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Is it true that marketing during a downturn is good for business?

Roberto Rivero
April 14, 2020

Marketing is typically one of the first items to be slashed by management in hard times. During the 2008 recession I received an instruction from my CEO to immediately cut 1/3 of my team of 30 and ½ of my budget. I reluctantly agreed to implement this and later found out that every other department had been asked to make cuts of only 1-2% over a longer period.

Yet, during every recession I’ve experienced, many articles appear claiming that maintaining, or even increasing, marketing expenditure during downturns makes good business sense (here is the latest). The problem is that most of these articles are written by marketing professionals, and only evidenced with one or two anecdotes.

marketing is essential

I am a marketer and I am sceptical

 

Which side is right? What do academics and the empirical evidence say? Confined in my house by COVID-19, I thought I would devote a couple of days to finding out. I enlisted the help of Vable’s in-house Information Professional and between us we found and downloaded nine relevant articles from academic sources.

The first thing I noticed was that all the papers were written during, or immediately after, recessions. It seems the topic does not merit much academic attention at other times. One of the papers, Srinivasan et al (2002), reviewed 20 marketing strategy textbooks and found that only seven mention recessions, with three of these being non-committal about what to do.

It seems like dealing with recessions is something that is only learnt by marketers through real-life experience. I read 7 (listed below) of the 9 articles, them stopped because the evidence was all pointing in one direction – that marketing does improve performance through and after a downturn.

 

The evidence for marketing during a downturn

 

Rollins, Nickell and Ennis (2011) conclude that:

“companies who continue their marketing efforts during economic downturns tend to become post-recession winners”.

Srinivasan et al (2002) reviewed past academic research and surveyed 154 senior marketing executives and found that:

“proactive marketing results in improving both market and business performance during the recession.”

“Although business press anecdotes seem to indicate that marketing during a recession provides mainly long-term advantages, our research suggests that there are some immediate returns as well”.

Amissah and Money (2015) reviewed the academic literature and found that:

“Researchers have shown that companies that are able to maintain and even increase their marketing budget/spend during a recession experience growth in their sales figures and market share during and after recession.”

Srinivasan (2002) refers to:

“Dobbs, Jesudason and Malige 2002; Dobbs, Karakelov and Malige 2002; Rigby 2001 found that some firms (e.g., BMW, Dell, General Motors, Intel, Microsoft, and Wal-Mart) view recessions as opportunities to strengthen their businesses, invest aggressively and overtake their weaker competitors.

I could provide more quotes from every paper but I’ll spare you. So that’s that – just maintain or increase your marketing spend and you will do well, right? Well, actually no. Two points should be kept in mind.

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CAVEAT 1

 

There is a hint to the first caveat in the last quote, above. 

Every drastic change in business environment brings winners and losers and recessions are drastic changes in the environment – this coming one probably more than most.

At times like this many firms (perhaps with justification) quickly decide that they will struggle during the downturn; classifying themselves as potential “losers” – and a much smaller number of firms spot opportunities, classifying themselves as potential “winners”.

The losers cut back on everything, including marketing – and the winners maintain or increase their investment in marketing. If there is any accuracy in the winner/loser self-classifications, the subsequent data will be biased. 

Anyone just looking at the data later will see that the companies that increased marketing tended to be winners and the ones who reduced marketing tended to losers – but they will assume that increasing marketing was the cause and winning the effect – whereas, cause and effect probably runs in both directions.

 

CAVEAT 2

 

Some of the papers look in more detail at the actions of the winners. In none of the cases described, did the winner simply maintain or increase marketing uniformly across the board and continue to use the same tactics for the same products in the same proportions.

The biggest winners recognised that they were in a new world and reacted accordingly. They re-aligned marketing resources towards products they thought would do well in the new world and changed their marketing tactics to take advantage of the new conditions.

 

Marketing: what should we be doing?

 

We are agreed then that you should be taking marketing action, here are some immediate hints and tips:

  1. Don’t give in to the reflex to act immediately.
  2. Analyse the impact on your clients and their behaviour. How has their world changed? What new needs do they have?
  3. Rush to put measures in place to keep existing clients – and maybe sell them more.
  4. Analyse your products and their appeal to different clients in this new world.
  5. Analyse your distribution and promotional channels. Even if they have not been disrupted, there might be better ways of doing things because their relative costs will have changed.
  6. Invest in products that will do well in the new environment but revise your marketing mix to suit the new world – and your own situation.

And finally, read my next blog post, where I plan to cover all this in more detail.

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References:

Amissah G. and Money U. (2015). Marketing During and After Recession. International Journal of Business and Social Science.

Guy Consterdine (2009). Advertising In A Recession: It pays to maintain marketing pressure. A review of the evidence. Research Commissioned by The Periodical Publishers Association of Ireland (PPAI).

Dhalla, Nariman, K. (1980), “Advertising as an Antirecession Tool", Harvard Business Review,

Gulati, Ranjay, Nohria, Nitin, & Wohlgezogen, Franz (2010). Roaring out of recession. Harvard Business Review.

Mina Rollins, David Nickell and Justin Ennis (2011). The Impact of Economic Downturns on Marketing. Journal of Business Research.

John A. Quelch and Katherine E. Jocz (2009). How to Market in a Downturn. Harvard Business Review, April 2009.

Raji Srinivasan, Gary Lillien and Arvind Randaswamy (2002). “Turning Adversity Into Advantage: Does Proactive Marketing During a Recession Pay Off?”. Pennsylvania State University.

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