INNOVATIVE MARKETING STRATEGIES:

Panacea for Economic Downturn

Presented By

Anup Dujari
Mohit Dixit
Sandeep Agarwal

ECONOMIC DOWNTURN OR RECESSION ? : Does the term really matter? News about changes in
economy is an everyday event. Foreclosures, high food prices, escalating healthcare cost just to name a
few! It's taking a great deal of mindshare with our customers. Whatever the state of our economy - our
individual perception becomes our reality! Feelings of fear and uncertainty make us go back to our basic
survival instincts. History has shown that during economic downturns; cash flow becomes our compass.
We would have to agree that the goal of any profitable business is to increase incoming cash through sales
by capturing more market share. The catch is, that by doing so, we also need to increase the outgoing cash
for sales and marketing. Therefore creating more fear and uncertainty! We see most perceptions are based
on the fact that we have complete control over cash disbursements and no control over sales.

In fact a downturn is a worsening of business or economic activity. It may be related to a decline in a

stock market, economic cycle, or corporate profits. A downturn may refer to a market, industry or
corporation, but generally it refers to economic conditions at large. An economic downturn may be a part
of or precede a larger recession; however a downturn does not necessarily signify prolonged negative
growth.

Economic downturn is a contraction phase of the business cycle. Broadly it is ‘a significant decline in
economic activity spread across the economy, lasting more than a few months, normally visible in
real GDP, real income, employment, industrial production, and wholesale-retail sales.’ It may involve
simultaneous declines in coincident measures of overall economic activity such as employment,
investment, and corporate profits. Economic Downturn may be associated with falling prices
(deflation), or, alternatively, sharply rising prices (inflation) in a process known as stagflation. A
severe or long downturn in an economy can be referred as an economic recession. The prolonged
stage of it can even lead to economic collapse.

RESPONDING TO A ECONOMIC DOWNTURN :- During a booming economy, you reap the

rewards of increased sales and revenue. However, you need to quickly adapt your business to the current
conditions and learn to do more with less when faced with a recession. This is particularly true for small or
home-based businesses. Fortunately, there are many steps you can take to protect your business during
hard times.Strategies for moving an economy out of an economic pitfall vary depending on which
economic school the policymakers follow. While Keynesian economists may advocate deficit spending by
the government to spark economic growth, supply-side economists may suggest tax cuts to promote
business capital investment. Laissez-faire economists may simply recommend the government remain
"hands off" and not interfere with natural market forces.

Both government and business have responses to recessions. Strategic Business advisers have discussed
precautions that businesses should take to prepare for looming recession, likening it to fire drill.

 First, they suggests that business owners should gauge customers' ability to resist and
redesign customer offerings accordingly.
  They suggest to use lean principles, replace unhappy workers with those more motivated,
eager and highly competitive. Also over-communicate. "Companies," they says, "get better at
what they do during bad times.

SCENARIO OF AN ECONOMIC DOWNTURN - The normal tendency of economic players

during periods of economic downturn is to slide into a mood of despondency. They loose hope due to fake
supposition that if they have to grapple with an external or internal environment that is apparently out of
their control. Also, they tend to look for scapegoats to minimise their own responsibility to meet the
challenge. The danger of this escapist frame of mind combined with absence of a sure and hopeful touch
on the part of the Government is that it soon leads to business and industry too catching the infection. Thus
a vicious cycle forms, with hopelessness feeding on itself. It is precisely when all indices are pointing
down that it is imperative for everyone on the economic front — strategic planners, policy makers,
manufacturers, wholesalers, retailers, sales and marketing executives, human resource managers and, yes,
the analysts of the think-tanks and the media — to pull up their socks and fight back. They must take to
heart what Winston Churchill, the man who flashed the V for Victory sign at the worst moments of the
war said: “When you are at the bottom of a barrel, there is no way to go but up”!

