CREDIT CRUNCH

Companies Marketing in Time of Prosperity and in Time of Financial Difficulty i.e. Credit Crunch

Table of Contents

Chapter 1: Introduction (1000)3

Background of the study3

Problem Statement4

Purpose of the study5

Rationale of the study5

Significance of the study6

Chapter 2: Literature Review (5000)8

Chapter 3: Methodology (3000)32

Theoretical Framework32

Research Design42

Keywords42

References45

Chapter 1: Introduction (1000)

Background of the study

When times are tough and companies are uncertain where to invest their marketing dollars, one sure bet is to invest in the reputation of the company and key people. When budgets get lean, relationships and not salesmanship win the day.

Everyone is talking about recession. (Cherrier, 2007) The talk alone may be enough to trigger one, whether the underlying economics dictate it or not. From observations of recessions past, we know that consumers are quick to rein in spending when hard times are predicted. Many business leaders behave the same way. Anticipating reduced sales, they are inclined to cut back on variable costs, including marketing, in order to deliver on the expectations of the financial market. However, a great deal of evidence suggests that it's not a good idea to reduce marketing spend during recession in order to hit financial targets. Doing so may leave your brand in a less competitive position when the economy recovers. (Connolly, 2008) Over the years, research studies have confirmed that the best strategy in terms of long-term ROI is to increase marketing expenditure during an economic slowdown. An analysis of the Profit Impact of Marketing Strategies (PIMS) database, presented at a March 2008 IPA conference, provides the latest evidence. This analysis compared the results achieved by companies that increased, maintained, and reduced marketing spend during recession. Metrics used were Return on Capital Employed (ROCA) during the recession, ROCA during the first two years of recovery, and market share change during the same period of recovery.

Problem Statement

Managing businesses in recession, especially service businesses, is not as easy as it looks. Let's consider for a moment trying to manage an advertising firm that specializes in promotion, public relations, and marketing for its clients.

During a recession every client wants results, and no client wants to pay for them. Worse, even if you give them the services they may not pay you for them, as they began complaining about the results even though you've already made the deal with them. (Chhabara, 2008)

In fact, you sign the contract and now they want to renege on the payment. But it gets worse, as the last thing you want to do is to lose a client during a recession, if you lose enough clients, your income stops and you are out of business.

If you complain to your clients that they must pay you or you will go at a business they say things like; "I thought you were a great advertising and PR firm, and you guys were whizzes at marketing? If so how come you aren't making any money? If you can market yourself why should we let you work for our company and market our great products and services?" Of course, ...