1.

Introduction The following background will give an overview on how SMEs in the hospitality sector
have to cope with the current COVID-19 pandemic - from a marketing perspective. Moreover, a problem
discussion is presented in this chapter which allows the purpose of the research to be given, along with
the stated research questions. At last, an overview and outline of the entire thesis will be provided. 1.1
Background Companies are today managing businesses in a highly interrelated international business
world (Alhawari et al., 2012). Companies are therefore more exposed to abnormal and unexpected
events such as a crisis, since it constitutes new risks and an unpredictable business surrounding. For
companies that are not adequate to adapt in time of crisis, it can be challenging to have a sustainable
profitability or even survive (Darbonnens & Zurawska, 2017). As this thesis is written the world is in the
midst of an economic crisis derived from the corona-pandemic outbreak (COVID-19), which is affecting
businesses all over the world. The coronavirus outbreak was officially declared as a pandemic in March
2020 (WHO, 2020) and in early February the first case was detected in Sweden (Statista, 2020). As this
thesis is written, the country has 20 300 confirmed cases where the region Norrbotten has 243
confirmed COVID-19 cases (Statista, 2020). The COVID-19 pandemic has caused a chain of events that
have led to an economic crisis. The driving factor has been that governments all over the world have
advised their population to stay at home and practice social distancing, which has led to a declining
household consumption and thus also reductions in production (Statistics Sweden, 2020). In a survey by
Norrbottens Chamber of Commerce (2020) it shows that the corona crisis has caused damage to the
business sector in Norrbotten and that over 70 percent of the firms have taken measures to reduce their
costs. The survey also confirms the image that the hospitality industry (i.e. hotel, restaurant, tourism,
travel, cafes) and small and medium sized enterprises (SMEs) have been hit hardest so far. A SME is
according to EU’s definition a company that employs less than 250 people, and has either a turnover
that is not more than EUR 50 million or an annual balance sheet that is not more than EUR 43 million
(European Commission, 2003.). 2 Almost 80 percent of the SMEs in Norrbotten have already been
affected directly or indirectly by the coronavirus. Demand has decreased for two-thirds of the firms.
Cashflow has already negatively affected 60 percent of the firms and 68 percent of the firms see long-
term negative effects of the corona crisis (Norrbotten Chamber of Commerce, 2020). 99.9 percent of all
companies in Sweden are small and medium sized companies. They create employment for 70 percent
of the total labour force and since 1990 they have created more than 4 out of 5 jobs every year
(Yazdanfar et al. 2015; Yazdanfar & Öhman, 2018). SMEs are considered to be an important factor in a
market economy and a great source of national economic growth (Haltiwanger et al 2013; Decker et al.
2014). However, SMEs are likely to be the ones who are most negatively affected in times of crises. Since
they are vulnerable with their, in general, inferior financial- and human resources when it comes to
responding to the consequences compared to multinational corporations (Vargo & Seville, 2011;
Cesaroni et al. 2020). A suggested tool in order to deal with an economic crisis for firms with limited
resources (many times SMEs) is to adopt marketing innovation (Naidoo, 2010). Marketing innovation is
defined as the application of a new marketing strategy with changes in product design, pricing strategy,
packaging and product placement (Varadarajan, 2018). When a crisis hits the organizations, in this case
the hospitality industry, they might need to adjust and change their marketing strategies (Karlsson &
Tavassoli, 2016). In those cases, it is vital for firms to remember that the adaptation of a new way of
marketing should avoid cutting expenses of marketing (Köksal & Özgul, 2007). A good first step to adapt
the marketing strategy might be to reevaluate the marketing mix and realign the value offered in order
to please customers changed demand, due to the crisis (Karlsson & Tavassoli, 2016; Falk, 2013).
Empirical results also show that marketing innovation activities positively influences the economic
profitability for firms in the hospitality industry (Nieves & Diaz-Meneses, 2016). Although changes in the
marketing mix (i.e. product, price, place, promotion) have been proposed as a feasible strategy for
companies that face a crisis, little research has been directed at empirically proving this, at least in the
context of SMEs (O'dwyer, Gilmore & Carson, 2009; Naidoo, 2010). 3 1.2 Problem Discussion When an
economic crisis hits and the turnover rate declines, it might lead to bankruptcies (Yazdanfar, Öhman &
Homayoun 2019). The declining turnover also contributes to decreases in innovative activities, mainly
because new product innovation is expensive (Peric & Vitezic, 2016; Grewal & Tansuhaj, 2001).
