Marketing in a Difficult Economic

Environment
Summary
A difficult Economic time is one of the Environmental shocks in marketing. It
appears suddenly and produces dramatic changes in market positions: the
sharp adjustment in the housing market from its 2006 peak, job losses and
an increase in precautionary saving led to a decline in private consumption.
There is a large drop in real GDP in Ireland in 2009 followed by a smaller
decline in 2010, before positive growth resumes in 2011. Inflation should
return to a low positive rate in 2010.
Faced with recession, rising unemployment, falling housing markets and
difficulty in obtaining credit, consumers are cutting spending.
Job losses will continue for some time. A gradual stabilisation in
employment is likely towards the end of 2010 and into 2011 as the recovery
takes hold.
The retail sales index has reported record losses across all sectors, further
compounded by the collapse of the motor trade and rise in cross border
shopping.
Consumers have less to spend, are focusing on non – discretionary
purchases, are seeking value and convenience, and are staying closer to
home.
Some retailers try to attract consumers giving them discounts etc.
Unfortunately, retail sales fell any way.
Car sales went down in Ireland when compared with 2008, down to 60% year
on year.
Payments on credit cards have exceeded indebtedness. Increase in the
number of consumers holding saving accounts.
To sum up, businesses have to take recession positively and think different
way about marketing.

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Introduction

For the purpose of this assignment I will be analysing and discussing

Marketing in difficult Economic times. I will employ the use of information
from textbooks, my own knowledge and other sources of Marketing in
difficult Economic times.

Doyle (1994: 39) defines Marketing Management as

the process of identifying target markets, researching the needs of customers in
these markets and then developing the product, price, promotion and distribution
to create exchanges that satisfy the objectives of the organisation’s stakeholders.

Doyle (1994: 90) states

when sudden environmental changes occur they can trigger major developments in
markets. These shocks are often termed ‘strategic windows’ or ‘paradigm shifts’.

One of these strategic windows is Environmental shock.

Doyle (1994:91) defines Environmental shocks as

sudden, unpredicted changes in commodity prices, currency alignments, interest
rates or political events can produce dramatic changes in market positions

A difficult Economic time is Environmental shocks in marketing as well. It

appears suddenly and produces dramatic changes in market positions.

According to http://ec.europa.eu/ireland/
after having enjoyed well over a decade of strong growth, Ireland has been
particularly hard hit by the current crisis and faces significant adjustment
challenges. The sharp adjustment in the housing market from its 2006 peak spread
to the wider economy and has been amplified by the financial crisis (the weight of
the financial services sector is high) and by the recession in Ireland’s main trading
partners (Euro area, US and UK).

The most recent economic data for Ireland is indicating that

decelerating disposable income growth, also reflecting job losses and an increase in
precautionary saving led to a decline in private consumption. On the back of
declining imports, the external sector is estimated to have made a significant

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 positive contribution to growth despite slightly declining exports of goods and
services.

Every sector of business, including hospitality, faces momentous challenges

stemming from the global recession. Occupancy is suffering, and all
indications are that the deterioration will persist for quite some time. It is
the worst recession since 1980’s with an upturn not beginning until late
2009. Some predict it may take longer.
In difficult economic times, it’s more important than ever to win every deal,
hold on to your customers and take control of your business. But you also
need to keep your costs and risks to a minimum.

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Economic Environment

Ireland currently faces a severe economic downturn; GDP fell in real terms
by over 6% in 2009 and positive growth not projected until 2012.
The Irish economy entered into recession in the first half of 2008 and with a
sharp fall in the fourth quarter. Low economic activity and further
employment losses should imply a further decline in average wages in 2010.
Inflation fell strongly compared with last year. Inflation should return to a
low positive rate in 2010.

According to www.mii.ie/en/rel/269/
consumers have reacted cautiously to the ongoing economic problems by increasing
savings and curtailing expenditure.

The ongoing downsizing of the housing market and the contraction in overall
activity reflected a large decline in employment in 2009.

Economic Growth Rate

Nowadays, there is a great diversity of economic growth in the world.

Clearly economic growth is a complex interaction of different factors, such
as quality of governance, technological progress, population growth, human
capital stock market, inflation etc.
In Ireland a large drop in real GDP is in 2009 followed by a smaller decline in
2010, before positive growth resumes in 2011.

