Effects of recession on marketing - Essay Example

?Effects of recession on marketing Introduction Recession is a term in economic studies that refers to a period of slow economic activities characterized by business cycle contraction and a general slowdown in economic activities. During recessions, such essential economic activities as investment, spending and business profits fall while unemployment and bankruptcies increase. Recessions occur during a decline in spending following a financial crisis and eternal trade shocks among other business activities that inhibit public spending (Alexander, 2010). Recessions are unpredictable and may occur at different times of the financial year following the trends in different markets. The economy consists of different market segments operating in different business activities. Each of these is important; however, some markets are stronger than others and a negative business trend in the results in a sequence of recurring negative effects in other markets. The energy sector is one such important market for every product or service uses a form of energy. An unprecedented increase in the price of oil or any other commonly used product possible results in either internal or external shocks that affect the product pricing and possibly resulting in price hikes most of which discourage public spending. In an attempt to curb recessions, governments react differently since recessions affect government operations thereby discouraging economic growth. Among such government efforts include the decreasing taxation, increasing government spending and increasing the supply of money thereby possibly devaluing a local currency. Different economies have different extents of recessions however; there are certain economies whose recessions result in global financial crises. One such economy is the united states of the American economy and the economies of some of the developed world. The dollar crisis of 2009/2010 for example resulted in a global recession that affected the economy of several countries in the world. Recessions are therefore periods of reduced public spending. This implies that the market becomes more categorical and conscious of their spending. Consumers consider their shopping lists often showing priority to the essential products only. During such times, people show preference to the basic products and eliminate the secondary products most of which they can survive without. This stifles the operation of some manufacturers who operate on such secondary products. Knowing the reduced spending, the companies become more articulating in their expenditures since the market does not promise the effective returns as always. They therefore plan their spending trying to sell as much of their product in the uncertain times. Companies therefore engage in unorthodox marketing strategies with the aim of improving their product visibility and possibly sales. While the market is always compelled to use the basic products such as food products and clothing, the purchasing trend changes and becomes characterized by low rates of purchase and purchase in smaller quantities. The trends worsens for some specific products and services considered secondary by the markets. Such products include electronic and leisure services thereby hampering the productivity of the tourism sector. Leisure for example is a mode of relaxation in which people engage during specific times. Additionally, such leisure activities are costly and therefore require a lot of money. Most people therefore prefer to remain at home and spend three times with their families thereby saving on the additional and often unnecessary spending through the holidays. Additionally, recessions result in job losses thereby rendering the financial status of some families unpredictable. While they suffer shocks, they detest spending and therefore control their finances stringently often showing preference to the basic products. The reduced market activities require specific marketing strategies to ensure that products and services perform favorably enough to keep the companies operations. This therefore requires specific marketing strategies most of which are cheap yet effective enough to earn the products and services enough publicity to increase their performance. Companies try to invest in effective market research to determine the most cost effective means of marketing. The recent recession just as any other affected the monetary movement by stifling public spending thereby reducing the rate of activities in the different markets. Different companies and products therefore engaged in different marketing strategies with the aim of increasing their product visibility and possibly the sales. The discussion below portrays the specific marketing strategies employed by some of the leading world manufacturer and service providers. Samsung is arguably the largest global manufacture of electronic products and has currently diversified its production to include laptops and smart phones among other handheld communication devices. Being a producer of electronics implies that the company produces products considered secondary by many and therefore suffers the greatest effects of recession. However, despite the recession, the company continued registering profits features that validate the marketing strategies employed by the company especially during the recession. Samsung has one of the largest marketing budgets in the world second only to Coca Cola. The company invests a lot in market research hereby producing products that are specific to their different markets thereby earning substantial success in their operation. Diversity is a form of marketing one that the company has continued to employ thereby keeping competition among different markets (Fournier, 1998). Currently, Samsung produces every type of electronic appliance ranging from music systems for televisions and communication gadgets. This implies that the reputation of one of the products possibly influences the reputation of the other thereby increasing their product’s visibility and sales. Another form of diversity is the production of products with different specifications thereby different prices. This follows an effective understanding of the market thereby tailor-making products for every section of the market. By diversifying its product this away, the company widens its hold on the market by developing products for every segment of the market. The rich and the wealthy are at the top of the market segment, they spend at any time of the year regardless of the recession. Recession