A long-standing New Year's eve tradition in my family is to go around the room and have everyone relate one thing he or she was thankful for in the year about to end. I suspect if I asked a group of marketers what they were thankful for about 2020, many would loudly answer, "I'm thankful it's over!"
It's easy to understand why marketers want to put 2020 in their rearview mirror. For almost the entire year, marketing leaders were forced to deal with an exceptional level of uncertainty - about the trajectory of the pandemic, about the restrictions governments would impose to mitigate the spread of the virus, and about the status of the marketing budget.
As a result of these uncertainties, many marketers saw their planning horizon shrink tremendously. Rather than focusing on what marketing programs would be run six or nine months in the future, the burning question for marketers became, "What programs can we run next month?"
Fortunately, 2021 isn't likely to be a rerun of 2020. Last year, business conditions were largely dictated by the evolution of the COVID-19 pandemic, and that will remain true for most of 2021. But because of recent breakthroughs on the vaccine front, control of the pandemic is now within sight, and therefore business conditions are likely to be improving as the year progresses.
The Beginning of the End
Last month, the U.S. Food and Drug Administration gave emergency approval to two COVID-19 vaccines, and inoculations began on December 14th. While supplies of these vaccines are still limited, they are expected to increase rapidly over the next several weeks. In addition Johnson & Johnson expects to have clinical trial results for its vaccine candidate later this month. If those results are good, the J & J vaccine could be approved in February. So it's likely that vaccines will be widely available by the spring of this year.
Since March of last year, the foremost question for most of us has been, "When will the pandemic end?" Until a few weeks ago, it wasn't possible to answer this question. Now, however, it's reasonable to project that the pandemic will be brought under control this year.
In a November article, McKinsey & Company argued that ". . . the United States will most likely reach an epidemiological end to the pandemic (herd immunity) in Q3 or Q4 2021." The article's authors also argued that the U.S. could begin a "transition toward normalcy" in the second quarter of this year if vaccine distribution and other factors go well.
The pandemic storm clouds will not dissipate immediately. Several epidemiological models are now projecting that the incidence of COVID-19 will peak in this quarter and then begin to decline as the rollout of vaccines expands. The fall of new cases, hospitalizations, and deaths is likely to accelerate in the second quarter as warmer weather also helps to diminish the transmission of the virus. By the second half of this year, many of the public health measures implemented to control the spread of the virus will no longer be needed.
The Economic Outlook for 2021
There is an emerging view among economists that the U.S. economy will enjoy above-average growth in 2021 - after what may be a rocky start in the first quarter. The following chart depicts the latest forecast by The Conference Board for real GDP growth and real growth of consumer spending in 2021.
As this chart shows, economists at The Conference Board are forecasting tepid growth in the first quarter followed by substantial growth over the balance of the year. For the entire year, The Conference Board expects real GDP to grow 3.6% and real consumer spending to increase 4.3%. Other economists have predicted that real GDP in the U.S. will grow nearly 6% this year.
The connection between economic performance and the pandemic is easy to see in the quarterly forecast by The Conference Board. Economic growth in the first quarter of the year will be weak as mandatory business closings and other economic restrictions remain in place to combat a high incidence of COVID-19.
In the second quarter, the economy will improve as the number of people vaccinated continues to increase, which will depress the spread of the virus and allow some public health restrictions to be relaxed. Economic growth will be robust in the second half of the year as the U.S. nears herd immunity, and most public health restrictions are no longer necessary.
The biggest challenge for marketers in 2021 is to match their level of marketing activities and spending to the business conditions their company is facing. To meet this challenge, marketing leaders will need to use a planning process that can quickly adapt to changing business conditions. I'll describe one effective approach to marketing planning for 2021 in my next post.
Top image courtesy of Animated Heaven via Flickr.