Research Paper in Finance About Recession

So how exactly does Recession Influence Promotional Activities in Your Country?

A speculative bubble, formed on the planet financial markets at the beginning of the 21st century and burst in 2008, entailed a full-scale financial crisis, and a widespread economic recession – the latter, according to popular belief, continues to this day. A long time of economic stimulation, both through monetary and budgetary policies, has led to significantly less than satisfactory results: economic growth is below historical standards, inflation balancing on the verge of deflation, and a prolonged normalization of the unemployment rate is noticed.

Actually it should be taken into consideration that the external environment is constantly changing, and it is crucial that the marketing strategy is prepared for the new conditions. Effective online strategy involves the development of measures to respond to a changing market environment by identifying market segments and positioning offers for these segments. Additionally , to succeed in industry, companies should use active strategies – that is, perhaps not react to events, but create them.

Regarding these thoughts, it can be stated that the advantages of advertising to businesses are already well established. Nevertheless , in the academic and business communities there is a dispute for advertising around recession times. In economics, the declining portion of a business cycle is called a recession. Generally speaking, economists possess some disagreements on the general definition of a recession. The conventional textbook definition considers a couple of consecutive decline in GDP as a recession. This definition of a recession makes it difficult to identify first and end of a recessionary period. Additionally , it ignores other economic indicators such as unemployment and consumer confidence. For this reason within this paper the National Bureau of Economic Research’s definition is likely to be used. Ergo, the recession is “the time when business activity has reached its peak and started to fall until the time when business activity bottoms out” (Ayşen and Ercilasun 2).

On the basis of the explanation provided above, it's obvious that during an economic downturn, it might appear logical for organizations to cut off expenses. In other words, organizations adhere the principle that in those times savings are a whole lot more important than spendings. The practice implies that expenses that the company often cuts first come from the advertising budget (Ayşen and Ercilasun 3). The logic of this decision can easily be explained despite its argumentativeness. On usually the one hand, there exists a negative economic environment where because of the negative media reporting, there would have been a decline sought after for these products and services and eventually, organizations would want to save your self more than they spend. But on the other hand, if the companies reduce advertising expenditures, they become less visually noticeable to the public.

Experts concluded that in economic downturns, marketing could provide crucial functions with beneficial effects mainly because of the competitive advantages which can be received by companies. There exists a dynamic environment, constantly changing, therefore it is essential for marketers to know the changes and understand how to react to them. Firms may possibly view the recession being an opportunity they've control within the situation and outcome and continue to invest. On the contrary, the businesses, which view recession as a threat, end up with conserving their resources.

The real history shows us numerous examples when organizations have ignored these “commandments” and enlarged the listing of negative examples. According to John Zhang, the professor of marketing at Wharton, advertisers in all categories must be in tune with consumers in the present climate. That he cites the famous slogan of LG Electronics firm “Life’s Good” that do perhaps not reflect the mood of men and women at the present state of the lives: “That’s not the mood individuals are in. Should you that, it's going to generate resentment. You need to fine-tune your message to be painful and sensitive. In challenging times, marketers must also work harder to segment consumers with specific messages” (Forbes 2008) – they cannot continue steadily to use advertising as they used to previously since there is a need in being more targeted and also to make sure that the message extends to the right individuals with the right sense.

The practice, along with theories on the basis of the empirical studies, showed that the economic crisis would not straight away hit clients economically – a psychological shock will occur even faster: through job cuts, weakening of the currency, rising prices, yet others signs of economic instability. People begin to think about the future more, and it's also more difficult in order for them to enjoy shopping. For example , clients can limit the volume of purchased premium products (although the incomes of these individuals have not yet been reduced). Moreover, throughout the financial crisis, people think more about the appropriateness of spending: the audience tries to buy only necessities, goes over to budget brands and is more skeptical about advertising. Considering the dilemmas above, it may be summarized that companies should review their marketing strategies that have been effective in the past, and adapt them to the newest situation. In a crisis, people buy differently but don't stop buying in general.

Bearing in mind this truth about recession time, the very first issue that companies should address to is the product (or the line of goods to be much more precise). Because it was already stated, at the beginning of the economic crisis, people inevitably start to think more about their savings – this might be due to both a real decline in incomes and a build-up of psychological stress in society. People start to look narrowly at cheaper brands and buy only necessary goods. To understand how firms should react in these instances an example of a few Swedish organizations can be cited. Barbara Hruzova (2009) noticed that Axfood, Coop, and ICA took under consideration the knowledge and each of the organizations offered low priced alternatives to popular high priced brands in most segments of the trade. In addition , within a recession, clients pay more attention to the standard and durability of the item. Therefore , Swedish retailers launched their own labels, positioning them as similar in quality to industry leaders (Hruzova 35). For this reason it can be stated that low cost was achieved due to the not enough intermediaries involving the manufacturer and the buyer.

At exactly the same time, concentration on the brand new products or cheaper substitutes of the expensive ones cannot be a remedy during the time of recession. If a company wants to be or remain to be successful, the complete promotional strategy should be reviewed. Numerous experts insist that the first step would be to change the promoted values. Nevertheless, there is absolutely no single idea about what values will be the most advantageous – mainly because this will depend on the merchandise and the overall values of the company (its vision, mission, objectives, and reputation). The testimony of the idea may be the good outcomes of Nissan campaign that was centered on ideas like mileage per gallon as opposed to road trips despite the prevailing thought that changing concentrate on prices and discounts is really a risky strategy due to the fact that consumers frequently get accustomed to price cuts (Binet 2009). Much greater unity can be observed regarding the family and community values. You can find pieces of evidence that the very best promotion strategy is to sell a sense of community in the adverts and to utilize the approach that claims “We’ll get through this together because we are a family group. ” The foundation of this is based on the sense of security that is supplied by family: people tend to retreat to their village when the economic hard times starts (Quelch 2008). This is the reason why recession results in the reducing the number of pictures of sports, adventure, and extreme individualism in the advertising materials – all this elements are replaced by cozy and home family scenes (home furnishings and the same entertainment). The promotion of specific values reflects not only in the advertising pictures and video, however the types of activities also are affected. Thus the very best tactics is to use credit card and telephone sales that appeal right to the final user.

