How economic crisis affects organizational marketing budget and operations

Marketing Budget During Economic Crisis

The marketing operations have come to play a pivotal role within economic entities. As the customer is placed at the core of corporate actions, the marketing team is the one to ensure a full satisfaction of the customers' needs and wants. They accordingly need extensive budgets to segment the market, identify the target market and its characteristics, reveal the most desirable features of the desired products and so on.

The role of the marketing team has grown exponentially throughout the past recent decades and this basically revolves around the idea that organizations no longer manufacture the items they like and then hope to sell them onto the market, but they prospect the market and manufacture the products which are demanded by the customers.

The growing importance of the marketing department within economic entities is indubitable and as a result of this stand the large number of topics that have emerged relative to it. These could include the customer features, market segmentation, the marketing budget, the marketing mix, the life cycle and the adherent strategies for each product.

In the more recent context, when the United States, and consequently the entire world, is threatened by an economic recession, it would be interesting to analyze the marketing budget. In other words, how does the economic crisis affect the marketing budget and operations of an organization?

In order to answer to the previously posed question, one should first get a clear understanding of both concepts. Then, one should get an insight into the general marketing implications of an economic crisis, exemplified with real life examples.

2. Marketing and Economic Crisis

Throughout the past recent decades, the scholars have pointed out an impressive role of the marketing operations within organizations. Combining the academic works with empirical results, corporate managers were able to retrieve successful outcomes. The palette of activities and concepts dealt with by marketing specialists is quite vats, but among the most important ones, these include the 4 Ps of marketing (product, price, promotion and place), market research, customer satisfaction, market segmentation, brand management, sales, communications or advertising.

Marketing as a scholarly discipline and an organizational practice could be defined as the totality of strategies implemented to increase customer satisfaction. In other words, it could be described as "the wide range of activities involved in making sure that you're continuing to meet the needs of your customers and are getting appropriate value in return" (McNamara, 2008) the marketing strategies are crucial for the overall success of the economic entity. Basically, properly implemented marketing practices ensure a satisfied customer which will continue to purchase from the organization. This will in turn imply sustained organizational revenues and ultimate corporate success.

An economic crisis is a highly unfavourable situation in which local or international markets encounter major difficulties. A crisis generally commences from one sector and expands to affect all features of life. Foremost, numerous forces contribute to the emergence of a financial crisis. The most severe financial crisis occurred between 1929 and 1933 and was caused by the fact that most European countries had relied on the U.S. As their main creditor to finance their post-war reconstructions. When the American stock market collapsed, the global economy took a hit.

In the modern United States for instance, the threatening economic crisis is based on the real estate crisis and the situation created by the credits sector. Also, the crisis has been fostered by an ever growing price in crude oil and a sky rocking cost of living. The labor market and social features have also contributed to the crisis in the meaning that the generation of baby boomers is aging and beginning to retire. As the birth rates are decreasing and the number of specialized employees is also decreasing, the labor force market is likely to encounter serious shortages. Another factor that has contributed to the present situation is the increased focus the Bush administration placed on national security and the war against terrorism. It consumed tremendous financial resources and threw the country into a record high federal debt. Also, an ultimate reason for the economic crisis currently threatening America is the fact that large parts of the country's economic growth had been based on consumerism, an unsuitable model of economic growth and development.

The effects of an economic crisis are numerous and they often depend on the particular characteristics of each player. For instance, a country with a strong banking system will find it easier to face the challenges of a financial crisis than a state with an unstable banking system. The most common effects however include:

Inflation

Lack of trust in the political and economic authorities in the national and international backgrounds

Reduction in the financing opportunities, often materialized in reduced access to credits for both population and economic entities

Low morale among social members

Higher costs of living

Corporate bankruptcies

High unemployment rates

International tensions and damages on interstate relations

The list of potential effects an economic crisis might generate upon the micro and macro environments could go on for pages and still be far from exhaustive. As it can be observed from the succinct presentation above, the financial crisis has impacts upon numerous features of life.

4. Conclusions

Economic crises are generated by a combination of forces and affect organizations and individuals in a multitude of manners. The responses forwarded by each party depend on individual characteristics. Ford for instance decreased its marketing budgets, to then increase them; Nike on the other hand kept them at constant levels but distributed them differently.

However each economic entity will respond to the crisis as the management sees fit and in accordance with the personal features of the organization run, the outside observer can easily reveal a trend of reducing marketing costs when signs of economic crisis are presented. In this order of ideas, most players in the industry find it important to reduce operational costs in times of financial difficulties. Foremost, even those who do not entirely subscribe to this opinion will be easily influenced by the competition. "In times of financial crisis, many companies cut their PR and marketing budgets as well as their advertising budgets to save money. They look at their competitors and follow their example" (Word Press, 2008). This course of action is not always the best one however. Here are some reasons in support of this statement:

reduced marketing costs imply fewer advertisements the organization loses touch with the customer base they mostly rely on the loyal customers and do not attract new clients (and gaining new customers in difficult times is crucial for survival) the marketing campaigns are poorly implemented and have little relevance for the consumer most companies will tend to implement such strategies, meaning that they are more focused on internal issues and the competition within the market will be reduced (Word Press, 2008)