Submitted by: Ghanendra Singh Rana 641 MBE(F)

The project How marketing changes during recession? is basically a study to find out how the promotional activities of the companies get affected due to recession, how companies cope with recession and whether the steps taken by companies to avoid the ill effects of recession really works?

To examine associations between company earnings and marketing communication (i.e., advertising and promotion) expenditures during recessions vis a vis sales of three companies 1) HUL, 2) P&G, 3) Nestle, were studied for a period that is 2002-2012 which includes the recessionary period . Further to see the consumer/customers side a FGD was conducted based on which some hypothesis were formulated and proofed by conducting a survey.

Hypothesis 1: Promotional activities reinforce the brand value of a product during the recession times. Hypothesis 2: Purchase decision of consumers changes during the recession times. Hypothesis 3: Promotional activities during the recession times impact the consumer buying decision in a positive way. Hypothesis 4: The less promotional activities of a brand confuse the customer about the brand value of the product.

Millward Browns in May 2008 written an article on Marketing in Recession: To Spend or Not To Spend? It suggests that increasing marketing spend during times of recession can produce long term gains that more than compensate for the investment required. The explanation of this phenomenon lies in the established relationship between share of voice (SOV) and share of market (SOM). When a brands share of voice is greater than its share of market, it is likely to grow its market share in the coming year Harvard Business School professor John Quelch written an article marketing your way through a recession in which it writes that in a recession, consumers become value oriented, distributors are concerned about cash, and employees worry about their jobs. But a downturn is no time to stop spending on marketing. The key, is to understand how the needs of your customers and partners change, and adapt your strategies to the new reality.

$90,000

$3,000

$80,000
$2,500 $70,000 $60,000 $50,000 $1,500 $40,000 $2,000

$30,000
$20,000

$1,000

$500 $10,000 $0 2002 2003 2004 2005 2006 2007 2008 2009 toatal sales (in millions) Adv budget (in Lakh) $0 2010

The financial values of P&G suggests the following things:

There is a steady increase in the advertising budget over the years except during 2005 and 2008-2009. The sales vis a visa advertising budget is always increasing at a rapid rate except in the period 2008-2010, where sales takes a dip vis a vis less expenditure on the advertising. Though the sales exactly follows the path of advertising budget , but in 2010 when the advertising budget was increased , the sales didnt increase which shows that the link between advertising and promotion spending increases and future earnings is stronger and more immediate during recessions. Decreases in advertising and promotion spending during recessions have a delayed relationship with future earnings.

70,000,000

3,500,000

60,000,000

3,000,000

50,000,000

2,500,000

40,000,000

2,000,000

30,000,000

1,500,000

20,000,000

1,000,000

10,000,000

500,000

0 2002

2003

2004

2005 toatal sales (Rs in '000)

2006

2007

2008

2009

0 2010

Advt. budget (Rs in '000)

The financial value of NESTLE suggests the following things:

There is a steady increase in the advertising budget over the years except during 2004 and 2006-2008. The sales and advertising budget is always increasing at a rapid rate from 2004. Increased in advertising budget resulting in increased in sales.

During recession your purchase decision

8%

18%

74%

a) b) c)

Do not change I become more conscious in what I buy I become less conscious in what I buy

In the recessionary times, if there are brand A & B available in the market for satisfying my need, brand A is doing aggressive marketing and brand B is not doing any promotion at all, I will choose

20% 10% 70%

a)

Brand A

b)

Brand B

c)

Whatever I was buying earlier

My child demands the product which he/she recently saw in advertisement

4%

16%

80%

a)

Yes

b)

No

c)

Cant say

My child demands the product which he/she recently saw in advertisement

4%

16%

80%

a)

Yes

b)

No

c)

Cant say

During recession, I feel more confident in buying a product which I saw in advertisements recently

24%

12% 64%

a)

Yes

b)

No

c)

Cant say

I prefer to buy a product which gives complementary samples with them or give rebate

4%

12%

84%

a)

Yes

b)

No

c)

Cant say

I used to buy brand A for ling time, but recently I didnt see any advertisements during the recession times
2% 8%

90%

a)

I feel good about it

b)

I feel confused

c)

Cant say

I discuss the recent advertisements of the products with my friend and we discuss which advertisement is good and we must try the product.
14% 8%

78%

a)

Yes

b)

No

c)

Cant say

Analyzing the relationship of advertising budget and sales of three FMCG companies and by taking view of consumers , we can conclude that if companies cut down their advertisement budget during the recession time period it affects the sales of the companies. And the companies who increased their budget during recession, it will give them positive response in terms of sales & brand loyalty. It shows the link between advertising and promotion spending increases and future earnings is stronger and more immediate during recessions. Decreases in advertising and promotion spending during recessions have a delayed relationship with future earnings