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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
economy. local job markets. S.(2) Other statistics often cited to indicate the economic climate in the U. it is possible that a manufacturing-led recession in the GNP will have little or no impact on a company in the service sector. The LEIs index is a composite of 11 variables said to indicate the overall trend of the U. consumer spending--accounting for two-thirds of the GNP--declines. "Spending for trade promotions reached a record level last year (1990) as marketers adjusted their budgets because of recession. the U. and perceptions about buying big-ticket durable goods. as well as numerous reports by the economic departments of major banks. and a recessionary climate results. According to Miller (1991. include the results of monthly surveys of the Association of Purchasing Managers and the Blue Chip Indicators. It is important. Furthermore. their own financial condition. public. it is possible that these indicators are irrelevant to many small and large companies or even regions. 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.S. Department of Commerce gathers and publishes two highly watched statistical data: the GNP and the LEIs. such as the trade promotion companies which have been thriving since 1990. The Survey Research Center's consumer sentiment index (CSI) "reflects consumer attitudes toward the economy. it is critically important that marketing managers make sure that the economic environment facing their company is indeed one of recession.S. the computing service of which has been growing rapidly because of the recession (Hayes 1991 When it comes to small business. but their use on a company level may be misleading. Thus. In view of this. the existence of a recession is often determined on a national level by federal agencies and business and economic research organizations.related study. the relationship between the economic environment and business strategy is even more significant. to note that not only are these statistics different.(1) Customarily.S. Since the very nature of many small companies is to . The LEIs include indicators such as orders for plant and equipment and claims on unemployment insurance. and their own financial conditions. 6). The GNP is the total monetary value of the "goods and services produced and consumed in the private." The Conference Board's consumer confidence index (CCI) "reflects consumers' attitudes toward the economy. 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. 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 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. Similarly. however." Another example is Electronic Data Systems. an economic recession exists when the GNP declines for two consecutive quarters and/or when the LEIs decline for three consecutive months." When each of these turns negative in comparison to past months. Therefore. However. domestic and international sectors of the economy" and is therefore "the broadest indicator of economic output and growth" (Guide to Economic Indicators 1990). For example. recession often means growth to many companies. economy. Surveys of consumer sentiments measure consumer economic outlook as well as plans to buy specific products such as cars and houses.
however. real estate. because the different regions may also be interdependent. even small changes in the economic environment and the market niche tend to have far-reaching effects. Larger companies usually have more market power. is undergoing a broad retrenchment. Sebastian (1989) reports that a "rolling recession" is behind regional economic differences in the U. much as the manufacturing sector did in the past decade. The underlying theory behind sector-level statistics is that different economic sectors may be experiencing different. and temporary help. Nasar reports: "The United States service sector. Specifically. Rex (1990) reports that while the economy of Arizona continues to grow. Recently. Yet. Consistent with this. are facing the hardest times. the "entire New England region has slipped into recession. such a retrenchment characterizes service companies in retailing. The theory behind regional statistics is that different regions constitute different economic entities which might be experiencing different economic climates with different marketing needs. Also." According to Nasar. However. especially those in manufacturing.S.market niche. the hypotheses of this study are: . accounting. On the other hand. and with Pearlstein (1991) who views the recession in the financial services industry as an example of recessionary pressure in the service sector. may be squeezed out of business. Regional level. This discussion suggests the importance and relevance to marketing managers of economic indicators on a regional level. Company-size level. while Clark (1990) reports the existence of recessionary conditions in 34 states of the United States. This is consistent with Mandel (1991) who differentiates among different service industries. once heralded as a powerful engine for new jobs. Also. a small business might have a protected market niche which can help it in a recessionary climate while other small businesses. and what their resulting marketing strategies and actions are. a [UNREADABLE WORDS] may "roll" from one industry [UNREADABLE WORDS] Thus. Graven (1990) reports that mid-size companies. reporting growth in some and decline in others. Nasar (1991) and Stout (1990) report that the service industries are in recession. Different sized companies may be facing different economic environments depending on their target markets and market power. what the impact is. a recession may "roll" from one region to another. For example. On the other hand.. making the timing of adjustments to such a climate on the part of the marketing [UNREADABLE WORDS] especially important. which often can help them weather the impact of a weak economy. and company-size level. Feder (1991) reports that small businesses are especially affected by the recessionary economic environment. and Bowers (1991) reports how small businesses are reducing expenses. The goals of this study are to measure by sector and company size what a national recession means to marketing managers." Sector level. unable to borrow needed cash. economic climates at the same time. even opposite. financial services. service industries in general have been regarded as growth industries for many years. the textile industry has been growing (Oswald 1990). 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). economic sector level. while many manufacturing industries have been experiencing a recession.
Specifically.2]: The perceived impact of the economic environment of recession on marketing managers varies by sector.[H.sub. three samples of marketing managers in different sectors and different size companies were surveyed.1]: The subjective meaning of a national recession to marketing managers varies by small and large companies and by sector [H. [H. 500. The samples were drawn from small and growing companies and from the largest (in terms of total sales) industrial and service companies.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. 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. .sub. Total sales was the operational measure of the "company size" variable.sub.