normally affects their businesses but may never affect their spending. Samsung has products that target this market segment (Thomas & Michael, 2001). The products are qualitative and promise value for money, the products follow comprehensive design showing prominence of the features that seem to satisfy the lifestyle of the market segment. Because this class does not give much attention to the product prices, most of such products, which often range from music systems, Smartphones and laptops, are expensive but their prices are relatively enough depending on the features of each. However, the rich and wealthy are always few in any society, the company therefore sells a limited number of products but ensure maximum profits by setting their prices effectively. The other signet of the market is the middle class and possibly the poor. While the poor show very little preference for such products, the middle class often saves enough to afford the luxury of electronics. However, they may not spend as much as the rich and the wealthy, yet they have the number since the middle and poor classes always constitute the majority in any economy. Samsung therefore manufactures products for the different markets changing the specifications and quality of their products thereby earning the products relevance among the different market segments. Product and market diversification guarantee the company success at any time since the success of one product or market subdues the loss of the other. Additionally, the failure of one another results in a seamless abolition of its subsequent production without the company evidently feeling the effects of such failures since the success of the other products still sustain the production process. Additionally, while the rich are few, they spend more on their products. The middle class and the poor spend little on their products yet they are numerous. This implies that with the effective manipulation of such market features the company makes profits every year by targeting its different products to the different markets. Besides diversification, the company carries out effective market research and therefore manufacture products that are of relevance to the market (Tabbush, 2011). Africa for example has remained un-tapped market. Most services and product manufacturers favor the west and some of the developed markets in the East such as China and Korea. Unfortunately, the developed countries feel the effects of the recession more than the developing countries in Africa do. This implies that while companies in the west close down due to recessions, those in Africa and other developing economies continue to register growth following the cheaper costs of conducting business in the region. Companies situated in Africa therefore enjoy increased productivity since they enjoy lower production cost. Samsung therefore identified the market and decided to expand its territories. With effective market research, the company identified the specific problems facing the continent and capitalized on the. Africa experiences power interruptions with impassable roads riddled with potholes (Kotler, 2010). However, the region receives increased levels of sunshine and therefore requires creativity. Samsung promises this by providing products that resist most of these challenges and retain their effectiveness in the region despite the numerous infrastructural challenges. The company has products fitted with solar panels and does not therefore rely on a secondary source of power. Such creative features in products increase the presence of such markets thereby ensuring purchase even during some of the worst recessions. The products promise more convenience in the region due to their understanding of the problems of the region thereby increasing market affiliation towards such. So far, Samsung engages in cost effective marketing strategies most of which rely on the reputation of their earlier products and the creativity of their subsequent products to retain their hold on the market and possibly expand their market territory (Iacobucci, 2012). Using such strategies, the company does not incur any marketing costs since it simply relies on the reputation of its earlier products. The company also carries out extensive media campaigns specifically aiming to improve their product visibility in the market. The company employs different media both the old, local and international in different markets thereby portraying their products favorably often highlighting the advantages of their products over others in the market. However, media advertisements are expensive and the company cannot often afford such during recession. This therefore invokes the use of cheaper yet equally effective marketing mechanisms. During recession such as the recent one, the company cut off all local advertisements and relied specifically on the international adverts through such international media as the BBC, CNN Aljazeera among others. The local advertising agents are numerous and therefore more expensive as each has different advertising tariffs. The company has local headquarters in different countries, all which draft the advertising budgets for the affiliates and branches of the company. Such head offices coordinate local advertisements such as the use of billboards and the local media while the head office located in Seoul South Korea manages all the company’s international advertising. During a recession, therefore, the company simply revised its international advertisement budgets permitting the local offices to engage in advertisements sparingly as the head office took over effective and expansive marketing process using the international media. Additionally, the company uses the new media, which is relatively cheaper than the traditional media. The company uses the internet extensively in advertising their products and carrying out electronic commerce thereby creating an internet portfolio for itself. The company has registered its website with some of the most famous search engines. It therefore enjoys adequate online publicity (Aaker & Aaker, 2010). The internet is cheaper than the traditional media and the company shows increased preference for the internet during recession thereby reducing its marketing cost. The company also runs a number of accounts on the social networking sites and social microblogs. The company runs a number of Facebook accounts among other commonly preferred social networking sites through which they manage their customers and attract more of the online population. Currently, about two and a half billion people