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By Anthony Bennett, Managing Partner, RedSky Strategy

I remember working through the 2008 financial crisis. Most of my clients at the time were financial services companies, and the upheaval shook their clients so much that their attitudes and behavior fundamentally changed. Trust went out the window, and our data followed. Not long after the crisis, we would look at any research conducted prior to September of that year — even if it was only a few months old — and basically disregard it as out-of-date.

COVID-19 is changing consumer behavior so fast that it makes the 2008 crisis seem like a radar blip. People who’ve never shopped online are suddenly buying everything they can, as soon as they can. Delivery slots for Amazon Fresh are fully booked two weeks ahead, and other food delivery services are facing unprecedented demand. TV and movie viewing habits have fundamentally changed. (Take a look at some of your emails from February 2020, and you’ll see what I mean.)

Kurt Lewin, who is often called the founding father of change management, perceived change as happening in three steps, known as CATS (Change As Three Steps), his theory has been modified over time[1] to be explained as simply unfreeze → change → refreeze.

By viewing change as a process with distinct phases, we can get some perspective on what is happening now — and more importantly, what will  happen in the future.

Unfreezing

• Unfreezing happens when the status quo breaks down. In a company, this might be the arrival of a new CEO. In broader society, unfreezing often happens slowly. The advent of the internet caused unfreezing of our behaviors (such as reading print newspapers, or buying pet food in a store) over a period of years.

In September 2008, events unfolded over a week or so and came as a shock to most of us. The shock was exacerbated by the fact that few people could understand what was going on with terms like credit default swap and collateralized debt obligation being thrown around. But the net result was that people no longer trusted their banks to keep their money safe.

Change

• I like to think of the Change phase as a period of chaos. It’s a time where everything is up in the air.  Following some of the uncertainty and confusion of the unfreezing phase, people will look for ways to resolve their insecurity. Often, this results in behavioral change. This doesn’t happen overnight (in the financial crisis, it probably started in late 2008 and continued through early 2010 when the stock market started to approach its pre-crisis levels).

It’s sometimes difficult to tell when we’ve moved from unfreezing to change/chaos. During this time, people are very susceptible to influence — whether from pundits,  financial advisors, colleagues or friends. And they will look to brands they trust and seek guidance and help from these brands. Not everyone will change, but the deeper the unfreezing the more likely we will see a larger change.

Refreezing

• Refreezing: Following a period of change, there is a period of refreezing. After all we are creatures of habit, and we look for new routines that help us achieve a sense of stability. We also tend to have short memories, so after a time, we may lapse back into some of our original behaviors (like buying speculative investments). But refreezing brings a new era of stability that gives us comfort. It also means that many of these new habits will continue. During the 2008 financial crisis, many people switched to cheaper brands and found that they were perfectly fine. Ten years later, discount retailers such as TJ Maxx and Ross were still outperforming the market, while stores like Bloomingdale’s were suffering.

These behavior patterns will hold true for the coronavirus pandemic,  but the magnitude of the change will be unprecedented — like most other aspects of this event.

Why is this? First, the unfreezing happened so suddenly — over  just 1-2 weeks in most places in the US. And it was dramatic — from closing down schools, restaurants, coffee shops and travel to hundreds of thousands of people losing their jobs instantly.

Second, as of today, there is no end in sight. The fallout from the 2008 crisis was extensive,   but governments came together to make a plan and rebuild the economy (and we still were able to get Starbucks in the morning).

But the current crisis could take weeks, months or years. And there is a palpable leadership vacuum, at least on a national and global level. So, we have no idea if we should buy groceries for a week or start prepping for a year at home. This alone means that it will be difficult to move from the unfreezing to the change/chaos phase.  Consumers will look for signs of stability, and unfortunately none of these will be forthcoming in the short term. In fact, the opposite is true — Experts currently predict the number of cases will peak in April/May. So not only did unfreezing happen suddenly, but it may go on for a long time.

What does this mean for research? Well, the bad news is that much of your research conducted prior to March 2020 won’t be all that relevant going forward. This is a horrible situation. We’ve conducted incredibly insightful research in the health and wellness sector recently — but will it be useful next year? I don’t know. Can you think of any marketing category that will not be affected? I can’t. Will any existing pre-2020 research be relevant going forward? It’s doubtful.

However, every crisis likely has an upside somewhere. We think there are three major opportunities for marketers:

Empathize:

During a period of unfreezing, people are very unsettled. Brands need to empathize with this condition and reflect it. Brand Strategist Ed Cotton put it brilliantly: “Every brand is now in the business of public service. If they are going to act responsibly and don’t want their interruptions to be ignored and dismissed, and ultimately damaging to their brand, all messaging needs to change. [People are thinking,] I don’t want to buy a toothbrush from you, I want to learn how to look after my teeth when there are no dentists available. I don’t want to buy a car, I want to know how to keep my car running.”

Nike has already responded with a campaign about working out at home. Bud Light has sponsored a virtual concert while its parent, Anheuser-Busch, is manufacturing hand sanitizer. People will remember these efforts and will reward these companies going forward.

Track:

Astute marketers who really care about and want to understand their customers will be tracking their customers and brands to understand what is happening during the crisis so they can be quick to adapt their products, or, at minimum, their communications. The current period of unfreezing will be long, and it will be important to understand what is going on and keep a finger on the pulse of what’s happening. It will likely be this type of marketer who will be the first to know when we move from unfreezing to change/chaos to refreezing.

Agility:

Agile companies will be fast off the mark during the change/chaos phase to influence people to refreeze their behaviors in a certain way. These companies will be planning to do research early and often in order to track changes and respond quickly. I can bet that Target.com, Chewy.com, FreshDirect and others will soon be using their data troves and putting smart programs in place to encourage loyalty and stickiness among their new customers.

Importantly, this research needs to be broader than usual and  go beyond the narrow target market as more customers may be entering/exiting a category. Companies that stick with their pre-2020 segmentations and U&As will be operating from an out-of-date playbook.

The 11-year bull market may have softened our memories a bit, but the aftermath of the 2008 financial crisis was huge: interest rates remained persistently low, wages stagnated, and wealth imbalance increased.  However, it also permeated many different categories. A year after the crisis, McKinsey found that not only did people trade down to “lower quality” bottled water and face moisturizer, but one third of these people felt better about using these products than they thought they would and continued to use them well after the crisis[2].

No one can predict ultimate changes in behavior, but I’ll go out on a limb and say that they are going to be gargantuan — to put it mildly. We are living through an historic event, and we should expect entire industries or companies to fail, and new companies to grow.

Will people ever go back to movie theaters to the extent that they did prior to 2020? Will we consume vitamins and supplements differently going forward? Will we be putting our retirement money into ETFs vs. using an advisor?  Nobody knows anything. The entire marketing landscape is likely to change, but those marketers and researchers who are preparing now will be the most likely to succeed going forward.

[1] See Cummings, et al, (2016) Unfreezing change as three steps: Rethinking Kurt Lewin’s legacy for change management, Human Relations vol 69(1)

[2] McKinsey Quarterly, Dec 2009, ‘How the recession has changed US consumer behavior’