Marketing budget allocation during economic crisis

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.

3. Marketing Budgets throughout Economic Crisis

An international economic crisis threatening the stability of nations has the immediate impact of generating reduced trust. In other words, all stakeholders lose trust in the organization and the organization itself loses trust in the economic, financial and political systems. A study conducted throughout nine years by the IPA revealed that as a consequence of these forces, the marketing budgets are being drastically cut. "Third quarterly annual marketing budgets have been cut at a record rate as the economic crisis weakens business confidence, a survey published today has found. The Bellwether survey, published by the IPA, found that business confidence was at an all time low, in the survey's nine-year history. The cut was the fourth successive quarterly reduction in spend since the summer" (Lovell, 2008).

The reduced business trust materialized in that only 8% of the studied organizations believed in a brighter future, the rest of 92% revealing pessimistic scenarios for the future. The reductions in the marketing budgets were most severely felt by sponsorship operations, market research, public relations and advertising. Out of the total companies studied, 88% had implemented strategies to reduce the costs of the marketing department. 12% on the other hand had further increased the marketing budgets of their departments (Lovell, 2008). This only goes to show that the responses to an economic crisis vary based on the personal characteristics of each player in the industry.

Ford is probably the most relevant example of how features in the micro and macro environment impact the organizational success. Once the undisputed leader of the automobile industry, Ford has recently been dethroned by Japanese manufacturer Toyota and has ended the previous year on negative results. The organization has dealt with the international crisis by attempting to reduce costs. They closed down several plants across the globe and have downsized thousands of employees. Most of these were members of the marketing teams. As a result then, the market research operations have been conducted at poor levels. Consequently, the product development does not integrate the new requirements and needs of consumers, materializing as such in reduced sales. "Even as Ford Motor Co launches a marketing blitz under the slogan "Bold Moves," the automaker's turnaround is at risk of stalling due to a weak pipeline of new vehicles and an erratic product strategy" (Daily Times, 2007).

But the problems they were facing, most relevantly materialized in a decreasing market share, decreasing sales and revenues, represented a weak-up call for the officials at Ford. Coming to terms with the actual importance of attracting the customer, the organization developed a strong marketing campaign which will be launched this year. The campaign has been constructed with the aid of both traditional and innovative marketing techniques and it aims to reach millions of customers through a wide variety of media channels. Another important aspect of the Ford Flex campaign is that is will be promoted with the aid of numerous strategic partners, such as Apple, Microsoft or Yahoo (PR Newswire, 2008). The single conclusion of this marketing approach is that Ford responded to its crisis by allocating supplementary funds to its marketing budget.

Nike is probably the ultimate epitome of corporate success. However it has been the target of numerous accusations, Nike continues to lead the charts of the most successful multinational organizations. One of the main reasons why Nike has succeeded could revolve around their ability to cut costs by outsourcing all of their manufacturing operations. The U.S. quarters only deal with administration and marketing operations.

The marketing campaigns of Nike's are directly tied to the corporation's success and the specialists managed to capture the attention of the audience by using traditional and interactive marketing and airing the campaigns on numerous media channels. They created a strong brand, culture and set a trend. All these were achieved with immense marketing budgets.

In the current situation when the United States and the world are threatened by an economic crisis, the giant shoemaker continues to sustain an increased marketing budget. A specification that must be made however is that changes in the structure of the budget have occurred. In this order of ideas, the marketing specialists at Nike are more centred on interactive and innovative marketing, rather than traditional marketing operations. In a time of financial difficulties then, the number one shoemaker of the globe is trying to approach the audience using less conventional means. Nike officials argued that they were not in the business of keeping the media companies alive, but that their primary interest was that of best communicating with the audience. In this order of ideas then, the multinational organization drastically reduced marketing budgets for television advertisements and other traditional means and supplemented the budgets for innovative marketing campaigns. "Last year, Nike spent just 33% of its $678 million United States advertising budget on ads with television networks and other traditional media companies. That's down from 55% 10 years ago. [...]Nike -- the 800-pound interrupt marketing gorilla in the sports world -- is increasingly betting on social media, branded content and engagement marketing (where brands engage with the passions and values of their customers)" (Chandler, 2007).