Literature Review of Marketing Tactics during Recession
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Published: Mon, 5 Dec 2016
Recession is defined as a process of decreasing demand of products, raw material, labour and services for prolonged time. The overall economy of the country is slows down during recession (kentent). As recession is a part of normal economic cycle but the effects are always terrible.
Studies undertaken by researchers for the marketing tactics during recession shows different results. Warden et al, (1990) suggested marketing strategies to cope with a recession. Usually sales declines during recession. Before developing a marketing strategy to cope with a recession, it is important to forecast its duration, depth and diffusion. Duration describes the extensiveness and depth of the recession; and diffusion, how wide it spreads. Diffusion is important in a sense that recessions don’t affect all customers at the same level.
Bonoma (1991) gave some suggestions to marketing managers to compete recession. These suggestions are (1) Avoid empty middle marketing. (2) “Doesn’t spent money on the expensive lifestyle of empire” (3) “Do more for less”. In another study, Goerne (1991) stated that to prevent the negative impact of recession, marketing managers should significantly focus on the promotion strategy. Recession is usually determined by federal agencies and economic investigate organizations on a national level. In America the department of commerce collected two extreme of statistical data i.e. GNP and the LEIs. The GNP is the total monetary value of the goods and services produced and consumed in the private, public, domestic and international sectors of the economy (Economic Indicators guide 1990). The LEIs index indicates the overall trend of the U. S. economy. In another study conducted by Feder (1991) stated that mostly small businesses are affected by the recessionary economic situation.
The idea of innovation has attracted the attention of business managers and organizations in recent times. The idea of innovation was also supported by Porter and Linde (1995). They mentioned that whenever there is global economic crisis innovation plays a vital role as a survival policy. They explain their idea by giving the example of Bangladesh. In Bangladesh, economic stress may come from a variety of external resources. This includes the situation where external resources flowing from highly developed industrial countries. If these highly developed western nations face problems in their economies, this could lead to them reducing their foreign aid commitment. Countries such as Bangladesh who are heavily dependent for their development on foreign financial aid therefore, their development plans would noticeably suffer. In this situation innovation is best option that Bangladesh must adopt to survive in this tentative environment. This implies that management should look for new ideas when there is recession. In fact, these also suggest that all the alternatives need to be explored to find out the best possible options. Therefore, innovation is a best option that can be considered in this respect.
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Pearce, and Michael (1998) gave marketing strategies to commercial firms to deal recession. In the United States the recession of 1990-1991 badly affected every industry. And commercial manufacturing firms were facing serious threat by the recession. The failure rate among this group by mid-year 1991 had risen 37% from the previous year. This study involves financial and subjective information from 118 publicly traded U.S. manufacturing firms. None of the firms has achieved a market share of more than one half of one percent (< 0.5%). The aim of the study was to determine the components of a marketing strategy that enabled a firm to survive in the negative financial consequences of a recession. We come across that in these industries the economic slump is due to company's marketing policies. They give few suggestions like maintaining marketing activities in the core business as assurance against recession. Changing marketing policies like sales and advertising, increasing production, improve performance during both the peak and the contraction of the business cycle. Secondly, during the peak period importance should e given to marketing strategy. During recession if we give importance to incentives and efficiency alone it will hurts an organization. All of these suggestions suggest that recession simply requires cutbacks and economization.
