DMN3 Blog

Did you know that the outcomes of marketing in a recession are consistent across all studies that have been done during the 11 recessions prior to the current one?

While Internet marketing is the main focus of this Blog, I will occasionally deviate from it to more general issues on marketing. Today is one of those days. Marketing in a Recession: What Have We Learned?, is the title of a review article I recently authored for the DMN3 Institute. In addition to my role as Senior Online Marketing Strategist for DMN3, I also serve as Director of Research & Education for the DMN3 Institute. The article summarizes the research on the impact of marketing during every recession since the World War II. Aggressive marketing during a downturn has a positive impact on sales, market share and profits both during and after the recession. You can find the complete article here: Marketing in a Recession

In a discussion of my findings, I speculated that Hyundai would do well during the current recession based upon the research done following previous recessions. The research clearly demonstrates that if a company has the right culture and a strategic marketing emphasis (I will get to in a minute) going into a recession, then it's in a position to take advantage of the opportunity that the recession presents to maintain sales, increase market share and increase profits. Yes…I said increase profits during a downturn by increasing the marketing budget.

My predictions appear to be proving right based on an article titled, Hyundai Reports Record Profit, authored by Choe Sanghun and published on July 23^rd in the New York Times.

The article states that Hyundai reported a record quarterly profit for the second quarter of 2009. Its second quarter net income increased by 48 percent from a year earlier. It also increased its U.S. market share to 4.3 percent, compared to 3.1 percent a year earlier. That’s a 39 percent increase in market share from a year earlier. Hyundai expects its overall sales to increase by 7.9 percent this year. All this is occurring during a world-wide recession with car sales in the U.S. expected to be down approximately 20 percent for 2009 as a whole and many car companies experiencing a steeper decline in sales.

Why the change in Hyundai’s status? They must of read the research data! They understood that a recession is an opportunity. While others were cutting costs, including their marketing budgets, Hyundai was radically increasing spending on marketing, especially in the U.S. The results were predictable based on what we know about the impact of marketing during previous recessions.

Could anyone do the same? The research shows that the organization must view marketing as a strategic emphasis and have an entrepreneurial culture to take advantage of such an opportunity. An organization must also have good products and services in place and be willing to reallocate resources. Finally, an organization must change the emphasis of their marketing message to reflect consumer orientation during such a dramatic downturn. The idea is to market aggressively to the recession.

Hyundai did just that with offering U.S. buyers an assurance that if they lost their jobs they could return the car. Then in June it followed up with a program to allow buyers to lock in gasoline prices at $1.49 per gallon for a year. They are aligning their marketing message to consumers' concerns while having the products and services in place to fill consumer demand.

Based on what the research has shown us about past recessions, Hyundai’s success was predictable. I suspect that when studies are completed on the impact of marketing during the current recession on sales, market share and net income, we will see similar results to previous studies from other recessions. Its impact can be dramatic.

It still confounds me that with so much research data available to organizations, why organizations cut marketing budgets during downturns. It only makes sense if the organization lacks the products, services and organizational readiness to avail themselves of the opportunity. However, they will end up spending much more trying to win back customers and market share after the recession is over. The problem is that the next downturn is, on average, only six years away. These organizations might be better served by creating the corporate culture and organizational readiness to take advantage of any future downturns. That same culture and organizational readiness will also serve them well between recessions.