeup, people seek perfumes as a means of expressing themselves in terms of self-satisfaction.
Movie theater
Movie theaters have also suffered a lot of setbacks. This is because the audience has decreased by 70 percent compared to before COVID-19. To watch a movie in a theater, people have to be with many people in a closed space. That is why people are reluctant to watch movies in theaters. Even if the theater operates normally, a drop in sales is inevitable because the government’s social distancing policy demand people’s seats to be separated. There is another problem besides that. Over-The-Top (OTT) platforms such as Netflix and Watcha have become a risk for theaters. As people spend more time staying at home due to COVID-19, they choose to watch movies at home. Also, many movies are being released almost simultaneously on OTT platforms and in theaters. In the case of Netflix, there are 37 million new subscribers in 2020. This is 31 percent higher than 2019.
Movie theaters are trying new marketing to ride out this crisis. One of them is target marketing. For example, CGV re-released Harry Potter that has a broad fan base in 4DX from February 2021 to early March 2021. Movie theaters are attracting audiences using the 4DX’s limit that they can only be seen in theaters. In addition, the fact that it is not common for movies to be re-released in 4DX stimulated consumption.
CGV also targeted fans by producing “movie merchandise”. CGV's own merchandise shop, “Cine Shop”, has online and offline stores. Online store induced people to buy merchandise without having to go to the movie theater. It was the result of a quick grasp of changes in social trends and altering its business direction after COVID-19 appeared. Cine Shop sells merchandise that catches the eye with cuteness, such as Disney, Harry Potter, Marvel, and Pixar. Also, there are many practical products aimed at people in their twenties and thirties that are not too childish. Cine Shop is making merchandise that fits fans' perspectives as much as possible. It starts with understanding the fan base and focuses on creating differentiated products. An example is the sale of merchandise for the 20th anniversary of Harry Potter's release in 2021. Cine Shop hosted a live broadcast to promote this event. During the live broadcast, Harry Potter merchandise was sold at a discount of 15 to 34 percent. A surprise event was also held to give gifts to customers who spent the highest amount of money. Merchandise for Harry Potter achieved the highest sales in an hour of broadcasting, and that broadcast ranked in the Shopping Selective Top 5 and the most searched twenty keywords in a famous Korean website Naver.
As such, theaters are using marketing to make a new market, away from the existing “place where you can watch movies”. They have expanded the scope of the movie theater industry. However, theaters still cannot earn much from movie screenings, which are the source of the theater.
Large offline retail companies
Large retail companies include department stores and marts. Sales at large retail companies have fallen since the pandemic. In Korea, Homeplus and Lotte Mart have closed some stores, while Lotte Department Store's sales fell 13.6 percent and Hyundai Department Store's sales fell 5.7 percent. In the case of overseas markets, companies such as Macy’s, Express, BED BATH & BEYOND have reduced the number of stores due to low performance.
On the other hand, Walmart, a retail company in the U.S., overcame the crisis by using various marketing techniques, including omni-channel marketing. This is because Walmart has absorbed the impact of raising labor and logistics costs. In other words, it combines the characteristics of each distribution channel. Walmart, has introduced a method of ordering online and picking up offline. Among many products, it focused on groceries, which are essential items. When people order food online, people can pick up products in a drive-through at the mart. Since mid-March 2020, the number of customers using delivery services and customers receiving pick-up services has quadrupled. Walmart has temporarily converted 2,500 of its 4,700 stores across the U.S. into online sales support stores as online food orders exploded. It used offline stores as warehouses. It can be seen as a strategy to cope with the sudden increase in online orders. Walmart also set a lower delivery price than its competitor, Amazon. Walmart has gained the upper hand in price competition. If people pay 98 dollars a year, they will receive unlimited delivery services for groceries, essential household goods, and electronics within two hours of ordering. People prefer this service because it is cheaper than Amazon Prime, which has an annual fee of 119 dollars.
In addition, Walmart used emotional marketing using offline space. On August 14, 2020, large screens were installed in parking lots of 160 Walmart stores across the U.S. to host the "Walmart Drive-in" event where you can watch movies for free. From classic films to recent films, such as E.T. (1982), The Wizard of Oz (1939), and Black Panther (2018), were screened free of charge. Walmart has generated profits from snack sales. Walmart was able to attract new customers by repurposing empty parking lots.
E-Mart in Korea which benchmarks Walmart in the U.S. quickly predicted that the consumption method would change due to COVID-19. To counteract that, like Walmart, E-Mart decided to introduce omni-channel marketing that integrates online and offline faster than its competitors. The existing SSG.com was used to build the omni-channel. SSG.com is an integrated online shopping mall of the Shinsegae Group, which owns E-Mart. E-Mart's managers focused on integrating E-Mart and SSG.com. SSG.com, which lacks logistics centers compared to its soaring consumption, used E-Mart stores as a PP (Picking & Packing) center. In other words, when people order from SSG.com, products are delivered from E-Mart's offline stores. The implementation of the omni-channel was successful, and E-mart was able to handle the vast amount of online orders. As a result, E-Mart's sales rose 5.9 percent year-on-year as in 2020.
Large retail companies have made a breakthrough by using omni-channel methods that integrate online and offline. However, while the impact of omni-channel in the distribution market will grow, ironically, consumers' desire to have a direct experience of the product increases. In other words, online and offline are complementary relationships. By the time COVID-19 is gone, offline marketing neds to be strengthened.
