By Ashita Aggarwal and Suraj Commuri

The companies were excited to welcome the new decade, and the world was optimistic about growth. Then the COVID-19 happened and taught us an important lesson- “Humans can only plan but cannot promise its execution because the unknown can happen anytime.”

COVID-19 has shifted consumption in significant ways. Some habits have changed (for example, eating out versus ordering in), and hence the demand for some product categories altered. For instance, WARC highlighted a 650% growth in hand sanitizer sales from the USA’s previous year. Nielsen data indicated that the hand sanitizer market grew from 11% in November 2019 to 53% in February 2020.

The health and hygiene segments have seen a significant increase during the times of COVID-19. The demand for immunity boosters, hand sanitizers, face masks, disinfectants, bleach, and handwash suddenly upsurged. The consumption has stabilized over the last seven months, but experts believe that it is here to stay as hygiene habits become a part of our lifestyle over time. The top five players struggled to meet growing demand. Many new players- both big and small- entered this category. Today, there are almost 200 local, regional, and national brands of hand sanitizers in India.

Also Read: Tarun Katial steps down as CEO of Zee5

Some sectors experienced artificial demand – either by fear, uncertainty, or false panic. For example, in the USA and Europe, toilet paper demand suddenly increased many folds, and the store aisles were stocked out. Back home, people were stocking essentials- food, groceries, personal care products, etc. The pandemic had nothing to do with increased demand, but it was just a result of uncertainty and fear as people wanted to be sure that they have enough stock to last them a few months. People just needed more assurance. This artificial demand led to consumer stockpiling and decreased demands in future months, which reached its original levels in the unlock stages.

And finally, changing habits and lifestyles indirectly impacted many categories. As people were spending more time at home, the demand for home entertainment increased. People were hooked on to Hotstar and Netflix and were paying for more content. Netflix has added more than 10.1 million paid subscribers since the lockdown. The demand for moisturizer went up as sanitizers, and repeated washing of hands led to dryness of hands. The demand for gas and petrol went down as people were not commuting. Lipstick sales decreased due to face masks, and women had to make the most out of kohl and eye makeup. Men were shaving less, and demand for beard care products increased.

Marketers can study the impact of these changes to devise their future strategies. These changing lifestyles and consumption patterns have impacted business and can have an enduring effect on toplines and bottom-line. The demand changes also have a significant impact on supply-side considerations. The companies have to plan to meet these demand-supply gaps and build new capability and production facilities to optimize resources.

1st level impact is the direct or the real impact, which is the increase and decrease in demand due to COVID-19 on businesses and consumers. The second level of impact or artificial demand is the change in demand and supply due to social or psychological reasons. The demand-supply gap in real and artificial demand conditions often happens due to the company’s non-preparedness due to a sudden shift in consumer demand and behavior. They are hence not able to match increased/decreased demand. 3rd level impact represents the change in demand for products and services due to change in consumer habits, lifestyle, and perspective and is not directly related to the current situation. These changes are mostly temporary unless they become deeply ingrained habits.

Demand-Supply Grid for Growth Plan

*This grid is drawn, assuming the demand growth is in a positive direction.

Let us understand this table with an example from the coffee category. As the media and doctors suggest, consuming hot liquid is usefulto prevent COVID-19 infection; instant coffee demand would go up suddenly, especially among coffee lovers. They would be happy to drink more cups of hot black coffee, thus having a direct high to medium impact on business. They are also working from home, and digital fatigue combined with easy access to coffee may prompt them to have more cups per day. However, for non-coffee lovers, the demand may come down as they could be having more tea or other hot beverages. Coffee, a social drink and out-of-home consumption item for them, is now less relevant. There could be a considerable decline in instant coffee demand as offices are closed, and no social gatherings are allowed during lockdowns. Under the indirect third level impact, it is possible that now people are staying at home and finding creative ways to kill boredom and distract themselves. They may experiment with coffee powders to make new recipes, including cakes, cookies, various kinds of hot and cold coffee beverages, affecting the business positively. Many personal care products like moisturizers, talcum, soaps, etc. saw a sudden increase in demand at the start of lockdown. This category has no direct relationship with COVID-19, but people ensured that they have enough supply during lockdown time and uncertainty prevailing. This is an artificial demand. The demand dipped in future months due to stockpiling and then stabilized to pre-COVID-19 levels.

For a marketing manager, this understanding and analysis can open ways to work on future strategies. In the direct impact, the manager has to fulfill the high demand and harvest. Promotion focusing on hot beverages and aroma associated can make consumers desire more coffee.

Also Read: Opinion: Brands prioritising Omni-channel strategy

Suppose the manager is operating within the artificial level. In that case, they have to create a new desire (drink for “me time”) and arrest the artificial demand to minimize the future decrease in sales and revenues. One can plan product extensions to categories that are easy to adopt by consumers, increase communication to trigger TOM recall, and invest in brand building.

Finally, suppose the manager is dealing with the indirect impact. The strategy is to move to a position of strength, either arrest the decline or amplify the demand depending on the effects and the category’s nature. In the instant coffee category, the manager can find the opportunity to shift consumers’ preference to coffee drinking through new product innovations (instant cappuccino coffee, dologona coffee mix, etc.) or give consumers new ways and methods of using the coffee. Some of these strategies may have a short-term impact on sales, while some may change habits for good.

Many experts feel that consumers will return to pre-COVID behaviors after normalcy is achieved. Though this may be true to a certain extent, we believe that 100% normalcy will never be achieved, and the way we do business will also change. Planning for future investment is crucial because a company would like to make people identify with their brand and include it as a part of their everyday life. It may become the brand of happy times for them and find its way back into the shopping basket once normalcy is achieved.

Ashita Aggarwal is a marketing professor at Bhavan’s SPJIMR (S.P. Jain Institute of Management and Research), Mumbai (India). Suraj Commuri is a professor of marketing at the University at Albany, SUNY (USA).

Watch BE+ | Way forward mantras for post COVID world | Leading marketing leaders like Deepa Krishnan, Anurita Chopra, Samir Singh to Santosh Iyer, across sectors in the special video series