Rockbridge Associates | How to Succeed During a Recession: Conduct Market Research

The sky is falling. By nearly all accounts, the United States is in the middle of the most serious economic challenge it has faced since the 1930s. In 2007, the US registered its first full-year annual decline in median home prices since the Great Depression, and 2008 is shaping up to be the second decline. Real GDP will likely decline in the 3rd Quarter of 2008 after having struggled to stay positive for the last year. The stock market is in its worst Bear Market since the collapse of securities in 1929, credit markets are undergoing unprecedented strain, unemployment is rising and layoffs continue to increase. This is truly an historic time and these are sobering facts for even the most hardened of businesspeople.

What is a company to do? Your first reaction is to retrench, and fast. Cut all departmental budgets across the board and institute a complete hiring freeze. If you already did that earlier in the year, you probably are facing undesirable layoffs and perhaps cutting benefits or salaries of remaining staff. This is not the time to spend, it is a time to retract. Or is it?

Let history guide you. Some people say we cannot look to history to guide us through a crisis that has no parallels. To some extent this is true. However, others say that while each crisis is indeed unique, we can, and must, look to the past to help guide us in the future.

Stick to your guns. What can we learn from history about marketing during a recession? According to market 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?", 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.
Some examples of successful marketing during a recession are:

Proctor and Gamble successfully marketed Ivory Soap during the Great Depression.
Intel initiated the campaign "Intel Inside” during the 1990-1991 recession.
Wal-Mart launched its "Every Day Low Prices" campaign in 2000-2001.

Additional advice on how to weather a recession comes from Harvard Business School professor, John Quelch, in his article “Marketing Your Way Through a Recession.” He focuses on 8 steps companies should keep in mind when planning their 2008 and 2009 marketing budgets. The first and most important step is to research the customer, followed by focus on family values and maintain marketing spending.

Companies that cut marketing and market research budgets and activities during tough times are myopic. In a tough economy where consumers’ financial situations (and fear) are affecting their spending behavior, you need to continue to conduct market research to inform your marketing strategy. Only through continued market research efforts can you discern what will motivate consumers to buy your brand or use your service. If you want to weather this recession so that your company lives to see the next one, you need to stay tuned to your customers and prospects.

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