Research: Proactive Marketing During Recession

UNIVERSITY PARK, PA (March 29, 2005)—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 research authored by Gary Lilien and Arvind Rangaswamy of Penn State's Smeal College of Business.

"Turning Adversity Into Advantage: Does Proactive Marketing During a Recession Pay Off?" is forthcoming in the International Journal for Research In Marketing. The 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.

"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," the authors write. "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."

Conversely, the study finds that firms without these strategic marketing traits are unlikely to derive economic benefits from a proactive marketing response during a recession. Such companies are better served by not increasing marketing spending until conditions improve.

"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.)," the authors add. "Thus, Wal-Mart would more likely benefit than the much weaker K-Mart franchise if they had both chosen to increase spending during the most recent recession."

To arrive at their conclusions, Lilien, Rangaswamy, and their co-author Raji Srinivasan of the University of Texas (a former student of theirs at Smeal) surveyed more than 150 senior marketing executives from a variety of industries including semiconductors and electronics, manufacturing, and telecommunications. Using the most recent recession as the context, the authors collected data during the second and third quarters of 2002.