Menon et al. (1999) find that behavior of organizations (e.g., centralization, formalization and innovative culture) affect the process of marketing policies during the recession. Also non-marketing executives (e.g., finance, top management team) of the organization can appreciate the work of marketing managers because it is their responsibility to cut down the pressure of investment during recession
The economic sector all over the world was affected by economic crisis. The marketing managers should change their marketing strategy according to the need of their customer which changes with crisis. During downturn costumers restrict their expenditure and switch to cheaper products (Leong & Kotler 2000). In another study Ang et al., (2000) found that financial crisis has a very adverse effect on consumer not financially but also psychologically. People start to worry about their future, and do not enjoy shopping anymore. The shopping strategy of consumer changes. So there in need for good marketing strategy for survival of firml. Generating indicative information is secret of marketing (Samli, 1993). The research in marketing plays a major role in determining firm’s business strategies. A firm can adopt proactive marketing during recession because it has a positive effect on firm’s performance (Raji Srinivasan et al, 2002). Greater the proactive marketing during recession greater is the performance of the firm. In the course of crisis taking risk is very essential for the survival. All those firms which are capable of investment in the hostile environment perform well. Senior marketing Executive plays a key role in formulating marketing expenditures. In another study the idea of proactive marketing was given. By adopting that strategy the effects of recession can e minimized. The results of the study showed that all those companies which adopt proactive strategy during recession can not only survive in period of crisis but also gets profit after recession (Srinivasan et al, 2005).
During the Asian crisis marketing managers changed their business policies by reducing their Expenditure to remain viable. This survey was conducted by Swee Hoon (2001) to understand how the crisis has affected consumers and businesses. Comparisons of impacts and adjustments from the Asian crisis were made across other crises, namely, the 1973US oil crisis, the 1990 Yugoslavian stagflation, the mid-1980s Filipino stagflation, and the 1989economic democracy in Eastern Europe. Explanations based on moderating factors such as nature of the crisis, socio-economic characteristics, trade dependencies, market sophistication, and culture are discussed for managerial insights.
Ferrell & Hartline (2002) states if companies want to achieve their goals, they need to develop a marketing strategy or plan. The first priority of marketing managers is to set these plans so they can survive in the period of crises. The 4ps of marketing (product, price, place and promotion) are very helpful in setting survival strategies. Some authors think improved technology can contribute in improved services during innovation (Afuah, 2003). Mostly company leaders and managers think that by decreasing price they can handle the situation but this is not a long term strategy (Barwise and Styler, 2002).
In an economic recession, consumers tend to be more sensitive about price. Throughout recession Organizations face difficulty in obtaining necessary resources was investigated by Ting-Jui Chou and Fu-Tang Chen (2005). In Asian countries marketing decisions are mostly taken by retailers and their nonconstructive decisions results in economic recession. The authors propose a contingent model, based on organizational resources and consumer. The results show that only retailers are able to use valuable strategies to thrive in a recession. Economic recession of the past 25 years had very adverse effects on many companies. When the economy is in a downturn, many business expenditures such as promotional activities, sales and market research are cut first. Some companies reduced their production and few were forced to close down. This was the period of high poverty, low profit, and high unemployment. All this negatively affects their market (Zehir and Savi, 2004). The recession also reminds the importance of keeping accounts current and keeping expenses and saving in proper balance sheet.
Lilien et al., (2005) analyzed that some firms take recession as an opportunity for competitive marketing. All firms did not react in a positive manner during recession, but those firms which have clearly planned marketing strategy can take advantage from a positive marketing response during marketing recession. Pearce and Michael (2006) analyzed in his study that more than 500,000 businesses failed during recession in the United States since the end of World War II. Researchers and practitioner are trying to prepare a strategy to meet the challenges of an economic downturn. In this study they suggested a program that involves investment in multiple markets and geographies. This program can e beneficial in increasing sales, ultimately leads to economic recovery.
In another resesrch Julia Cupman defines marketing as a process of identifying the needs of costumer profitably. Costumers can be attracted by making good marketing strategy of the product. All those organizations which make excellent marketing strategy can survive during recession but this depends on marketing manager to determine which policy they adopt to attracted customers. If any organizations don’t have excellent plans what they can do is simply cut down the prices of the product during recession. By adopting such a simple policy they can protect the image of their brand. All recessions are temporary or for short time later at the end of this period they can again increase the price of their products. Underestimating the importance of marketing one can meet customers demand y focusing on marketing policies. In the period of crisis a smallest mistake could lead to failure of the form. The correct marketing strategy can reduce risk. Professor John Quelch from Harvard Business School recently stated, “Adopting exact marketing can save the company from the effects of recession”. Symptoms and Indicators of the marketing impact then provide guidance for marketing policies. A quick response to market indicators and symptoms can reduce the effect of recession. Marketing strategies are not something new for economic climate.
