Outline of Case Study

In 2007, the world entered the biggest economic crisis since the Wall Street Crash in 1929. John A. Quelch and Katherine E. Jocz’s case study “How to Market in a Downturn” is therefore more relevant than ever. The case study looks at the impact of a receding economy on a company and investigates marketing issues from a consumer, product and business point of view. Strategies for effective marketing are identified, as well as preparations for the economic recovery period. Jocz and Quelch suggest that during a recession, consumers will be forced to become more price-sensitive and reduce spending. They will also be forced to have stricter priorities, thus making them less brand loyal.

Analysis of Case Study

Nevertheless, this is a general outlook. Normally, consumers are segmented according to demographics or lifestyle (Quelch & Jocz 2009). During the recession period, there are four segments which are identified with respect to the “consumers’ emotional reactions to the economic environment” (Quelch & Jocz, 2009). These include the ‘Slam-on-the brakes’ consumers who cut down on all forms of spending. ‘Pained-but-patient’ are optimistic for the long-term, but cut down on their consumption in the short term. There are those that will be ‘comfortable well-off’ because they are financially stable but will selectively purchase in the long run. Finally, the ‘live for today’ consumers will continue purchasing and spending as usual (Quelch & Jocz 2009).

Companies should be cautious, in order to not confuse their loyal customers when planning on changing their targeted segment. Loyal customers are most important to many businesses during an economic downturn. The case study mentions that companies reduce their marketing spending first, when cutting costs, which can reduce customer loyalty. Quelch and Jocz see marketing as an essential tool, which is used to build and maintain a strong brand that the consumer can recognise and trust, especially during a recession. Marketing budgets should therefore not be reduced as it is so often done.

Commonly a company can reap certain benefits a recession offers, such as cheaper advertisement (Quelch & Jocz 2009) allowing them to capture market share from their competitors. Direct marketing, such as online advertising, is one of the sectors that grows most during an economic downturn because it produces more measurable results and helps to reinforce brand loyalty. This is important, as the idiom “out of sight, out of mind” describes consumers who go for substitutes if they forget about a brand (Oakes, 2010).

It is also argued that market research is vital during the downturn because it enables organizations to identify new customers emerging out of the recession. It also assists in recognising where to innovate by the time the economy recovers. Consumers will have priorities according to their position in the earlier mentioned four segments and their financial situation. Marketers identify these four spending classes as: essentials, postponables, treats and expendables.

As investigated by Quelch and Jocz, three main strategies identified are: improvement of affordability, creation and building of trust and streamlining the product portfolio.

During a mild economic downturn, it is often sufficient for companies to adjust production quantities only, without having to change prices or the product line. However, in deep recessions, the company should analyse the market demand and its product portfolio in order to “reduce excessive complexity in product lines” (Quelch & Jocz, 2009). This is due to large product lines incurring greater marketing costs, thereby tying resources to an inventory that moves slowly.  Consequently, this leads to an eventual decrease in revenue. Companies should put more focus on improving affordability. Moreover, to sustain long-term profitability, companies should not move their premium brands down-market. Instead, they should introduce “fighter brands”, lower priced alternatives backed by minimal advertising thus targeting more customers. Price cuts of the original products could confuse consumer’s perception of normal prices. If their perceptions are too low, businesses may have trouble resetting prices after the recession.

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Finally, businesses should bolster trust by using “reassuring messages that reinforce an emotional connection with the brand” (Quelch & Jocz, 2009). Well-known brands are often perceived as the safe and satisfying choice.

Quelch and Jocz advise companies to position themselves for recovery. Marketers should examine whether the behaviour of a consumer will return back to normal and brace themselves for “possible long term shifts in consumer values and attitudes” (Quelch & Jocz, 2009).

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