University Park, Pa. — With ceaseless warnings that the U.S. economy is heading for or may be in a recession, many companies may be considering marketing cutbacks as one of the ways to endure the slowdown, but researchers say that an economic recession should instead prompt successful companies to boost their marketing to achieve superior business performance both in the short and long term.
Firms entering into a recession with a pre-established strategic emphasis on marketing; an entrepreneurial culture; and a sufficient reserve of underutilized workers, cash and spare production capacity are best positioned to approach recessions as opportunities to strengthen their competitive advantage, according to Raji Srinivasan of the University of Texas and Gary Lilien and Arvind Rangaswamy of Penn State’s Smeal College of Business.
Comparing these businesses to the best-trained athletes, the authors wrote 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, 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," the researchers said.
Lilien noted, "Firms like Amazon, Google and BMW that have the ability (marketing skills), the will (entrepreneurial culture) and the means (the money in the bank) should invest; for 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 wrote.
"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.)," they added.
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.
The team published their findings in the paper "Turning Adversity Into Advantage: Does Proactive Marketing during a Recession Pay Off?" in the International Journal for Research In Marketing in 2005.
"Our findings are particularly relevant now as the U.S. economy grapples with recessionary factors and firms are looking for strategies that will work in such environments," said Rangaswamy.
Lilien is a Distinguished Research Professor of Management Science at Smeal and research director of the College’s Institute for the Study of Business Markets. Rangaswamy is the Anchel Professor of Marketing and research director of Smeal’s Center for Digital Transformation.