use the internet. The company therefore targets this population by increasing its publicity using such social networks as Facebook and Twitter, which are more effective as the company communicates directly with the client without the unnecessary reliance on the traditional media. Unlike any other electronics manufacturer, Samsung sponsors a football team in one of the most famous leagues in the world. Chelsea football club earns the company enough international publicity to enable it to maintain its hold on the market. The club spends a constant amount of money on the club but earns the exclusive rights to use the team in whichever way in marketing its products. This makes the type of advertisement more economical during recessions. The players of the team wear uniforms adorned with the company’s logos thereby providing the company ninety minutes of free advertisement during matches on some of the most watched television channels. Additionally, the fans of the club also put on similar shirts thereby increasing the company’s publicity internationally. The club sponsorship is one of the most creative form of advertisement, which promises efficiency at cheaper costs since the company simply signs contracts that outlast recessions. The sponsorship earns the company exclusive rights to use the players on the team as celebrities to endorse the company’s products at no extra charge. Some of the team’s previous players such as Didier Drogba were sensational among female fans of the team. The player was therefore relevant in advertising the company’s products that targeted the female fans such as fridges among other home appliances (Lane, 2005). Additionally, Drogba and other African players in the team became very relevant in advertising the products that targeted the African market. The company used such iconic players in endorsing their products thereby gaining appropriate publicity for its products. The effectiveness of such an advertising is debatable but the fact that football is most adored sport in the world with more than four billion international fans makes the form of marketing effective. Additionally, the English premier league and the choice of Chelsea one of the four strongest teams in the league makes the products earn adequate publicity among its elite market segment which coincidentally are the majority of the company’s market (Chatterjee & Hevner, 2010). Another form of marketing that is equally effective and Samsung employs extensively is the social responsive investing. This refers to the marketing mechanism in which a company provides direct monetary assistance to the community in which it operates. Businesses exist in societies thereby implying that they interact with the society in a number of ways. Their behavior therefore affects the society, which coincidentally constitutes their target market. Business ventures therefore try to appease their environments by engaging in investment activities that promise benefits to the societies. Samsung takes part in a number of social initiatives in its native South Korea among other regions internationally where it seeks market. Samsung runs free eye treatment programs in Korea, among other philanthropic programs in Africa. Social responsive investing is an effective way through the business organization gives back to the community in which it cooperates. Such programs are effective ways of marketing a company’s product as those who benefit from such program develop a personal relationship with the company. Additionally, the company enjoys free media campaigns coupled with the favorable form other philanthropists and humanitarians who therefore develop affection for the company’s products possibly increasing the sales of the products. Coca cola is another multinational corporation, which employs creative marketing mechanisms during recession. Headquartered in Atlanta Georgia, the company has an international presence in more than two hundred countries. The company has the largest advertising budget in the world. While this did not change much, the company relies on a number of production features to increase its marketing process thereby increasing its product visibility in the market at relatively lower costs. Among such is the diversification of its products among the different market segments (Bogomolova, 2011). The soft drinks manufacturer produces an assortment of other products under different names thereby increasing its market base. Among its most common products are coca cola from where it borrows the name, sprite and Fanta among other types of soft drinks and enriched waters. Besides the product diversification, the company sponsors a number of different sporting events through its different products thereby earning relevance and recognition among the lovers of such sports. Looking at the activities of the two giant companies one of which is an electronic manufacturer while the other is a beverage manufacturer, it becomes evident that recessions require effective management including reduced spending. The companies understand the essence of advertisement and therefore spend fortunes on increasing their product visibility. During recessions, even the big corporations control their spending showing preference to more productive venture. One of the budgets that such business revise is their advertising budgets. This therefore validates the creative advertisement mechanisms that some of such corporations employ like the sponsorship deals. Bibliography Aaker, D. A., & Aaker, D. A. (2010). Marketing research. Hoboken, NJ: John Wiley. Alexander, B. (2010). International Financial Reporting and Analysis (5th edition). Oxford: Oxford university press. Bogomolova, S. (2011). Service quality perceptions of solely loyal customers. International Journal of Market Research, 53(6) 793-810. Chatterjee, S., & Hevner, A. (2010). Design Research in Information Systems: Theory and Practice. Berlin: Springer US. Fournier, S. (1998). Consumers and their brands: Developing relationship theory in consumer research. New York: New York Times. Iacobucci, D. (2012). MM2 (2nd ed.). Mason, OH: South-Western Cengage Learning. Kotler, P. et al. (2010). Marketing for Hospitality and Tourism, 5th ed. Upper Saddle River, NJ: Prentice Hall. Lane, M. (2005). Socially Responsible Investing: An Institutional Investor’s Guide, Euro money. London: Aspen. Tabbush, et al. (2011). MBA primer: Marketing management 3.0 instructor-led printed access card (3rd ed.). Mason, OH: Cengage Learning. Thomas, D. & Michael, C. (2001). Successful Management Projects. Oxford: OUP Publishers. Read More