Mehmet and Engin (2007) studied the relationship between marketing strategies and performance during economic crisis. The methodology they used was based on questionnaire contained questions relating to 21 marketing policies. The results shows that Companies that change their strategies properly can improve their performance in times of crisis. Future studies include data analysis. The results give effective ideas which may help in taking decision and marketing managers in times of economic crisis. In another study Ang et al. (2000) explains the importance of marketing for the growth and survival of organization. In his study he gave few suggestions for marketing by giving two different policies of pricing in the period of crisis. The company can increase their market share by adopting second strategy which is lowering the price of normal products. I should strict is not recommended that they should strictly follow all these plans but can use some of them of them
Manufacturers must recognize that channel strategies affect not only internal process, but also external relationships as well. For example, in order to achieve specific market objectives and enhance industry competiveness, manufacturing firms are adopting multiple channel strategies to sell and distribute their products or services (Reda 1999; Lee& Rhee 2007)
According to Anna Maria (2008) fear factor should be avoided during recession marketing. During the 2001 recession, companies such as Dell and Wal-Mart saw the slump and take it as opportunity to invest more in marketing than weaker rivals. They clients are less interested in image advertising and campaigns because they are more interested in the outcome.
Pajunen (2008) found that new technologies help to grow new business markets after recession. But there is no guarantee whether essential reform will do well for the growth of business. The findings suggest that firms should observe business cycle closely and be there to adopt different marketing strategies during growth and recession periods. Shao-Yu Chuang et al, investigates the relationship among company’s brand strategy, brand equity, channel strategy and market performance. The purpose of this investigation was to develop a model showing the linkages among brand tactic, brand equity, channel policy and market performance. the model of the cosmetic industry is developed to demonstrate these interactions by using linear structural relations (LISREL). The questionnaire is mainly used in methodology. The results show that channel strategy has significant impact on market performance. And also, brand strategy has significant influence on channel strategy when company’s channel strategy is more supported by its brand strategy.
Carral and Kajanto (2008) in his study gives a very successful example of Nokia. They took a very bold action by disposed of many non-core activities to concentrate on the telephone market. The purpose of the study was that always look ahead to predict environmental changes that will impact upon them.
Today’s researchers like Hooley et al, (2008) consider marketing recession as an opportunity to develop new products to meet the demands of their customer. This is marketing manager’s ability to serve it for a long-term benefit. Managers need to analyze the requirement of market and what their company can offer in the current situation. The organizational structure, resources and the company´s performance together can help to achieve. The purpose of marketing strategy is to develop valuable ideas to change market environments. Killing is very common due to these problems the world’s largest market is bound to harm many countries including India. Financial sector is facing lot of problems but analysts are expecting that consumer will face this problem in coming days. Marketers are going to face this critical situation in the next three quarters. Housing markets are already facing the music. This is good time for marketers to think again about their brand. Recession is high to think which brand will attract costumer and is profitable for their organization. If sales are decreasing, it’s right time to re-engineer the brand and negotiate rates with the media. During recession marketers need to cut down market cost for their survival. This is long term thinking and only those companies will survive who prepared themselves for crisis. Brand managers play a vital role during marketing recession. Marketing manager can play a vital role in marketing their product y expending less in advertisement and raw material. One may not survive recession without the support of stakeholders.
Pentecost et al., (2009) recommended that people differ in their changing shopping behavior during recession. In this study they examine those consumers who change their shopping behavior during recession. The results show that there are statistically major differences between the two groups which can tackle in the market by making impressive marketing strategies during recession.
