Research: Companies Strong In Marketing Should Increase Efforts During Recession
With financial analysts, pundits, and economists offering ceaseless warnings that the U.S. economy is heading for a recession, and actually may already be in the midst of one now, many companies may be considering marketing cutbacks as one of the ways to endure the forecasted bear market.
UNIVERSITY PARK, PA (February 6, 2008) – With financial analysts, pundits, and economists offering ceaseless warnings that the U.S. economy is heading for a recession, and actually may already be in the midst of one now, many companies may be considering marketing cutbacks as one of the ways to endure the forecasted bear market.
However, according to research by professors at Penn State's Smeal College of Business and the University of Texas, for well-positioned companies experienced in successful marketing, an economic recession should not prompt marketing cutbacks, but rather an aggressive increase in marketing spending to achieve superior business performance both in the short and long term.
"Turning Adversity Into Advantage: Does Proactive Marketing During a Recession Pay Off?" by Raji Srinivasan of the University of Texas and Gary Lilien and Arvind Rangaswamy of Smeal was published in 2005 in the International Journal for Research In Marketing, but the paper's findings are especially relevant now with a recession seemingly looming.
The paper finds that firms entering into a recession with a pre-established strategic emphasis on marketing; an entrepreneurial culture; and a sufficient reserve of under-utilized workers, cash, and spare production capacity are best positioned to approach recessions as opportunities to strengthen their competitive advantage.
Comparing these businesses to the best-trained athletes, the authors write that "athletes often choose times of stress to mount attacks: strong runners and bicycle racers may increase their pace on hills or under other challenging conditions" to beat out weaker opponents during the most difficult leg of their race.
"In a similar vein," they write, "proactive marketing includes both the sensing of the existence of the opportunity (a tough hill and fatigued opponents) and an aggressive response (possessing the necessary strength or nerve) to the opportunity."
According to Lilien, one of the paper's authors, "Firms like Amazon and Google that have the ability (marketing skills), the will (entrepreneurial culture), and the means (the money in the bank) should invest; with firms without all three, the decision is less clear."
Companies lacking these strategic marketing resources are better served by not increasing marketing spending until conditions improve, the researchers note in their paper.
"Those firms with a strategic emphasis on marketing have already put in place the programs that help them derive value from their marketing activities (e.g., well-recognized brands, differentiated products, targeted communications, good support and service, etc.)," the authors add.
To arrive at their conclusions, Lilien, Rangaswamy, and Srinivasan surveyed more than 150 senior marketing executives from a variety of industries, including semiconductors and electronics, manufacturing, and telecommunications. Using the last recession as the context, the authors collected data during the second and third quarters of 2002.
