Why Airbnb made a big mistake by ditching its marketing
To save money, Airbnb halted all its marketing activities at the end of March in order to save an estimated $800 million in 2020.
In this, it’s not alone.
When a crisis hits, a company’s marketing budget is usually the first to go. It’s pure economics: If consumers are not spending money on products and services, there is little point to invest in marketing them.
It’s also wrong.
Airbnb lowered its internal valuation by 16%, to $26 billion. The company also saw a 40% drop in bookings, and that was back in mid-March. Its hosts are so angry about the company’s recent removal of cancellation fees that some people online thought one particular host video was a parody. The entire travel sector is in turmoil.
But if there was ever a time Airbnb needed marketing, it is now.
How much a brand invests in maintaining the relationship with its customers during the crisis defines its long-term success. In the case of Airbnb, this means keeping both sides of its marketplace (the hosts and the renters) going. If hosts lose revenue and feel unsupported by the company, they will leave (and many of them already are) and may not come back.
What would have saved Airbnb from a very public backlash is a shift in how they think about their marketing actions: from creating demand for their products and services, to keeping the relationship with both of their customer groups.
There’s a lesson for all brands here. How they allocate their marketing budgets at the moment (and how much they cut them) should reflect the shift from spurring demand to maintaining the customer relationship. Otherwise, marketers are in danger of losing the connection with their customers, as the Airbnb ordeal shows. Marketing cuts deprive a brand of any still existing sources of revenue, like through email marketing or social commerce. They also fail to mitigate the damage of a negative impression. After the backlash, Airbnb secured a $10 million relief fund for “super hosts” and is offering grants of up to $5,000 for the hosts most impacted by the recent change in policy. It will also cover 25% of cancellation fees for hosts.
Regardless, all the public can think of is a very human and relatable image of a host shaking with raw anger.
A proactive and empathetic marketing action would have helped to balance this message out.
Holistic brand management is the new marketing
Blanket marketing cuts reflect a short-term view of the global pandemic’s implications. You may think, After this is over, and when consumers are ready to shop again, we will be there for them. But it may take a long time for the global pandemic to be over, and by the time it is, a brand’s customers may have forgotten about it.
The solution is to approach marketing holistically, in terms of its coordination with finance, operations, logistics, customer service, and internal and external communication, all working toward the same business and brand goals. A comprehensive business analysis, with all teams involved, gives a quick assessment of the situation and aligns them on the future plans. Before cutting expenses, marketers need to understand both short-term and long-term revenue implications of these actions.
Here’s the problem with that short-term, siloed thinking, as we’ve been hearing from businesses: for example, one company used ads to drive people to its e-commerce site, but its customers’ average order value was 40% lower than the e-commerce team projected. This was due to a lot of inventory having being moved into the sale section and a promotion going across the company’s email and social channels. To drive up average order value, the team decided to remove all sale items from the site. Within a week, average order value increased, but the site’s conversion rate went down 80%, halving revenue.
There are plenty of stories like these. Crises just make them more obvious. Crises are also great accelerators. They force organizations to transform faster toward their own future. This global pandemic isn’t a short-term emergency; it is a long-term shift in how businesses operate. It moves a more coordinated and less siloed approach from a “nice to have” to a corporate “must have.”
Holistic brand management is the new marketing. What worked in the past is not going to work in the future, and marketers should use this crisis for decisive action in the following areas.
Register the change in consumer expectations
Brand communication has to acknowledge what consumers are going through and what they need right now. Swap fancy produced content with scrappy, live, real-looking material, created for platforms with a direct communication and communal element, like TikTok, Twitch, and Zoom.
Delta had led the way here: In addition to keeping its customers continuously informed, Delta automatically extended its customers’ medallion status until it is safe to travel again. At the moment when everyone is in quarantine, customer-centric gestures like these work better than being bombarded with promotions. This was a holistic brand decision on Delta’s part and required coordination between finance, operations, and customer service management.
Actions, not words, are most effective, even though we’re seeing most brands seem to try to outdo each other in using their creative campaigns as public service announcements. People in quarantine don’t necessarily need a reminder of their dire situation.
Entertainment, exercise, and any sort of distraction works better than polished imagery and advertising. For example, true to its connection with independent musicians, Levi’s has launched a daily streaming music program called 5:01 Live.
Ask: What would make my customers feel good? How can I bring them joy and distraction? What is the “job to be done” for my brand community right now?
This is an opportunity for brands across verticals to capitalize on the shift from products to content, from physical stores to virtual membership, from transactions to inspiration, from buying to socializing. Brands should consider it a necessary—and holistic—business adjustment.
Rethink your relationship with influencers and press
Influencers have large audiences that have been watching, commenting on, and liking their content more than ever during this crisis. Audience engagement is up, but affiliate revenue is down. While brands are not launching new products and paying influencers to spread the word, there is an opportunity for sponsorships and partnerships around influencer lifestyle content that isn’t focused on pushing products but instead on coping with the crisis.
Similarly, the relationship between brands and publishers is moving from buying ads and affiliate revenue toward content sponsorship and partnerships that serve the joint brand and publisher community. For example, the Financial Times travel section reoriented toward “wish I was there,” and started offering stories of distant places where its travel writers love and would love to one day revisit. Or, there’s an opportunity for brands to capitalize on their own creative communities. The fashion designer Alexander McQueen launched McQueen Creators, where fans are invited each week to make something. Allure magazine engaged its community of independent beauty industry professionals to tell readers how best they can support those salon professionals.
A holistic approach works best: Brands have to ask what their customers can do in their own communities—and how they can kick-start this process.
Dial up your data management
Holistic brand management gives a company the opportunity to create a centralized customer data bank that links a company’s financial, commercial, and marketing strategy. A more granular audience data segmentation goes beyond demographic and psychographic, and allows a company to build its audience taste profiles instead. A more granular product segmentation optimizes product strategy, merchandising, and predictive inventory modeling, which is critical for adaptation to the prolonged global crises.
For example, Netflix extensively tags its content and, based on these tags and their connections, divides content into micro-genres. It then matches up micro-genres with micro audience segmentation, which allows it to predict how many hours of watched content per month makes its subscribers unlikely to cancel. Similarly, thanks to the insight into the relationship between its audience and its products and services, a company can know which products appeal to the biggest number of customers, what product combinations drive the greatest retention, higher-value customer acquisition, and which product entry points work best in terms of cross-sell and customer lifetime value. This helps a company adjust pricing accordingly. A more financially and operationally fine-tuned supply and demand, robust enough to adapt to a crisis, will in the future prevent what many retailers are going through right now.
The challenge for brands to keep going despite their decimated marketing budgets is real. More than anything, it points to inefficient corporate management, where departments compete with each other for resources. This has always been the case, but it intensifies in a crisis.
The solution is to create one holistic and centralized budget. Just like the right thing for the federal government to do is create a centralized medical supply to prevent states from bidding against each other, the right thing for a company is to create a centralized budget and enforce sharing of resources toward the common goal. This will require departments to collaborate and rely on each others’ strengths to weather the crisis.
It also represents a more resilient and robust corporate model for the future. This crisis is not a short-term acute emergency. It is a call to action for companies to pivot and hit a hard reset on the way they do business.
Ana Andjelic is Strategy Executive and Doctor of Sociology who specializes in modern luxury brands. She writes a weekly newsletter, The Sociology of Business.
Jessica Davidoff is a serial entrepreneur and founder of growth and crisis management consultancy Sprezzatura.
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