Recent studies by Williamson and Zeng (2009) emphasis the need of recession as an opportunity. The current recession is characterized by its global nature. They recommended that companies must invest in research but at lower cost to combat recession.
Tazrian Shahid (2009) analyzed effect on consumer behavior and the ways of survival. North American and European consumers are main culprits of global financial crisis because of substantial job losses and reductions in spending power. The financial crisis will certainly decrease the demand of few categories in America and Europe. Recession leads to a remarkable change in consumer’s behavior. Consumers change their shopping patterns like the buy discounted products and this will favor some brands and retailers who have changed their marketing strategy during recession. This period of recession is an opportunity for marketers to think from the point of view of a consumer not economist. This study was analysis of the impacts of financial crisis on the behavior of consumer in America. Author also analyzed past recessions and different steps taken by government to cope with this situation.
In another study by Kotler et al, (2009) they found that during recession many costumers reduce their expenditures. A consecutively sharp cut in marketing budget is seen by organizations. The marketing department should accept these cuts. To make company successful in a long run the company should cut down the prices of goods. The economic crisis is also taking a duty on the foreign payment flowing into the Bangladesh economy (Rashid, 2009).
Hermann (2009) analyzed the current crisis is having a severe impact on consumer behavior. Consumers were hesitating buying for the reason of fear factor. In the period of crisis, the customer’s fear of the future strongly impacts their behavior. Cost cutting can e beneficial during period of crises. Organizations hesitate to invest during economic crisis. This tough time is opportunity for organization to reexamine their policies and brand accordingly. While recent economic data indicates that Australia hardly escaped a technical recession. Online consumer survey of Nielsen’s conducted by Percy (2009) showed that almost two out of every three Aussies thought the country was in economic recession. The survey also reported that confidence level of Australian consumer has fallen during crisis. In response to these uncertain times, the average Australian consumer has changed their expense habits.
Luz A Caudilloand (2009) gave the idea of revenue management during recession. During reduction in marketing economic the demand of goods reduces and market prices tend to decrease. However, this downturn can affect business in the short and long term. Revenue management can be helpful in coping with the adverse economic situation, as long as the company takes sufficient time to understand new markets or develop new products. During this period one can find new ways of risk management and reliable experienced manager can manage the quality of automated revenue systems. Another related study done by Ang et al. (2000) explains the importance of marketing for the growth and survival of organization. In his study he gave few suggestions for marketing by giving two different policies of pricing in the period of crisis. The company can increase their market share by adopting second strategy which is lowering the price of normal products. It is not recommended that they should strictly follow all these plans but can use some of them of them.
Silvia Puiu examined how Romanian retailers modify their marketing policies during economic crisis. The methodology the used comprised qualitative research and for this empirical data was collected from two companies i.e. Hypermarket and Carrefour in the Romanian sector. Important data was collected by means of their annual reports and different articles present at their websites.th findings of the study shows changes in the behavior of customers. Then they suggested some marketing strategies to deal with financial crisis. This research is useful to see which policy they should adopt for companies to deal with this kind of crisis and for their long term survival. Sigitas and Indre studied consumer behavior in the course of economic slump. Majority of consumers have to reconsider their spending habits and reallocate budgets. Consumers show different emotional responses towards new economic conditions and change spending on goods and services. They propose a model for consumer income and expenditure to cope with economic crisis. Since different generations have different experience in coping with financial shortages by reallocating their budgets and limiting consumption they tested the model on two generations (20-26 years old and 43-52 years old). The research discusses differences of perceptions and behavior between the two generations of consumers.
Another study was conducted by Shih Lan Su and Yang Chen (2010) in which they pointed all those factors that influences good performance during financial crisis. In 2007 financial crises leads to global recession. At that time many firms faces severe financial loss. This study was performed during the crises period and they found the relationship between firm variables and firm performance. The result showed that some variables have an impact on performance, among which industry effect was the most influential variable. By expanding business or commercial organizations into new areas has a positive impact on performance. This strategic choice is made by the manager of the organization because they are more focused on the benefits of diversification. The results indicated that diversification strategy plays an important role in the long-term success of firms.