When faced with a slump, most economic players draw upon recipes to which they are addicted..
Historically, marketing budgets are among the first to get cut in a budget crunch by companies and
thus economic downturns give new meaning to the words “survival of the fittest.” Companies
customarily hasten to cut costs, slash workforce, jettison inventories, curtail their domestic and overseas
operational commitments and generally, withdraw into a shell, courting thereby the risk of being over-
taken by rivals. It is not that these measures, which are essentially palliatives, are to be scoffed at. For,
they do provide symptomatic relief, but more of the same traditional medicine very often ends up reducing
the R&D investment, market share and customer base. Also, governments are, for instance, tempted to
move interest rates up and down, juggle with duties and taxes, or go in for price controls

GENERAL STRATEGIC BEHAVIOUR OF FIRMS : - Economic downturn itself doesn’t

leads to pitfall rather it’s the steps undertaken by an organization that leads to it. An economic downturn
normally motivates private corporations to undertake unusual steps to protect their assets from continued
decline. Strategies, at least until the crisis is over, should avoid any fundamental change in character of a
business as well as major changes in the business interface with customers which are likely to confuse
them (for example, changes in sales personnel and distribution channels). The following broad strategies
should be considered to better understand how we generally behave in an economic downturn:

1. Restructuring
2. Shrink selectively
 3. Cost cutting.
4. Consumer behavior.
5. Long-term strategies.
6. Marketing
7. Other measures.

OTHER
MEASURES

MARKETIN
SHRINK
G
SELECTIVELY

TRADITIONAL
PANACEA
FOR LONG
RE- DOWNTURN
STRUCTURIN TERM
G STRATEGY

COST CONSUMER
CUTTING BEHAVIOU
R

These strategic responses to an economic downturn are discussed below.

RE-STRUCTURING :- Restructuring is the process of transferring production from an expensive site to

a cheaper one. It may involve the transfer of activities from a developed to developing country or from
high to low wage countries - as in the case of Japanese firms moving their operations overseas. Its main
objective is to bring the company to an acceptable minimum level of performance. Production
restructuring, for example, leads to improvement in quality, elimination of waste and reduction of the
production cycle. Cost improvement can be achieved through out-sourcing and buying directly from the
producer. There is evidence to suggest that the larger firms are out-sourcing some of their activities to
specialist forms. The selection of local talents, with some background in management and providing them
with training, forms part of functional restructuring.

SHRINK SELECTIVELY : - The principal product-market strategies, which are employed to re-position
a company’s business as part of the strategy to shrink selectively, are:

 Focus upon specific product-market segments which provide a profitable core of higher
margin sales and require least working capital to support them Withdraw from unprofitable market
segments to a point where the firm is operating from a more secure base of lower volume but higher
margin business.
 Sale of investments to get funds with higher rates of return in the principal activities of
business.
 Contract the business to one entity which will generally lower the level of fixed costs and
capital employed.
 Introduce value added or develop proprietary products.
 Shift position in the value-adding chain.
 Cutbacks are sometimes necessary if much of the recently acquired business is low
margin business and the firm faces critical cash-flow problems.

COST CUTTING : - In most businesses, cost reduction is a faster method to achieve greater profits than
increasing sales volume. In addition, cost reduction measures do not usually invoke a response from
competitors. Cost cutting also helps to tackle a cash-flow crisis within a business. Hence, the adoption of
typical cost cutting measures to minimize wastage and unnecessary expenditure constitutes an important
survival tactic for a business in a downturn. The typical cost cutting measures include the following:

 Working hours and wages – to be reduced as well as cuts in bonuses.

