Depression is a phenomenon of decreasing demand for raw materials, products, and services. For example, in the United States a recession is said to exist when the gross national product (GNP) declines for two consecutive quarters, or when the leading economic indicators (LEIs) decline for three straight months, or when the index of the Association of Purchasing Managers dips below 50 points. Whichever the 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 the marketing mix and/or changing the target markets.
Recession has been defined in the marketing literature as a “process of decreasing demand for raw materials, products and services, including labor” (Sharma 1978) or as a “state in which the demand for a product is less than its former level” (Kotler 1973).
COMPANIES AFFECTED AND UNAFFECTED:
Recessions are selective. Recessions impact some industries, products and regions of the country hard and bypass others entirely. Among the industries and products most affected are: automobiles, home furnishings, large appliances, travel and airlines, convenience foods, aluminum, steel, petrochemicals and synthetic fibers. Relatively unaffected are: liquor and wine, tobacco, small appliances, packaged goods, computer and service industries.
Companies that are Selling Basic Necessities Survive a Recession.
In particular, companies that manufacture the basic necessities of life are least affected by the recession. People still need to eat, wash their laundry, clean their homes, practice personal hygiene, and feed their pets. Discount giants such as BJs, Costco, and Aldi continue to open their doors week after week as consumers arrive to purchase necessities and simple pleasures. Discount stores such as Wal-Mart, Kmart, Kohls, Target, and discount pet stores continue to sell to loyal customers as well as new ones looking for less expensive goods than they are used to buying. Company health care giants such as Johnson & Johnson continue to see profits despite the economic downturn. Likewise, companies producing articles for daily use such as Procter & Gamble and Kraft Foods also carry on without experiencing too much of a pinch in their sales quotas. Fast food restaurants also continue to hold strong ground against the effects of the recession as more and more people opt for a less expensivemealout.
Companies that Sell Simple Pleasures Survive a Recession
Discretionary types of spending that are the first to be given up include expensive meals or nights out on the town. In turn, the alternatives that people select to replace these activities are going to experience a surge of increased consumerism. So, as more and more people stay home to save on gas while avoiding big ticket expenses, companies selling computer hardware and peripherals, basic needs, and simple pleasures are holding their own.
Companies selling the simple pleasures in life, also referred to as guilty pleasures or sin stocks, will continue to do well as many consumers attempt to keep their spending habits under control with small indulgences. These simple pleasures include such items as gourmet chocolates, beer, alcohol, cigarettes, DVDs, CDs, and video games.
Since parents aim to keep their children happy, even in times of economic trouble, toys will continue to be another big seller.
IMPACT OF RECESSION ON PEOPLE’S SHOPPING AND TRAVELLING IN UK
Flat-screen TVs UP 17.5% Low-energy bulbs UP 38.8%
Emulsion paint DOWN 7.4% Unit sales Jan – March 2009
Compared with Jan-March 2008 Source: GfK Retail and Technology
Airport traffic DOWN 8.0% Railway use UP 1.0%
London congestion charge payments Severn Bridge crossings DOWN 3.1%
UK house prices between 1975 and 2006.
The Economist magazine, writing at the same time, went further, saying “the worldwide rise in house prices is the biggest bubble in history”. Real estate bubbles are followed by a price decrease (also known as a housing price crash) that can result in many owners holding negative equity (a mortgage debt higher than the current value of the property).
ADVERTISING AND THE OPPORTUNITIES
The question of advertising during a recession is one that has been asked many times over many years. Interestingly, the answer still does not seem clear to enough marketers.
The answer to the question is that advertising during a recession provides a unique window of opportunity for investment purposes to:
1) Build equity 2) Solidify your customer base 3) Gain new customers and
4) Make inroads on your competitors who have cut their advertising during the recession period. This window of opportunity is created by the understanding that advertising is an investment, not an expense.