According to http://www.charteredaccountants.ie/

at almost 60% of total Gross National Product, consumer spending is a hugely

important determinant of Irish economic growth. It is made up of two components,
spending on goods and spending on services, each of which account for roughly half
of the total.

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Consumer Confidence

It appears that there are plenty of businesses with whom to market your
products. However, consumers have cut their spending. Consumers today
are seeking bargains more than ever of the lack of spending Euros.
Therefore, they are not spending big amounts of money they were
accustomed to spending in the past. Most of consumers are looking for value
rather than luxury. Saving money and buying products that last longer. In a
crisis people return to brands they know and trust – and is a key thing as
well as value for money.
Faced with recession, rising unemployment, falling housing markets and
difficulty in obtaining credit, consumers are cutting spending. This will have
a dampening effect on domestic output and exports.

Employment

The huge number of layoffs in building has been augmented by widespread

job losses in the financial and business service sector, retailing and
indigenous manufacturing. We expect the unemployment rate to reach 8.5%
be December 2009.

According to European Economic Forecast, autumn 2009

the ongoing downsizing of the housing market and the contraction in overall activity
are reflected in a large decline in employment in 2009.

Job losses will continue for some time, which will influence marketing to
remain weak. An easing trend in unemployment growth and a drop in labour
supply amid the first indications of the outflow of migrants from Ireland. A
rise in personal savings, influenced by households’ negative employment
expectations, this shows that 2009-year is the strongest decline in real
private consumption expenditure in over 25 years. A gradual stabilisation in

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employment is likely towards the end of 2010 and into 2011 as the recovery
takes hold.

Consumer market

Consumers are going out to eat less then they used to before the economic
crisis. Even if they do go out to eat they usually choose cheaper restaurants.
Items such as DVD’s, food, beverages, books and games etc are expected to
sell well as it is a cheap entertainment at home.
Consumers are more likely to look for value rather than luxury.

http://www.smurfitschool.ie says that

according to the monitor, the retail sales index has reported record losses across all
sectors, further compounded by the collapse of the motor trade and rise in cross
border shopping. Retail sales value, excluding the motor trade, decreased by 43.9%
for the year ending May 2009. One of the hardest hit sectors in value terms has
been the motor trade down 42.5% for the year to the end of May; household
equipment down 27%, clothing and footwear down 26.2%, department stores down
17.6%, fuel down 21.5%, and newspapers/stationary down 14.3%. The report shows
bar sales have held up better than might be expected with a decline of 11.4% in
volume and 9.8% in value.

Consumers will continue to shift their gift buying online this holiday season
because of convenience, timesavings, and price as consumers “trade down”
in price. Given the slow economy, experts predict a weak holiday shopping
season. Consumers have less to spend, are focusing on non-discretionary
purchases, are seeking value and convenience, and are staying closer to
home. Still, some retailers are expected to do well including mass-
merchandise discount stores.

Retail sales

Industry analysts see challenges facing the following retail categories:

http://www.uwex.edu states that

apparel stores that sell upper-end clothing (often the preferred tenants for
downtowns) are suffering from reduced sales. Department stores will likely struggle
as shoppers cut back on discretionary spending.

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 Home improvement store sales are expected to decrease. However, some argue
that sales rebound as consumers spend money fixing up their homes instead of
buying new ones.
Electronics store sales are expected to decrease. Others see increases in sales in
products like flat screen TVs and home theater.
Toy store sales may suffer as parents may cut back on toys and games.
Office supply sales may decrease in relation to overall business spending.
While some retail categories are expected to see decreases, there are still
opportunities in other categories to capture increased spending by focusing on
value.
Mass merchandise discount and Euro stores are expected to do well as consumers
“trade down” in price.

Consumers have less to spend because of economic downturn; in this case,

some retailers try to attract consumers giving to them discounts, special
offers and some other good deals. This actually works for them because this
is what people are looking for in these hard days. Unfortunately, despite all
factors, retail sales fell, however, took nearly the same value comparing to
2007 year.

Car Sales

The number of new cars sold in Ireland has always been one of the main
measures to the status of the economy. Unfortunately, car sales went down
in Ireland when compared with 2008, down to 60% year on year.
Figures from the motor industry show that car sales are down 39% for June
2009 when compared with the same month in 2008. While June figures
appear to show a much smaller drop in car sales figures when compared
with the rest of the year, June 2008 had experienced low levels of sales.
On the other hand, there are more increased sales in second hand cars.
Also, people are more fixing cars to keep them going instead of replacing
them by new ones.

