Recession is a phenomenon of decreasing demand for raw materials, products, and services.

Technically, its beginning, progress, and ending depend on the operational measures used by
different researchers and federal agencies. For examplethe gross national product (GNP) declines
for two consecutive quarters, or when the leading economic indicators (LEIs) decline for three
straight months, or when the index of the Association of Purchasing Managers dips below 50
points. Whichever the case, recession requires marketing managers to modify their marketing
strategy and action in order to stay both profitable and consumer-responsive. This generally
means adapting the marketing mix and/or changing the target markets.

However, the response of marketing managers to recession depends on how they perceive its
meaning and impact on their businesses. As a result, it is possible that a recession on the national
level may affect different companies differently and may, in fact, indicate different economic
environments, including those of growth and inflation. Specifically, an objectively measured and
determined recession on the national level may affect companies of different size and different
sectors and regions differently, hence requiring that marketing managers take different tactical
and/or strategic measures to adjust to or even exploit changes in the economic environment.

This article seeks to determine management perception of and response to economic recession by
measuring the following and contrasting the results by sector and by company size:

(1) The meaning of the 1991 economic recession to marketing managers,, in the United States a
recession is said to exist when

(2) The impact of this recession on marketing decisions, and

(3) The resulting adjustments in marketing strategy and action.

A fourth goal of this article is to make recommendations to marketing managers, which may be
especially useful to those in small businesses. By accomplishing the goals of this article, the
study will make a bridge between the scholarly marketing literature and daily or weekly
reporting on marketing and economic performance.

LITERATURE REVIEW

Recession has been defined in the marketing literature as a "process of decreasing demand for
raw materials, products and services, including labor" (Shama 1978) or as a "state in which the
demand for a product is less than its former level" (Kotler 1973). Recession calls for marketing
managers to use strategies to stimulate consumer demand. Such strategies often require a
redefinition of the target customers and the marketing mix. They may include narrowing the
product line, offering cheaper products and quantity discounts, lowering prices, increasing
promotion, and offering products directly to consumers.

To weather the recession, Bonoma (1991) advises practicing marketing managers to: (1) "Avoid |
empty middle' marketing," (2) "Don't mistake expansiveness for empire," (3) "Do more for less,"
and (4) "Remember what winter is like when summer again comes" (Bonoma 1991, 10). In a
related study, Goerne (1991) reports that marketing managers have been using significantly more
coupons in the promotion mix in order to fight the negative impact of the recession on sales. In
view of this, it is critically important that marketing managers make sure that the economic
environment facing their company is indeed one of recession.

However, the existence of a recession is often determined on a national level by federal agencies
and business and economic research organizations. Thus, the U.S. Department of Commerce
gathers and publishes two highly watched statistical data: the GNP and the LEIs. The GNP is the
total monetary value of the "goods and services produced and consumed in the private, public,
domestic and international sectors of the economy" and is therefore "the broadest indicator of
economic output and growth" (Guide to Economic Indicators 1990). The LEIs index is a
composite of 11 variables said to indicate the overall trend of the U. S. economy.(1)
Customarily, an economic recession exists when the GNP declines for two consecutive quarters
and/or when the LEIs decline for three consecutive months.

Similarly, the Survey Research Center of the University of Michigan and the Conference Board
publish monthly indices based on household surveys that indicate the perceived overall health of
the U.S. economy. The Survey Research Center's consumer sentiment index (CSI) "reflects
consumer attitudes toward the economy, their own financial condition, and perceptions about
buying big-ticket durable goods." The Conference Board's consumer confidence index (CCI)
"reflects consumers' attitudes toward the economy, local job markets, and their own financial
conditions." When each of these turns negative in comparison to past months, consumer
spending--accounting for two-thirds of the GNP--declines, and a recessionary climate results.(2)

Other statistics often cited to indicate the economic climate in the U.S. include the results of
monthly surveys of the Association of Purchasing Managers and the Blue Chip Indicators, as
well as numerous reports by the economic departments of major banks.