 Human resource – switching from seniority-based promotion and pay system to one
based on ability; retrenchment of unproductive employees; compulsory upgrading of skills and
knowledge by older workers and so on.
 Productivity – profit sharing creates an incentive for employees to enhance productivity.
 Bigger orders and lower bids – rewarding suppliers who meet quality standards with
bigger orders help to achieve lower bids.
  Competitive bidding – where subcontractors are selected through competitive bidding
rather than through negotiation.
 Time – management of time to include the handling of paperwork only once, cutting back
on report writing, holding fewer meetings to save time.
 Overheads – immediate and drastic overhead cost reduction forms part of the turn-
around strategy, including turning off unnecessary lights, making telephone calls at off-peak hours,
reducing unnecessary travel.
 Rationalising personnel – the reduction of employment involves the rationalisation of
productive capacity and product lines. Only the core personnel are retained and utilized fully to
minimize overheads. Additional staff can then be employed on a project basis.
 Rely on inexperienced staff – where young and inexperienced staff is employed to take
on a larger scope of work, including that of older employees who have been made redundant.
 Stock control – minimize the level of unproductive stocks that are held as this lowers
interest charges as well as costs warehousing and materials handling.

CONSUMER BEHAVIOR :- Consumer behavior changes during a recession and in return this affects
bottom line of the company. Consumers spend less and delay major purchases and even trade down to
cheaper alternatives. However, not all consumers stop spending. They will in fact alter their habits to
better fit their financial situations, but they will never stop spending. They will lean more into cheaper
brands and alternatives for the duration of the slow economic times, but if company maintains brand
loyalty they will aspire to regain the ability to purchase the stronger brands in the future.

They will continue to listen and watch for your communication to them. Your communication gears them
to justify and stimulate a purchase. If you can develop a lower cost solution, this may just be the time to do
so to help maintain that relationship through these difficult times. This will keep them loyal and help to
cultivate a stronger relationship in the future. The majority of larger brands continues to advertise during a
downturn and continue to see strong sales and revenue. Many of them do not do price cutting, but will
develop alternatives that fit more in line with the consumers budget. Consumers are looking for loyalty not
a one-night stand. Will you create a solution for them during this difficult time?

LONG-TERM STRATEGIES : - A business is only as valuable as its future. All businesses therefore
need long-term plans and strategies. The following list of strategies should be considered by all businesses
for their long-term planning in an economic downturn:
  Availability of funds – cultivate relationships with potential sources of funds, keeping
them abreast of the company’s performance and plans so that when their resources are needed, there is
an on-going understanding of the situation and a willingness to help.
 Restructuring – review organization structure to remove inefficient layers which
contribute to unnecessary costs.
 Marketing – constantly improve marketing methods, so customers are well informed and
efficiently served.
 Improve inventory policy – businesses should adopt a more stable inventory policy.
Speculation on inventories should be avoided. A minimum inventory level needed for efficiency
should be maintained.
 Financing – a long-term plan should include provision for financing that is not entirely
dependent on current profits
 Plant and equipment expenditure – leasing rather than purchasing assets offers the
potential for maintaining flexibility in a business’ cash-flow.
 Research and development – companies in decline should not be discouraged from
investments in research and development works.
 Public listing – private companies may want to consider going public to tap a wider
capital base.
 Diversification – overseas investments as well as upstream/downstream diversification
help to spread risks.

MARKETING : - An economic downturn, in which there is a decline in consumer spending power,

offers opportunities for profitable sales in so far as improved products are concerned. Marketing is
therefore a more desirable alternative to increase volume instead of cutting profit margins or continually
discounting prices. Marketer generally argued that companies wishing to thrive in an economic downturn
should not be cutting back on marketing and product development but should instead increase the budget
for marketing activities.

Companies typically pull down their advertising and marketing budget. Truth is by doing this and reducing
communication companies are only affecting short term sales, which in return negatively affects profit.
While this may give short-term relief, companies risk losing market share once the economy begins to
stabilize and recovery begins. Companies should consider learning to be more cost efficient rather than
reducing budgets, in the long run it will save them money.
Insight: - 60% of marketers at larger companies and 29% of medium-sized companies have already cut or
expect to cut their marketing budgets. Small companies are an exception – only 3% reported cuts or
expected cuts. This shouldn’t come as much of a surprise. Typically, budgets for smaller companies aren’t
as big and, therefore, these marketers don’t have as much to cut in the event of a downturn. Because large
companies usually spend more on marketing, it makes sense that they identify marketing as a place to cut
corners. A plurality of our survey respondents, 39%, said that their marketing budgets have not been
affected by the downturn yet. Small businesses were the highest in the “no change” category; 52% of those
respondents said their budgets would not change this year. Mid-sized businesses followed with 46% not
changing their budgets.

