Marketing Strategies during Recession: A Comparison of Small and Large Firms

Abstract

Recession is a phenomenon of decreasing demand for raw materials, products, and services. Technically, its beginning, progress, and ending depend on operational measures used by different researchers and federal agencies. For example, in United States a recession is said to exist when gross national product (GNP) declines for two consecutive quarters, or when leading economic indicators (LEIs) decline for three straight months, or when index of Association of Purchasing Managers dips below 50 points. Whichever case, recession requires marketing managers to modify their marketing strategy and action in order to stay both profitable and consumer-responsive. This generally means adapting marketing mix and/or changing target markets. However, response of marketing managers to recession depends on how they perceive its meaning and impact on their businesses. As a result, it is possible that a recession on national may affect different companies differently and may, in fact, indicate different economic environments, including those of and inflation. Specifically, an objectively measured and determined recession on national may affect companies of different size and different sectors and regions differently, hence requiring that marketing managers take different tactical and/or strategic measures to adjust to or even exploit changes in economic environment. This article seeks to determine management perception of and response to economic recession by measuring following and contrasting results by sector and by company size: (1) The meaning of 1991 economic recession to marketing managers, (2) The impact of this recession on marketing decisions, and (3) The resulting adjustments in marketing strategy and action. A fourth goal of this article is to make recommendations to marketing managers, which may be especially useful to those in small businesses. By accomplishing goals of this article, study will make a bridge between scholarly marketing literature and daily or weekly reporting on marketing and economic performance. LITERATURE REVIEW Recession has been defined in marketing literature as a process of decreasing demand for raw materials, products and services, including labor (Shama 1978) or as a state in which demand for a product is less than its former level (Kotler 1973). Recession calls for marketing managers to use strategies to stimulate consumer demand. Such strategies often require a redefinition of target customers and marketing mix. They may include narrowing product line, offering cheaper products and quantity discounts, lowering prices, increasing promotion, and offering products directly to consumers. To weather recession, Bonoma (1991) advises practicing marketing managers to: (1) Avoid |empty middle' marketing, (2) Don't mistake expansiveness for empire, (3) Do more for less, and (4) Remember what winter is like when summer again comes (Bonoma 1991, 10). In a related study, Goerne (1991) reports that marketing managers have been using significantly more coupons in promotion mix in order to fight negative impact of recession on sales. In view of this, it is critically important that marketing managers make sure that economic environment facing their company is indeed one of recession. However, existence of a recession is often determined on a national by federal agencies and business and economic research organizations. Thus, U.S. Department of Commerce gathers and publishes two highly watched statistical data: GNP and LEIs. The GNP is total monetary value of goods and services produced and consumed in private, public, domestic and international sectors of economy and is therefore the broadest indicator of economic output and growth (Guide to Economic Indicators 1990). …

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