Download impact of recession on marketing

Q&A: The Impact of the Great Recession on Marketing
For our Q&A this issue, we asked two professional marketers their views on issues related to
how the current economic situation and marketing impact each other. Our guests for this issue
are Kevin Clancy of Copernicus Marketing and Charles Colby with Rock Research. Kevin is a
well-known speaker and author and a member of the Journal of Marketing review board. Charles
is also a member of the Journal of Marketing Review Board.
MarketingAcademics@AMA:. We all recognize that the current economic situation presents
a never-before-seen (in our lifetime) business climate. What do you feel are some ways that
CMOs and other marketing managers can or should be responding to the economy today?
Charles Colby: Right now, buyers are looking for value. It is a mistake to respond to this need
by wholesale cutting of prices to be competitive, since this diminishes perceptions of quality and
it will be harder to raise prices in the future than it was to cut them in the first place. Instead,
marketers should create value offers such as bundled products or services, special financing, or
lower cost alternatives within the existing product line. This is also an important time to nurture
customer loyalty to ensure sales return as quickly as possible in a recovery. Companies with a
lifeline to customers (e.g., an e-tailer with email addresses of customers) are in the best position
to do this.
Getting new customers involves solving two problems that buyers face right now: a shortage of
credit and financial insecurity. Marketers can address these by helping buyers pay for products
and services, such as extended payment plans, and by mitigating risk in purchase terms and
warranties. For example, some companies have programs that cover payments in the event of a
job loss. Finally, CMOs should look for opportunities created by the current environment. For
example, our research shows an increasing interest in home improvements to save energy. As
another example, we have seen some evidence of consumer interest shifting from credit products
to savings products.
Kevin Clancy: If your ROI numbers weren’t in line before the recession, it’s more important
than ever to get them on track now. The best way to do that is to start thinking about the
fundamentals of your marketing strategy. Who’s your target? Are the most profitable buyers in
your category or industry in it? Do you have a positioning? Does it play to your brand’s
perceived strengths? Does it propose to solve a persistent problem for customers?
Many marketers have—understandably—lost heart with all the cuts to their budgets. With better
targeting and positioning, they will be able to get much more than they ever expected in terms of
sales and profits.
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MarketingAcademics@AMA: Some people claim that much of the current economic crisis is
the result of firms over-responding to consumer demand, producing too many products,
and, at the same time, creating consumers who “want it all.” Thus, marketing may be to
blame at least for some of the current economic situation. How do you respond to this?
Have marketers been too successful?
Colby Marketers shouldn’t kid themselves to think that they caused the recession. I have seen
plenty of data that suggests the recession is due to factors in financial markets. The mess was
caused by financial firms lending to people and businesses who should not have received credit,
and now it is being exacerbated by withholding credit from people and businesses who should
now qualify.
To illustrate this point, small businesses that my firm studies are facing growth constraints due to
a lack of access to capital. Marketers should avoid pondering ethical questions such as who is to
blame and focus on their job of identifying and responding to buyer needs, doing so in an ethical
and legal manner.
If they helped cause the recession by creating excessive demand, they can help build the
economy in the future by spearheading the introduction of new innovations that can spur real
growth and benefit the public good. Example: green products and services.
Clancy: That’s a tough case to make given that the ROI of most marketing programs is zero or
negative. Between 80% -90% of new products and service fail. Customer satisfaction hovers
around 75%--a “C” grade. More brands have been turned into commodities in the past 10 years
than commodities into brands. This is ‘too successful’?
I could buy that poor marketing decision making held companies back as far as profit
performance goes, but playing a major role in the current economic collapse seems a bit of a
stretch to me.
MarketingAcademics@AMA: Do you feel that the current economic experience will make
us change the way we look at marketing? How will marketing management in the future
be the same and how will it be different?
Colby: Marketing will change only if the marketplace changes. We need to be cautious that if
the economy rebounds, marketers and their customers will forget the recession. Longer terms
trends, such as the shift to a green economy and continuing convergence of technology will
probably be more significant than the experience of the “great recession”.
I am hopeful at the time of writing this that the economy will turn around soon and that this will
not turn into a decade long crisis that has a fundamental impact on consumer values the way the
“great depression” had on a generation. What might change marketing from an economic
perspective is if the next decade consists of a stagnation economy akin to the 1970s. If this is the
case, it will be a lot harder to grow and conventional products and services may depend more on
mergers and acquisitions rather than tapping natural economic growth and vying for market
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share. Still, I think there will be exciting opportunities for marketers in new technologies, the
green economy, and emerging global markets.
Clancy: I hope so. I hope that marketers feel more compelled than ever to make more careful,
data-driven decisions about their strategies and programs. I hope they are in less of a rush to just
get something out into the market and take more time to get a product or program right the first
go round.
Just prior to the recession, marketers were coming around to the idea that, like any other
investment activity, the financial pro’s and con’s of a decision needed to be calculated and
weighed against each other. Coming out of the recession, marketers will have a renewed sense
of urgency to get their decision-making processes up to snuff.
MarketingAcademics@AMA: Finally, what advice would you give to marketing educators?
What changes will be needed in our classroom discussions and our textbooks on marketing
to meet the challenges of business in the future?
Colby: The most pressing need in marketing education is mastering the “four Ps” in an
environment of rapid technological convergence. For instance, promotion and advertising
courses should cover areas such as web development, search engine optimization, online
advertising and social media. Students should be taught about the basics of e-commerce and
how companies establish and manage online channels for ordering products and services,
conducting service transactions and making payments. Students should also be instructed on the
new kinds of flexible pricing models emerging in the online economy. Finally, courses on
consumer behavior and market research should place greater emphasis on studying the role of
innovation and diffusion in the adoption of new products and services.
Obviously, course content needs to address other long range trends that are important to
marketers, including the increasing emphasis on environmental sustainability, globalization,
public policy and regulation, social marketing, and an aging population.
Clancy: Integrated marketing communications kind of came and went as a hot concept. Though
it’s still brought up on occasion, it’s not with the same fervor. But the idea behind it—that
there’s something inherently powerful about getting all the different forms of marketing
communication hitting on the same message—is more relevant than ever today. Marketing
educators should help their students understand how to get all the disparate areas—TV
advertising, print, radio, sponsorships, social media, and so on—working against the SAME
marketing strategy.
Educators also need to invest more time in companies in the marketing department learning
what’s really going on rather than what they think is going on, as a Journal of Marketing
reviewer, I’m continually distressed by the naiveté authors display when discussing basic
marketing functions.
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