Combined with shift of accents within the traditional advertising channels, it's worth to not forget about the modern digital channels (that are cheaper and easier to control). The latest indexes reveal that while revenues from most advertising media are declining, online and search marketing are showing growth, particularly as their costs can be changed very quickly with respect to the response rate, while TELEVISION advertising time should be booked for couple weeks. It is much cheaper to make use of PR teams to place clips on video sites or even to attract bloggers to cover new products than to buy time for tv advertising. This confirms by Dentsu Aegis Network’s forecasts according to which “digital technology continues to disrupt and drive innovation in the way brands connect with their consumers” (Dentsu Aegis Network 2017). The absolute most perspective direction is considered to be mobile advertising with the 56% of the share of world wide Digital advertising spend. For this reason the latest trends in the promotional activities of the most successful companies are centered around digital marketing channels. Combined with cheap and quick access to the millions of the potential customers, modern mobile applications allow since the most hard-to-reach groups of the people. For example , Millennials (the multitudinous category that's now earnestly entering the labor market, and consequently features a high purchasing power) who do not watch traditional TELEVISION and thus commercials giving preferences to the social media web sites are active users of Snapchat. The latter is just a perfect advertising tool, and channels as “Snapchat provides a prime method to reach coveted “millennial” consumers on their home turf, with the app boasting 100 million daily active users” (Perlberg 2016). The statistics provided by Nielsen study showed that this application has 41% coverage among people in the age gap between 18 to 34. That is why organizations including Taco Bell, Nike Inc., and General Electric Co. (all of the cited works in different industries) uses the platform to communicate directly to the clients.

Finally, it should be stated that recession also influences the physical space of advertising and sales. Without doubts, the place of the store is significant in retailing foods, and many rental specialists are attempting to find the the best option, ideal place for the purpose of sale. This factor does not change even in the conditions of the economic crisis – the correctly found location for the store, based on studying the habits of the goal audience, will even make a profit throughout the recession. At precisely the same time, the Internet remains a simple and cost-effective method to reach clients. There are many organizations that put it to use to inform, encourage and inspire the audience to buy. In the retail industry, website marketing in an emergency is especially essential for attracting clients to offline stores. Based on many studies, throughout the Great Depression of the 1930s, buyers in the United States were more disposed to self-service shops that allowed themselves to compare goods and save (Hruzova 17, 37). It is during this period when in-store promotions are getting to be a more significant part of the promotional activities. This decision is founded on the fact that in the period of recession, decisions about purchases are more frequently taken at the very point of sale and therefore organizations need to be more competitive there.

Concluding, it can be stated that businesses in the United States learning from days gone by experience learn a lesson – in times of financial downturns, it is not recommended to cut spending on promotion. During economic crises, communication with regular customers becomes especially essential. Taking into account the prior and the truth that people at such times pay more attention to real information about the merchandise and the business, rather than advertising fantasies. Businesses built their promotional activities around the desire of buyers to be completely certain of the choice before buying. In these conditions, direct mailings are becoming more relevant – with their help people can independently compare offers and make a weighted decision. In addition , print advertising – an inexpensive channel, also allows reaching a big audience. At exactly the same time, the conducted analysis of promotional activities of the American businesses during the time of recession confirmed that digital marketing entered the lives of individuals and became one of the most perspective channels for promotion no matter economic conditions.

Works Cited

Ayşen, Akyüz and Mustafa Ercilasun. “The Role of Advertising during Recession. ” International Conference on Eurasian Economies, University “Ss. Cyril and Methodius. 2014.
Binet, Les. “Marketing in a Recession: 10 Things to Remember.” Adweek. N.p., 2 Feb. 2009. Web. 10 Sept. 2017. < http://www.adweek.com/brand-marketing/marketing-recession-10-things-remember-98256/> .
Dentsu Aegis Network “Global ad spend to hit $563.4 billion in 2017 with digital driving growth.” Dentsu Aegis Network Official Site, 15 June 2017. Web. 10 Sept. 2017 < www.dentsuaegisnetwork.com/media/dentsuaegisnetworknewsdetaila/2017/2017_06_15?Global-ad-spend-to-hit-5634-billion-in-2017-with-digital-driving-growth> .
Forbes. “Don’t Skimp On Ad Budgets.” Forbes Magazine, 1 Dec. 2008. Web. 10 Sept. 2017. < www.forbes.com/2008/12/01/advertising-recession-wharton-ent-sales-cx_1201whartonadvertising.html.>
Hruzova, Barbara. “Marketing Strategies throughout Financial Crisis: A Case Study of ICA, Coop & Axfood. ” Halmstad University, 2009. Print.
Perlberg, Steven. “Snapchat: How Brands Reach Millennials.” The Wall Street Journal. N.p., 22 June 2016. Web. 10 Sept. 2017. < https://www.wsj.com/articles/snapchat-how-brands-reach-millennials-1466568063> .
Quelch, John. “How to Market in a Recession.” Harvard Business Review. N.p., 24 Sept. 2008. Web. 10 Sept. 2017. < https://hbr.org/2008/09/how-to-market-in-a-recession> .