The automobile industry
The automobile industry was also hit hard. In Korea, exports to the overseas auto market fell 13.9 percent. Overseas Renault, Nissan, and BMW reduced their employment in 2020, and the global auto market reduced 15 percent. The reason is the contraction of people's consumer confidence due to the economic recession. In a country with a large automobile market, most people already have cars. In such a society, the reason for buying an automobile is just to get an automobile that has better performance than the current automobile. However, due to the poor economic conditions, people decide that changing into a new automobile is not an essential option in their budges now.
Some brands have overcome the crisis by understanding social trends. Among them, Audi sold a total of 1,692,773 units in 2020. Although it fell eight percent from 2019, compared to a 15 percent decline in the global automobile market, it was a good defense. In particular, the fourth quarter of 2020 ended with sales higher than ever before. Audi studied ways to increase accessibility to stimulate low consumer confidence. The key to overcoming this problem is changes based on digital marketing. Audi led the digital transformation in the automobile industry. Audi introduced digital live consulting using virtual reality (VR) devices. Customers do not have to visit the agency. After connecting VR devices to a customer's network, an agency employee wearing VR glasses, goes to the car that the customer wants, and shows the details of the car through the connected device. Additional information about options and performance is shown on the display during the consultation.
The experiential marketing originally used by Audi has been changed to a digital marketing method. People's interests in Audi's digital consulting have increased, and 10 to 15 customers receive digital consulting every day. In addition to this, Audi promoted cars through live streaming and created VR showrooms. Various platforms were used to promote the cars. Audi used TikTok, a popular video application around the world, WeChat, a Chinese messenger application, and Autohome, a Chinese automobile community to communicate with customers. It also provided 24-hour online counseling to customers, enabling real-time feedback. As a result, Audi's entry into China was successful. In China, online contracts were carried out, achieving a 19 percent increase in sales.
The Automobile industry overcame the crisis by converting its existing marketing to digital marketing. It is important that online reservation systems and VR experiences have become possible in the automobile industry, where offline marketing and consumption were dominant. However, like the cosmetic industry, there is a limit to experiencing the ride of cars through VR.
3. The analysis of change in marketing
Homeconomy
Homeconomy is a combination of home and economy, which refers to various economic activities and consumption activities taking place in the home as "the home" is expanded beyond mere residential space to rest, and enjoy culture and leisure. Due to COVID-19, people's external activities have decreased, and the forms of home economics are diversifying. Objective data shows that sales online increased significantly in 2020 compared to the same period in 2019. In other words, people are purchasing at home, from necessaries, including food, to luxury goods such as cosmetics. In response to changes in society, companies diversify product promotion online in line with changes in society and strengthen distribution for fast delivery.
However, there is another way of marketing for homeconomy. As the pandemic continues, people are tired of the activities at home. Companies sometimes use emotional marketing based on psychology of people who are tired of homeconomy. It stimulates the emotions of people who want to spend their daily lives outside. Screening movies in Wal-Mart's parking lot is a good example of this emotional marketing. It allows people to watch favorite films in a parking lot so they can enjoy the cultural life they had previously enjoyed casually. This satisfies people's needs, so people naturally have a positive perception of the company.
Non-contact Digital Transformation
Since the advent of COVID-19, the pace of digital transformation has accelerated. In every industrial area, digital marketing commonly appeared. If companies focused on offline marketing before COVID-19, they are looking for ways to capture consumers through digital methods now. This includes AR and VR technologies. What
should be noted here is that Generation Z served as a link between COVID-19 and digital transformation. In the post-corona era, where non-contact will become a new norm, companies judged that marketing should focus on Generation Z, which is familiar with online consumption, to survive for a long time. For example, live commerce is conducted with YouTubers or SNS stars, considering the characteristics of Generation Z, which are heavily impacted by influencers. In addition, for Generation Z, which uses SNS frequently, companies expose short videotype advertisements to SNS, and post purchase links with the video. As a result, Generation Z has become a “general trend” leading consumption as the unique generational tendencyo f Generation Z has matched the rapidly changing era.
Digital polarization
As digital consumption soared, polarization problems began to arise among consumers. A class that suffers from digital alienation has emerged. The main cause is the generation gap. Generation Z responded flexibly to online consumption as soon as the pandemic began. Also Generation Y adapted to change, though slower than Generation Z. However, the older generations, such as Generation X, could not do so. In fact, this was a foreseen situation. As Generation Y have established themselves in the market and Generation Z have grown, experts predicted in advance that it is inevitable for companies to switch to digital marketing. They were worried that the older generation would not easily adapt to the changing society, and emphasized that the older generation should prepare for the changing society. In summary, change has become radical because of COVID-19. Although it has been more radical than expected, consumption through digital methods has become compulsory, not an option, to survive in a situation where offline consumption has become difficult. Therefore, older generations have been adapting to digital changes since the advent of the virus. Nevertheless, digital literacy education is important because the ability to utilize digital is significantly lower than that of younger generations. Experts say the role of government is important in this problem.
Conclusion
For companies, the COVID-19 pandemic is both the biggest crisis and biggest opportunity because it has changed radically, not gradually. It is true that companies are at high risk because there are so many things to prepare for because they have to seek new marketing techniques. Therefore, some companies may have had an unexpected success, or others may have failed. This period is perhaps the time to reform the fixed corporate governance. Companies are changing in search of effective strategies for the way people spend money and time. Companies are applying digital marketing to existing marketing or trying new marketing strategies to stimulate people's consumption needs. On the bright side, some experts say that COVID-19 has only advanced digital transformation by a few years. It is a change that we would have faced in the future anyway. To find a breakthrough without giving up, hope is the most important attitude in this pandemic.
