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Friday, March 07, 2008

Marketing in a Recession

Some marketers in the semiconductor industry are facing reduced budgets due to the current industry downturn. For many companies, it’s the last thing they should do.
What does history and research say about marketing during recession?

The 1990-91 recession lasted eight months with unemployment eventually peaking at 7.8%, 50% higher than the current rate. Home prices in the top 10 metropolitan areas fell 8.3% during the downturn and the stock market dropped 21%.

It was during this time that Intel launched “Intel Inside” and spent $100 million on a risky, untried marketing campaign. In 1992, the first year of "Intel Inside" campaign, worldwide sales rose 63%.

According to the February 4th issue of Advertising Age, consumer product giants P&G, Colgate-Palmolive, Kraft Foods, and Kellogg are all boosting (or have at least maintained) their marketing budgets. This even as they are cutting costs elsewhere due to the slowing economy.

For well-positioned companies, an economic recession should not prompt marketing cutbacks, but rather an aggressive increase in marketing spending to achieve superior business performance according to recent research by professors at Penn State's Smeal College of Business. Other studies have also confirmed that aggressive marketing during an economic downturn can result in greater market share gains than spending increases in a growing economy. The Penn State study finds that firms entering 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.

"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," say the researchers.

"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.)," said the authors.

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