As part of its marketing function, the firm will need to keep in constant touch with its existing client base,
introduce quick adjustments to its portfolio, and re-focus on client’s needs for financing, promotion,
quality and design. Attention should also be paid to delivery, time-saving product features, reliable after-
sales service and back-up, aesthetic features of the product, a unique, functional and convenient feature of
the product. Marketing policies will need to be redefined in line with customer shifts for more value-
adding products/services at lower prices.

OTHER ACTIONS : - Apart from the above strategic options, firms should also consider other aspects of
running their businesses both with and outside their organizations. These include the following:

• Maintain rapport with developers and suppliers.

• Improve employee morale.
• Cordial relationships with trade unions.
• Regain credibility with customers and suppliers.
• Retain staff.
MARKETING IN ECONOMIC DOWNTURN : -

Like a pebble in a pond, the ripple effect of a slowing economy can reach deep within a company.
According to Jagdish N seth the return on marketing investment has already occupied the central
stage. In an era of globalization where companies catered to different markets facing different
economic cycles, it has become compulsory for companies to evolve economy specific marketing
strategies for maximizing their returns on marketing investments. It would be a profit less cargo in case
a company lands up investing heavily through a standardized marketing strategy in a market where
consumers are faced with declining purchasing power. In such times consumers become less capable
of affording the unit price of any product unless it is required beyond the boundaries of the price.
Slashing prices to an extent and especially without compromising with organizational profit goals
would not be an idea which is good enough. Here comes the role of innovative marketing strategies to
influence the consumer buying decision typically, worries over sales lead to a halt in recruitment, a
squeeze on travel budgets, tightening of inventory and slashing marketing budgets. Can now company
avoid belt tightening? More importantly, can a firm actually take advantage of others’ overreaction and
gain valuable ground? The smartest companies will stay in touch with their target market, retain the
most talented employees, and work with the most agile and innovative vendors. According to us
following are the innovative rules to stay ahead of the competition and ready your company for growth
in an economic downturn.

 Break Away From the Herd : - One common error made in a volatile market is to panic
and follow the herd’s direction rather than the strategies that are best for an organization. Companies
that cut their marketing back to the bone when times get tough may be pursuing the wrong strategy
and providing opportunity for their competition. Smart organizations recognize a downturn as a
chance to gain market share and actually increase spending in recessionary periods. Companies who
continue to implement targeted communication plans while their competitors cut back build very
strong brands that they can then capitalize on when the market inevitably picks up. For example,
after the September 11th terrorist attacks, airlines and the travel industry were hit especially hard.
Nearly all carriers drastically cut staff, routes and amenities. Southwest Airlines was a notable
exception and looked beyond the slowdown to position themselves advantageously once the
economy picked up.

Also, Stand apart from the crowd and invest in innovation as according to AMA, 66 % marketers,
report that they would take the same amount or less risk with a new product and/or service
innovation during a time of economic uncertainty. Thus it will be really innovating concept in
marketing of differentiating - through innovation with a product or service that performs in a
faltering economy; investing in R&D to ensure that our company is in a position to compete when
the economy rebounds.

Tighten Up on Targeting : According to American marketing association 67% marketers say it is

important to mitigate the impact of an economic downturn by refining target audiences. Re-discover
the most basic marketing concept—targeting. Assess which segments of potential customers you do
not want to target; don’t market to inappropriate market segments (simply stated, some customers are
more costly to serve than to lose); focus marketing strategies on customer segments that will produce
the greatest ROI.

During an economic downturn, we simply can’t afford to blanket multiple target markets with our
message. Narrowly focus on only your best prospects and consistently communicate with them. Don’t
forget clients need to be marketed to as well.