Personal Debt

Households became tremendously indebted. Household debt to disposable

income is now 175%, up from 77% in 2001. For example, mortgage debt
interest service has soared from €3.1bn in 2005 to €8.4bn this year.

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Including interest and principal repayments, total household debt service
costs will eat up 23% of disposable income this year versus 13% in 2001.
“Credit card debt decreased slightly, by 0.8% between April and May 2009.
This followed a small increase of 1.8% between March and April although the
latter may have been caused by an increase in interest charges rather than
any change in actual spending. However, payments on credit cards have
exceeded indebtedness in every month of 2009 to date with the net
reduction in indebtedness of €23 million in May” according to www.mii.ie.

Personal Savings

A major survey looking into the future of Ireland’s personal wealth has
found that, even in these difficult times, there has been a steady increase
in the number of consumers holding savings accounts. People put money
aside because they feel uncertain about the future. “It is clear that Irish
consumers became more aware of the importance of savings, with almost
half of Irish adults intending to save on a monthly basis – despite the current
conditions. Of those, the intension is to save on average €225 per month”
according to www.halifax.ie
This has a very big impact on Marketing as consumers became cautious
about spending money on unnecessary goods or services.

Irish Economic Recovery

“Export – led growth remains the most likely driver of an Irish recovery”
states Bank of Ireland Economic Research Unit.
Irish exports did and still doing very well despite economic downturn. The
performance of Irish exports is very good compared with the Euro zone.
“Recovery in the global economy should be supportive of Irish export
performance. The global recession appears to be over and Ireland’s main
trading partners are expected to return to growth by the end of 2009. Irish
exports should pick up in the coming months before expanding more strongly
in 2010” says Bank of Ireland Economic Research Unit.

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Conclusions

All in all, everyone is going through the same transition period together.
Because the downturn is equally shared throughout many industry sectors
business people are seeking new ways and new partners to market products
and services. They may be very receptive to any potential new sources of
revenue during this time, so it may be a good time to approach with good
join-marketing ideas.
It is highly recommended to provide all benefits to customers like discounts
and gifts.
For any business to succeed, they should have certain key elements like
well-known brand name, multiple products, targeted advertising, after-sales
service, and support. These key elements are vital for any business to
succeed. Any missing elements will have an adverse effect on your cost-
affective targeting.
Businesses have to take recession positively, businesses have to study it
well, and apply marketing and advertising strategies accordingly without
compromising or downgrading marketing and advertising costs. The key
elements like well-known brand name, multiple products, targeted
advertising, after-sales service, and support are to be incorporated into
business in order to succeed.
Every Euro spent on marketing whether online or offline gives to businesses
much more during a recession if they apply their resources in the right way,
like their ability to get the maximum from their publisher with their
negotiating skills. If businesses take it positively, this is a god-sent
opportunity for a marketer to get more return on business investment on
marketing and advertising of products.
Marketing is a revenue generator, not simply an expense, so organizations
should be budgeting to market MORE in a down economy, and to market
smartly as much as possible.
Difficult economic times call for different ways of thinking about marketing.

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References

Books:

Doyle, P. (1994) Marketing Management & Strategy, Hertfordshire: Prentice

Hall Europe.

Websites:

http://ec.europa.eu/ireland/press_office/news_of_the_day/autumn-
economic-forecasts_en.htm [accessed 17 November 2009]

www.mii.ie/en/rel/269/ [accessed 17 November 2009]

http://www.charteredaccountants.ie/General/News-and-
Events/News1/2009/August-/Ireland---Ulster-Bank-publishes-August-
economic-update/ [accessed 17 November 2009]

http://www.smurfitschool.ie/aboutsmurfit/news/title,37627,en.html
[accessed 17 November 2009]

http://www.uwex.edu [accessed 17 November 2009]

http://www.halifax.ie/index.jsp?p=109&n=770&a=11069 [accessed 17
November 2009]

http://www.bankofireland.ie/html/gws/includes/corporate/pdfs/global_m
arkets/irish_economy_overview_041109.pdf

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