It is important, however, to note that not only are these statistics different, but their use on a
company level may be misleading. The GNP is an aggregate of the monetary value of all
products and services produced and consumed in a country plus the value of exports minus the
value of imports. The LEIs include indicators such as orders for plant and equipment and claims
on unemployment insurance. Surveys of consumer sentiments measure consumer economic
outlook as well as plans to buy specific products such as cars and houses. Therefore, it is
possible that these indicators are irrelevant to many small and large companies or even regions.
For example, it is possible that a manufacturing-led recession in the GNP will have little or no
impact on a company in the service sector, or that a recession as measured by GNP may be the
result of an economic slowdown in one region of the country and have no impact on another
region. Furthermore, recession often means growth to many companies, such as the trade
promotion companies which have been thriving since 1990. According to Miller (1991, 6),
"Spending for trade promotions reached a record level last year (1990) as marketers adjusted
their budgets because of recession." Another example is Electronic Data Systems, the computing
service of which has been growing rapidly because of the recession (Hayes 1991

When it comes to small business, the relationship between the economic environment and
business strategy is even more significant. Since the very nature of many small companies is to
market niche, even small changes in the economic environment and the market niche tend to
have far-reaching effects.

This discussion suggests the importance and relevance to marketing managers of economic
indicators on a regional level, economic sector level, and company-size level.

Company-size level. Different sized companies may be facing different economic environments
depending on their target markets and market power. Larger companies usually have more
market power, which often can help them weather the impact of a weak economy. On the other
hand, a small business might have a protected market niche which can help it in a recessionary
climate while other small businesses, unable to borrow needed cash, may be squeezed out of
business. Feder (1991) reports that small businesses are especially affected by the recessionary
economic environment, and Bowers (1991) reports how small businesses are reducing expenses.
However, Graven (1990) reports that mid-size companies, especially those in manufacturing, are
facing the hardest times.

Regional level. The theory behind regional statistics is that different regions constitute different
economic entities which might be experiencing different economic climates with different
marketing needs. Yet, because the different regions may also be interdependent, a recession may
"roll" from one region to another, making the timing of adjustments to such a climate on the part
of the marketing [UNREADABLE WORDS] especially important. Also, a [UNREADABLE
WORDS] may "roll" from one industry [UNREADABLE WORDS] Thus, Sebastian (1989)
reports that a "rolling recession" is behind regional economic differences in the U.S., while Clark
(1990) reports the existence of recessionary conditions in 34 states of the United States.
Consistent with this, Rex (1990) reports that while the economy of Arizona continues to grow,
the "entire New England region has slipped into recession."

Sector level. The underlying theory behind sector-level statistics is that different economic
sectors may be experiencing different, even opposite, economic climates at the same time. For
example, since the 1980s health care services have had continued growth while manufacturing
has experienced two recessions (one in 1981-82 and another in 1990-91). Also, service industries
in general have been regarded as growth industries for many years. Recently, however, Nasar
(1991) and Stout (1990) report that the service industries are in recession. Nasar reports: "The
United States service sector, once heralded as a powerful engine for new jobs, is undergoing a
broad retrenchment, much as the manufacturing sector did in the past decade." According to
Nasar, such a retrenchment characterizes service companies in retailing, financial services,
accounting, real estate, and temporary help. This is consistent with Mandel (1991) who
differentiates among different service industries, reporting growth in some and decline in others,
and with Pearlstein (1991) who views the recession in the financial services industry as an
example of recessionary pressure in the service sector. On the other hand, while many
manufacturing industries have been experiencing a recession, the textile industry has been
growing (Oswald 1990).

The goals of this study are to measure by sector and company size what a national recession
means to marketing managers, what the impact is, and what their resulting marketing strategies
and actions are. Specifically, the hypotheses of this study are:
[H.sub.1]: The subjective meaning of a national

recession to marketing
managers varies by small and
large companies and by sector

[H.sub.2]: The perceived impact of the economic

environment of recession
on marketing managers varies by
sector.

[H.sub.3]: The adjustments of marketing

managers to the economic environment

vary by small and large
companies and by sector

METHOD

Sample

To test the hypotheses of this study, three samples of marketing managers in different sectors and
different size companies were surveyed. The samples were drawn from small and growing
companies and from the largest (in terms of total sales) industrial and service companies. Total
sales was the operational measure of the "company size" variable. Specifically, these samples
and their population frames were:

Sample 1: 60 randomly selected companies

from Fortune 500:

Industrial

Sample 2: 60 randomly selected companies

from Fortune 500:

Services

Sample 3: 60 randomly selected small

business companies from

Inc. 500.