Nonetheless, the use of innovativeness in marketing could present an attractive solution for cash-
strapped firms in order to survive in an economic crisis (Naidoo, 2010). However, there is not much
previous research that has investigated or been able to prove marketing innovations' impact on firm
survival in an economic crisis (Naidoo, 2010). As a consequence of the COVID-19 pandemic,
governments all over the world have advised their population to stay at home and practice social
distancing, which has led to changed customer preferences and firms have to adapt to that in order to
stay profitable and competitive (Statistics Sweden, 2020; Fernandes, 2020; Karlsson & Tavassoli, 2016).
The changes in customer needs is something that has affected every industry in the business sector
(Statista Sweden, 2020). Since marketing innovation is a tool for firms in order to adapt to consumer
needs, and includes innovations such as advertising innovation, distribution innovation, promotion
innovation and pricing innovation (Naidoo, 2010; Varadarajan, 2018). A successful implementation of
that kind of innovations will help firms to better match customer needs and in turn also help them to
gain a competitive advantage (Anning-Dorson et al. 2018; Karlsson & Tavassoli, 2016). The marketing
mix (i.e. the 4P’s) is the mechanisms the organization can use to create customer satisfaction and to stay
competitive within the market (Karlsson & Tavassoli, 2016). It is considered to be a dynamic model since
it adapts to change in consumer preferences, market condition and government policies (Singh, 2012).
Hence, it is a vital tool for firms in the hospitality industry in order to adapt to the changes within the
marketing environment and find a new way of marketing to stay competitive and profitable (Karlsson &
Tavassoli, 2016). The coronavirus pandemic has created an economic crisis that so far has required
actions that the world has not experienced before (Fernandes, 2020). Since every crisis is more or less
unique, a firm cannot learn how to cope with it in advance and therefore firms encounter them with
little experience (Grewal & Tansuhaj, 2001). With that in mind the authors want through this study to
contribute with additional knowledge regarding how SMEs in the hospitality sector in Norrbotten can
survive the current crisis and also contribute to research that facilitates the management of 4 future
crises. To understand how SMEs can survive in the current crisis figure 1 was developed below, which
illustrates how SMEs can respond to an economic crisis by applying marketing innovation activities
(changes in the 4 P's in the marketing mix). Figure 1 - Economic crisis linked to the marketing mix 1.3
Purpose and Research Questions The purpose of this study is to examine how SMEs in the hospitality
industry in Norrbotten have been affected and how they are changing their way of marketing in order to
survive in the economic crisis that is derived from the COVID-19 pandemic. RQ1: How have SMEs in the
hospitality industry in Norrbotten been affected by the economic crisis derived from the coronavirus
outbreak? RQ2: How can SMEs in the hospitality industry in Norrbotten adapt a new way of marketing in
times of crisis? 1.4 Delimitations The conducted research in this thesis is delimited to small and medium
sized enterprises in Norrbotten, Sweden. The study is also delimited to a specific industry which is the
hospitality industry. Due to a limited timeframe for this degree project the approach for data collection
will be qualitative and the number of interviews conducted with companies will also be limited.
Economic Crisis Marketing Innovation Changes 4P’s 5 1.5 Outline of Entire Thesis The main objective
with this section is to give a comprehensive outline view of this study. The gradation of this thesis is
illustrated in figure 2 below. In the first chapter there is an introduction, which contains a background,
problem discussion along with the study’s overall purpose and it will end with this study’s stated
research questions. Delimitations of the study are also presented in chapter one. Chapter two will
discuss models, research and theories from previous research within the field. Methodology is the third
chapter. This chapter will present necessary proceedings and course of actions on how the
methodological choices that helped build this thesis. Chapter four will present the empirical data with
key citations from the interview with the respondents. Chapter five presents an analysis of the gathered
data from the interviews towards theories from this study’s frame of reference, a so-called data
analysis. At least but not last, in chapter six, the main findings and conclusions will be presented and
discussed. Figure 2 - Outline of thesis Chapter 1 - Introduction Chapter 2 - Literature Review Chapter 3 -
Methodology Chapter 4 - Empirical Data Chapter 5 - Data Analysis Chapter 6 - Findings & Conclusions 6
2. Literature Review In this chapter, the study will review previous literature in the area of (1) economic
crises and (2) marketing innovation. The reviewed literature on economic crisis will assist the study to
highlight the challenges that businesses encounter in dealing with the outcomes of an economic crisis.