 Be Adaptable: - Successful companies are the ones that adapt well and develop an agility that
allows them to respond more quickly to market challenges. Lorraine Johnson, Certified Financial
Planner and Principal of Triangle Financial Advisors, says that during any economic slowdown you
can count on consumers’ basic needs to continue. Food and medicine will still be in demand. Buying
that new car? Maybe not. Unless, of course, it is a hybrid—an investment that will pay off in lower gas
expenditures. What do you sell that can be adapted to become an essential rather than nice-to-have?
Back to the Southwest Airlines example—currently they are cutting 57 existing routes while adding 40
new flights as they focus on faster growing markets and building their business around flights that are
in high demand.

 Shape the message, don’t slash the price : - It is important for marketers to adjust pricing
strategy to help sustain and grow business during an economic downturn. But instead of slashing
prices, return on investment should be reaped by building specific message tactics into your marketing
plan based on specific research outcome.
For example, drive prospects to web site for a special offer and measure traffic. Promote a
specific line of product or set of services and measure sales results in that category. Measure
phone volume, web visitors, coupon redemption, incentive use, etc. to gain quantifiable
results that track back to your marketing. Conduct research to understand your competitor’s
positioning and your target audiences’ perception of the economic environment; hone and
refine your messages; highlight the value of your product or service, rather than slashing the
price Shift marketing message to reflect the new customer mindset. Stress quality, efficiency
and value and avoid luxury and status messages. An example from the past: A-1 Steak
Sauce’s message that “A-1 Steak Sauce isn’t just for sirloin anymore.”
 Take advantage of what you already own - Sustain the brand : - In the economic
downturn, aggressive marketing strategy is not prohibited but marketer are advised to follow a core
principle that a marketer should concentrate on making effort to maximize advantages from what he
really owns. This will not hamper organization’s growth but will enable to sustain in the market in
hard times. Motto that marketers should follow “NEVER EVER COMPROMISE WITH YOUR
CORE COMPETENCES” In summary, the greatest challenge in a down economy is how to use all
available resources in the most efficient manner to mitigate the impact on your business. The typical
knee-jerk reaction of cutting budgets indiscriminately may not be the best answer, and in fact may
have a much greater cost to your business over time. As experts in marketing strategy aimed at
delivering solid results, Strategic Guru can help you make the right choices for effective marketing.
Market can lessen the impact of a downturn by investing in brand building as part of their marketing
plan. They should establish access to executive officers to understand ongoing shifts in business
strategy; realign marketing strategies to match business objectives quickly to demonstrate a
commitment to the bottom line; qualify and quantify results quarterly to establish an ongoing
dialogue with executive officers.

 Watch your inventories carefully, but don't hold them down so tight that you'll
lose sales -: Typically during a slowdown, there is an imbalance between slumping retail sales and
bloated inventories -- don't be saddled with leftover merchandise that ties up your cash flow.
One possibility is converting inventories into cash. If your business traditionally stocks 250 units of
each of its slowest-moving products, consider cutting that number to 100 each. Monitor the results,
keeping an eye out for those products that can tolerate even leaner inventories or that should be
eliminated from your stock. This way if sales nosedive, less of your cash is locked into unproductive
assets.

 Separate the "nice to do" from the "have to do," and eliminate nonessential
expenses as much as possible - Ask yourself, is that activity necessary? If not, don't do it. Also
consider cutting personal spending. Simple solutions such as brown bag lunches and car pooling can
make a difference.5

 In strategizing how to build your customer base and induce current customers to
raise revenues, the importance of good service should not be overstressed - Especially as
their buying power or willingness to spend is lessened during tough economic times. Studies show
that perception of service is fixed primarily in terms of time in a customer's mind. Three examples
are: waiting time to obtain service; reaction time to deliver service; and length of time of the service.
In banks or stores, or phoning in orders or for information, prospective customers will walk out or
hang up if their time perception is strained.

