RECESSION IN UK

Marketing Activities in a Recession

Marketing Activities in Recession

Introduction

The current recession in the UK has hit businesses and individuals hard. Figures given by the media paint a bleak picture. The UK Government reports that we are "on the way up" do not appear to be dispelling fears as rapidly as they might hope. The marketing industry has weathered all manner of problems over the last few years and, as with any other industry, there have been those companies, which have survived, and those which have not. During the past recessionary periods, budgets for advertising and other marketing strategies have been cut, whilst market research generally has come out unscathed. This time, it appears that market research has also been affected.

The way a company responds to a downturn can make or break its ability to thrive once the market fully recovers. When customers start to tighten their belts and reduce their spending, some companies go into panic mode and react by cutting costs, slashing prices and putting off alternative investments. While it is prudent to rein in costs and tweak your operating strategy to respond to slowing market conditions, it is a mistake to make sharp changes in a strategy without understanding how it will affect your company's longer term goals. The key for managers is to understand which levers in your company's operations are actually driving its overall financial performance. Once you have this information, you can confidently pull the right lever to adjust your strategy when conditions change (Penne, 2009, pp 321).

Unfortunately, one of the business functions which have suffered in downturns from a knee-jerk cost cutting reaction has been marketing. In the cast, this area has been tainted with the stigma of just being a cost centre because, in the early days, it struggled to demonstrate clear returns on investment. While slashing your marketing budget at the first sign of a slowdown can help to prop up your bottom line in the next reporting period. It is a misguided solution. This can be a common scenario for UK retail market that does not fully understand the value of staying close to customers when it is most critical.

Discussion

A UK study from the last downturn analysed the performance of almost 1000 companies during two years of the overall market decline, followed by two years of market growth. It showed that the companies which increased their marketing spend relative to market size during the recession, increased their return on capital employed by 4.3 percentage points in the recovery. This is compared with a 0.8 percentage point of decline for the budget cutters. By the end, of the first two years of the recovery the investors had gained 1.7 percentage points of market share. This clearly demonstrates that investing in marketing during tough limes buys market share for much less than it costs when the market is growing. A lack of investment in your brand and marketing function can be difficult and expensive to reverse once the market turns (Matsusaka, 2005, pp ...