Further on in the chapter previous studies in the field of how innovation could be used in order to deal
with a crisis, within the context of: marketing innovation. 2.1 Economic crisis impact on businesses
Crises can come in various forms (natural disasters, technological disasters and economic crises) and
occur at the most surprising time, in a way one ever could imagine (Grewal & Tansuhaj, 2001). Pearson
& Clair (1998) defines a crisis as a low probability, ambiguity, high consequence decisions along with
time pressure. An economic crisis can affect companies in many different ways and if it is not managed
correctly it will be costly for the organization (Ghandour & Benwell, 2012). Some businesses are forced
to reduce the production (i.e. the supply) due to inadequate demand for products and services
combined with competition within the market environment. They could also be forced to lay off
personnel or lower the wages, and some companies are forced to shut down the business completely
(Köksal & Özgul, 2007). The financial suffering can also be in terms of disruption in the supply chains
(Ghandour & Benwell, 2012). A supply disruption leads to decreased production and demand shortage
which in turn causes unemployment (Guerrieri, Lorenzoni, Straub & Werning, 2020). Thus, a disruption
in supply could damage the organization internally but also externally since the reputation and trust
with stakeholders is put to the test, since it affects the brand equity (Ghandour & Benwell, 2012; He &
Ran, 2015). In an article about the macroeconomic effects of COVID-19, Guerrieri et al. (2020) mentions
that supply disruptions could cause supply shocks in an industry. Supply shocks that initially only affect a
single industry can spread quickly into other industries during a pandemic. This means that goods
become less available, whereupon the price of the products in the specific industry increases, making
consumption more high-priced and thus also less attractive (Guerrieri et al. 2020). 7 The economic
impact derived from the COVID-19 pandemic is really something else for businesses to handle. A valid
comparison of the COVID-19 pandemic to previous crises, such as the global finance crisis in 2008 and
the SARS outbreak in 2003 simply cannot be made. This time it is different: it is a global pandemic, it is
not solely affecting poor income countries, interest rates are down at record levels, and the whole world
is going through a destruction of demand and supply (Fernandes, 2020). 2.1.1 SMEs and the economic
impact Empirical results show that SMEs are the ones who suffer the most during financial turbulence
and are exposed to a higher risk of facing bankruptcy (Yazdanfar & Öhman, 2018; Vargo & Seville, 2011;
Quintiliani, 2017). Around 99 percent of all Swedish companies are SMEs and SMEs creates jobs for
about 70 percent of the whole labour force in Sweden (Yazdanfar, Öhman & Homayoun 2019). The
reason for why SMEs suffers to a larger extent compared to bigger firms is because of their dependence
on loaned money and overall limited financial resources (Bourletidis & Triantafyllopoulos, 2014). The
fact that SMEs many times have limited financial resources leads to limited flexibility and therefore lack
the ability to respond to environmental changes, especially during an economic crisis (Yazdanfar, 2011).
2.1.2 Understanding consumer behaviour in an economic crisis An economic crisis affects the purchasing
behavior of consumers (Mogaji, 2020), in both mentally and financial ways (Köksal & Özgul, 2007).
Mentally, the negative impact on businesses is that consumers become more eager to save money in
fear of losing their job (Sharma & Sonwalkar, 2013) and people that lost their jobs are the ones who are
most financially vulnerable (Mogaji, 2020). Financially, people reduce consumption due to a changed
perception of risk (Sharma & Sonwalkar, 2013; Mogaji, 2020). Most of all, during an economic crisis, the
household reduces its consumption which means that consumers prioritize necessary products and
switch to cheaper substitutes (Sharma & Sonwalkar, 2013). For a lot of businesses this means that sales
starts to drop (Srinivasan & Lilien, 2009). When the price elasticity curve changes the organization needs
to adapt to the customers redefined value in order to respond. In those cases, it is common that leaders
in charge think that cost rationalization and lowering prices are enough measures to stimulate the
organization again (Barwise & Styler, 2002; Piercy et al. 2010). 8 2.1.3 Significance of marketing in an
economic crisis However, one thing that should not be compromised in an economic crisis is the
marketing activities (Köksal & Özgul, 2007; Srinivasan & Lilien, 2009; Alananzeh et al. 2018).