A study was conducted in 980 hotels around the world by Sheryl E. Kimes from December 2009 through February 2010. He found that discounting was the best method used to balance the impacts of the recession of 2008-2009. Different groups have different opinion as most respondents disagreed the idea of discounting by cutting down their prices because they think this was not good choice for maintaining income levels. Discounting is one of four categories of strategy applied to compensate the effects of recession. The other three categories are marketing initiatives, obscuring room rates, and cutting costs. Hotels that sought to attract new market by making little changes in their marketing strategies survived during recession. These policies implicate free nights stay before purchasing. About one-quarter of respondents reported cutting costs. These respondents disagreed discounting and would like to focus on market, usually by closing facilities, taking the opportunity for renovation, or reducing operating hours. Asked for their recommendations for the next recession, the respondents said that they would avoid discounting and focus instead on market plan. In 2010, the respondents said that they planned to emphasis on value-added packages with addition to marketing plans.
Mark DeRuiter in his study indicates that marketing impacts our profession in a variety of ways. As in Marketing the most important thing is advertising. He gives us the idea of four “Ps” of marketing (product, price, place, promotion). Developing a marketing plan takes time, faculty, and consistent energy. In this study the relationship between four “Ps” of marketing, was explored.
During the global financial crisis Ali Quazi and Majharul Talukder give the idea of survival as improvement policy. They explore the possible ways of coping with the current global financial crisis. The study also suggested that modernization in business would be a better way of dealing with the crisis in a developing country such as Bangladesh. Reviewing current thoughts and related theories broadens the understanding of the complexities and found the way of survival is innovation strategy. There has been much research done on the impact of the Global Financial Crisis (GFC). Helen et al, also studied the impact of the global economic crises on the behavior of consumer. The study helps in understanding that the consumer behavior is influenced by both internal characteristics and external factors of the environment. The Global Financial Crisis is one such environmental influence that had a strong impact on the behavior of consumers. The GFC has forced consumers to change their attitudes towards purchasing. The results show that success of the companies lies in the long-term marketing planning. Great marketers don’t jump back at the hour of crises. They continuously make plans and marketing strategies during critical times so they can quickly adapt change. And this thinking can be seen in marketing their budgets.
Throughout economic boom every organization is struggling for survival. Related study was done by Panda. He studied that in the state of financial global recession organizations are struggling for survival. The only remedy they see in reducing human capital. The aim is to save cost by getting more work done using fewer resources. Thus to survive in this critical situation one needs to strengthen himself with new skills. The only remedy to survive in this critical situation is through complete concentration on the multi-tasking and multi-skilling at this hour of crisis.
In another study by Samli and Coskun (2010) gives the key of success and counter chaos marketing policies. Chaos theory has been in existence for some time. Conditions that are creating chaotic shock waves are very real in both global and national markets. Chaotic markets need immediate solutions because they are creating disorder in markets. Marketing executives need to rule out the cause of disorder and must learn to manage them. This situation will call for the creation of a counter chaos culture in the organization and developing a counter chaos marketing strategy that is proactive. It transforms the conditions that are creating chaos into new market opportunities.
Another study done by J.Monrabal . In his study he recommended that survival in recession requires strong marketing strategy like investing on the promotion of brand and to get stbale in the market it can take 5-10 years. All those firms which adopted this strategy before the recession did not get much from their sales but suffered less as compared to other companies during recession. Their strategy was based on the promotion of brand which involves many years struggle. What happens is small firms don’t have enough money to spend for long term planning so large companies takeover in this way they get market shares. So strong brands not only survive during recession also by increasing their market share after recession.
Kieth Roberts (2003) studied profit impact of market strategy (PIMS). He concluded from his study that if firms raise their marketing expenditure during recession they do not suffer instead of that they make profit after recession as compared to those companies which cut their price.
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