Companies that have taken advantage of advertising during a recession to establish strong market positions while developing brand equity include such diverse company names as Bristol Myers, Campbell Soup, Coca-cola, Gillette, Nabisco, Pillsbury, Procter and Gamble, R.J. Reynolds, Rubbermaid, Levi Strauss, Stroh Brewery, United Airlines and Welsh Foods-among others.
McGraw-Hill Research study of over 600 Businesses found that:
1981-1982 …. Business that maintained or increased their ad spend during this time
* Averaged higher sales growth during the recession and in the following 3 years! By 1985 …. Sales of the businesses that maintained or increased their ad spend during that recession
* Sales had risen 256% over those that had cut back on advertising
Likewise in 2001 …. Another study found that aggressive recession advertisers
* Increased market share 2 ½ times the average for all businesses in the post-recession
In 2002 …. The Strategic planning institute illustrated that during economic expansion
* Although 80% of businesses increased their advertising spend there was NO improvement in market share
* Why? – Because everyone has increase ad spending!
Many sites have experienced a few sales decline and are trying to cut short their budgets and focusing on some other areas too, but as the time passing it’s now just a reason that many companies are giving for the firing their employees and cost cutting.
Survive Online Recession with Internet Marketing Techniques
Recession has over-shadowed all business worldwide making it difficult for companies to survive and earn profits. World Wide Web is also experiencing the pinch of this global financial mess.
Tips to survive:
Blogging PPC marketing Social networking
1.Convert your analysis according to customer insights.
2.Convert your insight into some real action.
3.Repeat the above steps as and when required.
Other strategies that you can follow in this situation:-
Focus on recent customers Rewards
“Fire” your banner Conversions
Return on Investment Remember the basics
Recession will impact search marketing
We can see some of the leading Internet search stocks taking a hit in the recent past. Google down 38%, Yahoo lay off 10 – 20% of its staff.
The official estimates of GDP growth for the first two quarters of 2008/9 stayed above 7.5 percent. However, industry-wide indications after September are uniformly gloomy.
There are reports of significant declines in output of automobiles, commercial vehicles, steel, textiles, petrochemicals, construction, real estate, finance, retail activity and many other sectors. Exports fell by 12 percent in dollar terms in October and advance information points to a similar decline in November. After September, the economy seems almost to have gone over a cliff.
Brent barrel petroleum spot prices, May 1987 – March 2009.
In January 2008, oil prices surpassed $100 a barrel for the first time, the first of many price milestones to be passed in the course of the year. In July 2008, oil peaked at $147.30 a barrel and a gallon of gasoline was more than $4 across most of the U.S.A. These high prices caused a dramatic drop in demand and prices fell below $35 a barrel at the end of 2008. There is concern that if the economy was to improve, oil prices might return to pre-recession levels.
In the second half of 2008, the prices of most commodities fell dramatically on expectations of diminished demand in a world recession.
RELATIONSHIP IN CRISIS
Consumers feel somehow abandoned by big brands. In a way they feel brands are indifferent to their situation and don’t do anything for them. Comparing the period of Jan/Nov 99 with Jan/Nov 98, prices in supermarkets went down by an average of 5%. During the recession all supermarkets, despite their positioning, base their communication on price and, compared to FMCG categories, increase their ad spending.
ü Acknowledge the problem
ü Respond sensibly
1) Communicate performance to justify price
2) Communicate special discount as opportunity and
3) Communicate price reduction to reinforce brand proposition.
Steps a marketer should take in times of recession
Time to introspect Invest in brands
Be a paranoid Cut Costs
Partner your stakeholders Trade Up or down
Listen to your customers
5 Tips to Recession-Proof Global Marketing
Offer something that will provoke a heartfelt Keep in touch.
“It’s about time!” Great sportsmanship pays off
Make yourself available. Dare to be different.
Thus the depression calls for marketing managers to use strategies to stimulate consumer demand. Such strategies often require a redefinition of the target customers and the marketing mix. They may include narrowing the product line, offering cheaper products and quantity discounts, lowering prices, increasing promotion, and offering products directly to consumers.