Organizations that increased the spending on marketing during the economic crisis did not increase the
income in the economic downturn. However, the revenues increased quicker once the recovery of the
recession started in comparison to firms that solely focused on cost rationalization (Köksal & Özgul,
2007; Srinivasan & Lilien, 2009). Empirical evidence shows that firms who focused heavily or maintained
the degree of marketing, the market stake increased thrice faster when the economic downturn was
over (Roberts, 2003). However, research shows that it is more important to retain customers compared
to chasing new customers. Thus, in an economic crisis it is of great importance to retain the loyal
customers, since they are the most profitable and therefore marketing mainly should target the loyal
customers (Grundey, 2009). 2.2 Marketing Innovation Another marketing strategy that has proven to be
successful in times of crisis is the adoption of marketing innovation (Naidoo, 2010). Marketing
innovation is a tool that assists the developing and sustaining of competitive advantage (Anning-Dorson
et al. 2018). Market innovation can be described as the application of a new marketing strategy with
changes in product, pricing strategy, packaging style and product placement (Karlsson & Tavassoli, 2016;
Hussain et al. 2020). It can also be described as the creation of value by using relevant information and
capabilities to implement an idea for a new marketing strategy or improvements in an existing
marketing strategy (Varadarajan, 2018). Marketing innovation includes innovations such as distribution
innovation, promotion innovation and pricing innovation (Varadarajan, 2018). The objective with
marketing innovation is to better meet customer needs, give the company’s product a new position in
the market or open up new markets (Karlsson & Tavassoli, 2016; Medrano & Olarte-Pascual, 2016;
Widjojo et al. 2020). Empirical studies have shown that successful marketing innovation helps
companies to gain or sustain a competitive edge (Line & Runyan, 2012; Scaglione et al. 2009). An
empirical study by Falk (2013) shows that firms that focus on marketing innovation during a crisis have a
higher chance of surviving. 9 2.2.1 Marketing Innovation in Times of Crisis An economic crisis or
recession will most definitely create changes in the business activity and strategies for the organization
(Gümüş, Geçti, F, & Yılmaz, 2019). Since product innovation tends to be too expensive in the midst of an
economic crisis the focus therefore shifts toward market factors instead, such as demand management
(Grewal & Tansuhaj, 2001). In an article related to COVID-19 it is highlighted how companies need to
figure out how the consumer’s needs have changed (Bartik et al. 2020). People’s habits are changing,
and millions of households are capsized and therefore firms constantly need to work with marketing
innovation to increase customer satisfaction and to stay competitive (Medrano & Olarte-Pascual, 2016;
Medrano et al. 2020). By employing a marketing innovation strategy, it is intended to shift the demand
for a firm's products or services from elastic to a more inelastic demand (i.e. less price sensitive
demand), by increasing the customer value and thus also the organization’s revenues (Naidoo, 2010;
Hussein, et al. 2020). 2.2.2 Marketing Innovation for SMEs in Times of Crisis Marketing innovation is
ideally suited for SMEs who usually have limited resources and if SMEs achieve competitive advantage it
increases the likelihood of surviving a crisis (Naidoo, 2010; Halpern, 2010). An explanation to why
marketing innovation is well suited for SMEs is that an economic crisis many times triggers a price war
(i.e. a course of intense competition with price reductions). Most of the time companies engaged in a
price war take severe damage, especially SMEs. The reason for that is the small margins for SMEs
compared to big firms (Grundey, 2009). However, an adoption of a marketing innovation strategy
facilitates the firm's ability to differentiate and to secure a cost leadership. Derived from the
differentiation and cost leadership comes competitive advantage, which in turn is a major contributing
factor to SMEs firm’s survival in a crisis (Naidoo, 2010). In addition to that, SMEs have a vital role in
every economy as companies of such character are said to be the central driving forces of economic
growth, employment and innovation (Kossyva et al. 2015). Furthermore, because of the organizational
size, SMEs are considered being more adjustable and flexible than bigger companies when it comes to
introducing new products or services in an economic crisis (Kossyva et al. 2015; Naidoo, 2010). That is
also the case for companies that are not a part of a group of companies, since those companies do not
have to adjust to the parent company and therefore remain more flexible (Medrano et al., 2016). 10
2.2.3 Marketing Innovation in Hospitality Industry In times of crisis empirical results from a previous
study proves that new technologies, foremost the rise of the internet have had a great impact on the
tourist industry and hotel industry marketing innovations (Campo et al. 2014; Nicolau & Santa-María,
2013). The rise of the internet has given firms access, at a low cost, to an indefinite number of
consumers (Consiglio et al. 2018; Campo et al. 2014). Firms web pages and social media activity are key
elements for promoting services and products. In addition, the website use as sales channels reduces
the use of intermediaries, making it cheaper for the hotel company and easier for the customer to reach
information about the company or a product (Hjalager, 2010; Consiglio et al. 2018; Campo et al. 2014)
These marketing innovations derived from new technologies has proved to be an important element for
firms in the hospitality industry to stay competitive and to increase revenues (Scaglione et al. 2009).