According to management consultant Donald Blumberg, author of Managing Service as a

Strategic Profit Center, customers will temper their time demands when they see store employees
busy helping other customers. But they will not be so tolerant when clerks are chatting with one
another or on the phone while waiting customers are ignored. An informal, friendly attitude by
owner-managers is key to a happy workplace, with emphasis clearly placed on the important role
all employees play in meeting customer needs for attentive, timely service.

INNOVATIVE TRENDS IN MARKETING : Customers today are keen on businesses

understanding their individual needs and to each of these customers, their own need is unique.
The sooner marketers understand these needs and endeavor to satisfy and delight their customers,
the soon they will be able to retain a fairly Marketing practices have witnessed a significant shift
over the years. Well defined marketing models do not work any more today. Now a days we can
new trends in marketing, like Micro Customer profiling, Product placements Mood marketing
etc., which are more customer-centric. It also highlights the creative strategies used by marketers
to find and retain their customers.

 Micromarketing - According to Zilliani, who has done pioneering work in this field,
Micromarketing “relates to ways of controlling environment complexity, facilitated by by
information technology and required by highly competitive markets .Such control has three
forms
- segmentation which reduces complexity to a controllable number of variables
- Organization which absorbs a certain amount of complexity by modeling the structure.
- Technology which explores complexity and dominates through simplification

 Blog marketing- Web logs means online journals, which is published on web by either
individual or by blogging host or by an entity that share a common interest. Its one the most
popular mean of marketing now a days. Companies are focusing on this way of marketing as
the internet has become an ingredient part of daily life. People of every age group are
connected with it. So companies are easily able to connect with the prospects. Companies are
reserving a share in total budget for blog marketing, in India this trend is very new and only
large scale companies are linked with this innovative way of marketing.
 Buzz marketing - Greg Metz, in his article “Building Buzz in the Hive mind”, defines
buzz marketing “as the amplification of initial marketing efforts by third parties through their
passive or active influence.” According to his observation the task of growing and retaining
customer is the number one concern for every business. It would be great if there were some
simple techniques that made achieving this task easier. This term known as viral marketing,
People were alluding to with this term. Buzz marketing has superseded its meaning more
cogently and appropriately. He states that it follows the basic patterns.

 Mobile Marketing – This area of marketing is very sensitive to individuals. Looking

closely at AT Kearney’s data shows that two countries within western Europe rival Brazil’s
mobile advertising conversion rates – Spain (10%) and the UK (6%). These results depict the
potential of mobile marketing to stimulate growth. In India it is its primary stage or it has just
started.

 B2B marketing – Now a day a new trend in marketing is the shifting of approach,B2C
(Business to Consumer) towards B2B. An example to explain the term B2B, (Business to
Business marketing) A sales representative makes an appointment with a small organization
that employs 22 people. He demonstrates a photocopier/fax/printer to the office administrator.
After discussing the proposal with the business owner it is decided to sign a contract to obtain
the machine on a fully maintained rental and consumables basis with an upgrade after 2 years.

 SMS as marketing tool - It is also one the most popular way of marketing. The telecom
sector’s growing and increase in use of mobile phones has lead to a new way of marketing,
SMS marketing. It is just base on informative aspect of marketing, that customers must be
informed about the product and opportunity to buy the product. In India mobile phones are not
much old so its in infant age and limited to few cities but use of this way of marketing is
growing with high. Pace.

 Marketing Innovation in Indian Scenario – A new and very unique in nature marketing
trend can be seen in India, which is Rural marketing. In India all companies are focusing on
rural market segment as has the maximum number of prospects and the number of cities in
India are growing rapidly with the real estate boom. It’s an emerging theme of India last few
years but it is at a pace now a days. The four factors that influencing demands in rural India are
Access, Attitude, Awareness and Affluence.
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BIBLOGRAPHY

http://www.Wikkipedi.org
Marketing mastermind 2007
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The hindu business line
http://bebusinesssmart.com/blogs
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Data and graph : marketing sherpa
American Marketing association – Journals
Economic times – Times group