Turning adversity into advantage: Does proactive marketing during a recession pay off ?
Raji Srinivasana,T, Arvind Rangaswamyb, Gary L. Lilienb
b a The University of Texas at Austin, TX 78712, USA The Pennsylvania State University, University Park, PA 16802-3004, USA
Abstract Recessions can severelyaffect the performance of firms, and even their very survival. However, all firms are not equally affected by a recession. Some firms view recessions as opportunities to strengthen their businesses, invest aggressively and establish their advantage over their weaker competitors, whereas others cut back, waiting for the recession to pass. Why do some firms view the recession as an opportunity anddevelop an aggressive marketing response to it? What are the effects of such a marketing response on the performance of the firm? These are the two central questions we address in this paper. We propose a new construct, which we call proactive marketing in a recession, as the firm’s interpretation of the recession as an opportunity (opportunity interpretation) and development and execution of aresponse to capitalize on the perceived opportunity created by the change (offensive response). We develop and test a model of the antecedents and consequences of proactive marketing during a recession. The results of a survey of 154 senior marketing executives show that some firms do indeed adopt proactive marketing during a recession. Both organizational and environmental contexts influence firms’proactive response to a recession. Firms that have a strategic emphasis on marketing, an entrepreneurial culture, and slack resources are proactive in their marketing activities during a recession, while the severity of the recession in the industry negatively affects proactive marketing response. In addition, firms that have a proactive marketing response in a recession achieve superior businessperformance even during the recession. Our results suggest that not all firms do, or should, respond in a proactive manner during a recession. Those firms with a strategic emphasis on marketing already have programs in place (e.g., well-recognized brands, differentiated products, targeted communications, good support and service, etc.) that enable them to derive benefits from a proactive marketingresponse during the recession. D 2005 Elsevier B.V. All rights reserved.
Keywords: Recession; Proactive marketing; Structural equation model; Marketing strategy
T Corresponding author. Tel.:+1 512 471 5441; fax: +1 512 471 1034. E-mail address: Raji.Srinivasan@bus.utexas.edu (R. Srinivasan). 0167-8116/$ - see front matter D 2005 Elsevier B.V. All rights reserved.doi:10.1016/j.ijresmar.2004.05.002
Business cycles, in general, and recessions in particular, can severely affect the performance of
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individual firms, industries and entire economic sectors (Domowitz, Hubbard, & Peterson, 1988; Gabisch & Lorenz, 1987; Zarnowitz, 1985). However, not all firms perform poorly or failduring recessions—some firms prosper and even grow.1 Some firms view recessions as opportunities to strengthen their businesses, invest aggressively and overtake their weaker competitors. For example, brands, such as Camel cigarettes and Chevrolet, seized top market positions from their competitors through aggressive marketing campaigns during the Great Depression in the US in the 1930s. Procter andGamble, a company noted for consistent spending during periods of recession, heavily promoted some of its best-known brands (e.g., Camay, Ivory, and Crisco) at that time. Other firms (e.g., GM’s Saturn Division, and Intel Corporation) invested during the 1990–1991 recession to improve their competitive position, with Intel launching its bIntel InsideQ brand-building program, aggressively...