Marketing innovation activities positively influences the economic profitability for firms in the hospitality
industry (Nieves & Diaz-Meneses, 2016). Also, empirical results from a study by Campo et al. (2014)
proved that hotels' ability to innovate during the financial crisis in 2008 allowed an increase in customer
service quality, satisfaction level and greater value offer. These three terms are key elements in order to
sustain and gain competitive advantage and financial profits (Medrano et al. 2016; Anning-Dorson et al.
2018). Due to that, firms that on purpose limited the investments on marketing innovation activities
when facing a crisis, should have reviewed their decision and done so instead, implementing marketing
innovation activities such as new process bettering’s and new services (Campo et al. 2014). Results from
an empirical study reveals that companies in the hospitality industry primarily should focus on
marketing innovation in order to survive in times of crisis. The results proved that firms in the industry
mainly focus on applying innovative marketing ideas, followed by better pricing along with
improvements in promotional activities (Pappas, 2015). In a paper that investigated how marketers in
the hotel business managed the SARS epidemic in Toronto (where around 75 percent of the businesses
in the hospitality sector experienced a downturn), the most common strategy way to rely on
government assistance (Jayawardena et al., 2008). Among the strategies where the company actually
took action the most common tactic was to offer price reductions in order to attract customers.
However, a few hotels offered their rooms for other purposes than accommodation, like renting their
available rooms as offices instead (Jayawardena et al., 2008). Solutions like the one mentioned can be
effective for 11 companies in a crisis instead of the common price reductions since price reductions do
not increase the profit in the same proportion. In order to stay profitable in the long-term companies
instead need to retain the spending on marketing (Köksal & Özgul, 2007). Since marketing innovation
suits the spending ability of SMEs and is defined as improvements and necessary changes in the
marketing mix. The tools available to create increased customer value are; place promotion, product
and price (Naidoo, 2010; Köksal & Özgul, 2007). 2.3 The Marketing Mix The marketing mix can be
described as the set of activities the organization applies to promote its product or brand in the market.
Another description could be as the mixture of different marketing decisions that the organization uses
to market its products or services. Which could be used to innovate the organization out of the impacts
of an economic crisis (Singh, 2012). It is a dynamic and innovative model thus it changes according to the
changes in preferences of the consumer, market competition, market situation and government policies
(Singh, 2012). Managers in the organization need to evaluate the traditional marketing mix model when
a crisis strikes by reshaping it with tools in the marketing mix for marketing innovation (Naidoo, 2010). It
is essential to create and apply an appropriate marketing mix of the elements in it to gain competitive
advantage (Singh, 2012). To get the best profitable outcome from marketing activities, the marketing
mix should adapt according to the market condition and how the outside world is changing (Singh,
2012). The four elements of the marketing mix: product, price, place and promotion are presented in
figure 3 down below. 12 Figure 3 - The Marketing Mix Source: Adapted from Singh (2012) 2.3.1 Product
A product is what is actually exchanged. A product is a package of complex advantages that please the
customer. The customer gives money for the product or the service but what the customer actually pays
for is the experience the product brings and the level of satisfaction that it has. Hence, the product or
service needs to be accurate and suitable in order to match the need of the customers (Salman et al.
2017). That firms that focus on innovation are more likely to survive is commonly known (Falk, 2013).
However, new product innovation tends to be expensive and therefore it might not be a viable tool for
companies in order to survive a crisis, especially not SMEs (Grewal & Tansuhaj, 2001). Instead it is
suggested that innovation in a crisis focuses on the other components of the marketing mix, i.e. price,
place and promotion (Hamdani & Wirawan, 2012). The Marketing Mix Product Price Place Promotion 13
2.3.2 Price What the customer must pay to receive the offered product is the price. The price of a
product or service relies on numerous factors and therefore the price is continuously changing. Due to
that, the price should be dynamic so that it can adapt to changes over periods of time (Singh, 2012). The
prices element in the marketing mix model is ruled by what is being debited for what it takes to perform
the service or buying the product. Pricing does not only influence the revenues for the organization, it
also influences the buyer perceptions regarding the quality of the product or service. Therefore, pricing
is vital to the organization’s daily business operations (Salman et al. 2017). Hence, an economic crisis
obligates companies to adjust the pricing, mostly downwards with price reductions. The objective with
price reductions is to increase sales volume in the short term. It is a course of action that could damage
the organization in the long run, primarily by receiving lower revenues from reduced prices, but it could
also damage the image of the brand and consumers might not accept returning to the normal price
when the crisis fades (Köksal & Özgul, 2007). Ang, Leong and Kotler (2000) proposes two pricing
approaches when in an economic crisis: Use the initial price for quality products and services or offer
quality products to a reduced price (Ang et al. 2000). Yet, if the organization does not adopt pricing
strategies, such as premium pricing or lower pricing and does not adapt to the consumers purchasing
behavior during an economic crisis, the organization will probably be deprived of customers and struggle
to survive (Raggio & Leone, 2009). However, the selection of price during a crisis should be combined
with other marketing operations involving the three other P’s in the marketing mix (Köksal & Özgul,
2007). 2.3.3 Place The place element in the marketing mix model is mainly about the distribution
channel methods that the organization uses in order to support the facilities to its market in a way that
satisfies customer expectations (Salman et al. 2017). It also includes warehouse buildings and mode of
transportation since the place element is a process in which products and services are transported from
the organization to the customer (Singh, 2012). Mode of transportation (i.e. distribution) has a large
impact on the organization’s profitability. Hence, the organization should have a solid supply chain and
logistics management when it comes to distribution (Singh, 2012). 14 In a study that examined how the
hospitality sector dealt with an economic crisis the result was the same as in most other industries,
which is that companies put a lot of effort in trying to reduce the costs (Pappas, 2015). In turn that is
also in line with how the “place” element of the marketing mix is typically dealt with. Since a suggested
solution for how to deal with a crisis is to reallocate resources and focus on improving the effectiveness
in the distribution channel in order to reduce costs (Kotler & Armstrong, 2006). The distribution has a
vital role in every business model. However, when a firm has to reallocate its resources it might not be
prioritized, when firms instead emphasize other parts of the business that are more directly connected
to profitability (Chesbrough, 2010; Kotler & Armstrong, 2006). 2.3.4 Promotion Promotion involves all
the elements that the organization can use to enlighten the customers within the market with
information on its product or service offering and includes advertising, public relations, personal selling,
direct marketing, publicity, sales promotional efforts and interactive channels (Salman et al. 2017; Singh,
2012). These previously described features are so-called promotion activities whose purpose is to
communicate and persuade the selected market to purchase the organization’s product or service
(Singh, 2012). The promotion element supports the organization when it comes to presenting the
product or service to the customer in an efficient way and encourages the customer to buy the
company's products or services (Salman et al. 2017). The decisions the organization makes regarding
promotion tactics during a crisis are vital. By having the same degree of advertising or increasing the
degree of advertising increases sales, market share and revenue after and during an economic downturn
(Köksal & Özgul, 2007). Also, the customer buys more rationally with diminishing spending power during
a crisis. Thus, advertising should highlight the importance of safety, durability and reliability, rather than
a representable portrait of the brand (Köksal & Özgul, 2007). 15 2.4 Frame of reference In the frame of
reference, the most important theories from the literature review (collected from previous research)
will be summarized, in order to guide the collection of data. Since the collected data will be compared to
previous research in the field, the frame of reference also works as a foundation to guide the analysis of
the collected data, and in the end also guide the fulfillment of the purpose of this thesis: “to examine
how SMEs in the hospitality industry in Norrbotten have been affected and how they are changing their
way of marketing in order to survive in the economic crisis that is derived from the COVID-19 pandemic”
Hence, the reason why this frame of reference highlights previous research within the field of economic
crisis, marketing innovation and the marketing mix. The subjects that are emphasized in the frame of
reference will ultimately guide the data collection and data analysis into answering the research
questions of this thesis, which reads: RQ1: How have SMEs in Norrbotten been affected by the economic
crisis derived from the coronavirus outbreak? and RQ2: How can SMEs in Norrbotten adapt a new way
of marketing in times of crisis? The purpose of the first research question is to examine how SMEs in the
hospitality sector have been affected by the COVID-19 pandemic and the following economic crisis.
Since every crisis is as Grewal and Tansuhaj (2001) mentioned; more or less unique. The purpose of this
research question is to examine how this crisis differs or what similarities it has in comparison to what
characterizes a crisis according to previous literature. According to Köksal and Özgul (2007) a common
consequence of an economic crisis is a reduction in demand, which in turn is a consequence of
customers' changed behavior during a crisis. The changed customer behavior is according to Sharma and
Sonwalkar (2013) a response to the fear of losing the job and therefore customers have a tendency of
prioritizing saving instead of spending money. Another reason for a changed behavior during a crisis is
found among those who actually lost their jobs and therefore changed their way of consuming (Mogaji,
2020). 16 However, a reduced demand is not the only thing that causes financial suffering for firms in a
crisis, it could also be brought by disruptions in the supply chain (Ghandour & Benwell, 2012). Both
supply disruptions and a reduced demand leads to decreased production and demand shortage which in
turn causes unemployment or even forces companies to shut down completely (Guerrieri et al., 2020;
Köksal & Özgul, 2007). According to studies made by Yazdanfar and Öhman (2018), Vargo and Seville
(2011) and Quintiliani (2017) SMEs are among those who suffer the most during a crisis. Bourletidis and
Triantafyllopoulos (2014) mentions SMEs in general, high dependence on loaned money and overall
limited financial resources as the main contributors to their vulnerability. In order to survive a crisis
Naidoo (2010) and Falk (2013) suggests that companies should use marketing innovation as a marketing
strategy. Hence the reason why the second research questions main purpose is to see if SMEs in the
hospitality sector in Norrbotten have adapted their marketing according to what is suggested in previous
research, i.e. marketing innovation. Marketing innovation can be described as the improvements that
can be made in the marketing mix: product, price, place, promotion (Medrano & Olarte-Pascual;
Karlsson & Tavassoli, 2016). Empirical evidence from a research by Naidoo (2010) proved that marketing
innovation is a suitable solution for cash-strapped firms (mainly SMEs) when facing a crisis. In addition to
Naidoo’s (2010) research, Line and Runyan (2012) and Scaglione et al. (2009) research suggested that
successful marketing innovation helps firms to keep the competitiveness. To maintain competitiveness
in times of crisis, Hamadan and Wirawan (2012) suggested that innovation activities mainly should focus
on the dimensions, place, price and promotion, since product innovation is relatively expensive (Grewal
& Tansuhaj, 2001). For instance, Köksal and Özgul (2007) mentioned that the most common pricing
strategy when in an economic crisis is to lower the prices. However, Köksal and Özgul (2007) also
underline the danger with lowering the prices too much, as it can damage the brand image. Hence, the
pricing strategy should be dynamic, which Singh (2012) suggested. Kotler and Armstrong (2006)
suggested cost effective distribution channels, which Salman et al. (2017) explained as fundamental
since the company’s facility usually does not change location. One more suggestion is mentioned by
Srinivasan & Lilien (2009) regarding promotion is the importance of marketing during an economic crisis.
Alananzeh et al. (2018) supports Srinivasan & Lilien (2009) statement, which Grundey (2009) meant is
aimed at the most frequent and loyal customers, not new customer segments. Based on 17 the
knowledge and theories from previous studies mentioned above, a frame of reference was developed,
which can be seen in table 1 below