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The relationship between marketing strategies and performance in an

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Article  in  Marketing Intelligence & Planning · June 2007

DOI: 10.1108/02634500710754574

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MIP
25,4
326
Received November 2005
Revised January 2007,
February 2007
Accepted February 2007
Marketing Intelligence & Planning
Vol. 25 No. 4, 2007
pp. 326-342
q Emerald Group Publishing Limited
0263-4503
DOI 10.1108/02634500710754574
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0263-4503.htm
The relationship between
marketing strategies and
performance in an economic crisis
Mehmet Haluk Köksal
Olayan School of Business, American University of Beirut, Lebanon, and
Engin Özgül
School of Economics and Business Administration,
Dokuz Eylül University, Izmir, Turkey
Abstract
Purpose – To examine how companies are affected by economic crises, to assess the effects of
marketing strategies on company performance in such conditions, and to identify those that can help
companies to maintain successful performance despite turbulence in the operational environment.
Design/methodology/approach – A structured questionnaire contained questions relating to
21 marketing strategies, associated with the elements of the marketing mix, plus a “general marketing
strategies” category. It was completed by 172 Turkish companies, drawn from a national frame of
1,000. Data were analysed by factor analysis, with performance criteria set as the dependent variable.
Results are reported for each of the elements of the marketing mix.
Findings – Companies that modify their strategies appropriately can maintain or improve their
performance in times of crisis. Conclusions and recommendations identify the strategic changes most
likely to achieve that outcome, measured mainly in terms of sales, market share and profitability.
Research limitations/implications – Subjective measures of performance were used because of
practical obstacles to obtaining objective financial data from the sample, which would have severely
reduced the response rate. Future studies should include such data in the analysis. They might also
cross-index findings by company size, industry sector and market scope, and take account of company
resources and skills.
Practical implications – The findings provide valuable insights for decision makers and
marketing planners in times of economic crisis, specifically in the Turkish context but potentially in
general.
Originality/value – Adds a specific focus on marketing strategies to existing studies of general
measures taken by companies during economic crises.
Keywords Economic cycles, Marketing strategy, Marketing mix, Company performance, Turkey
Paper type Research paper
Introduction
Since, the objective of this study is to draw conclusions about the effect on corporate
and marketing performance of the marketing strategies pursued by Turkish
companies in the wake of the twin economic crisis of 2000 and 2001, it will be helpful to
begin with a brief history.
The Economic Programme of January 1980, launched Turkey on a course of
structural change, adopting an export-led development strategy in place of import
substitution. Over the last two decades, many positive attempts have been taken
towards a market economy. These include the free-market determination of exchange
and interest rates, the development of a financial market, the lowering of barriers to Marketing
foreign direct investment and the liberalizing of import and export regimes (Utkulu, strategies and
2001, p. 20). Although some were successful to some extent, and the Turkish economy
achieved a significant growth rate, the country has experienced three major economic performance
crises since the beginning of the 1980s.
The most recent erupted twice within three months: in November 2000 and
February 2001. Among many causes, the main reasons were the “crawling-peg” 327
system, which caused a further deterioration in the country’s current account deficit,
the absence of a solid banking system, and the continuous postponement of economic
reforms by successive governments (Örnek and Taş 2001, pp. 241-43; Acar, 2002, p. 23).
The crisis gained momentum with portfolio losses and liquidity problems for some
banks. The Central Bank provoked the flight of excessive amounts of money abroad
when it decided to transfer resources to the banking sector in order to lessen the effects
of the developing crisis in the financial markets, thereby giving the impression of
abandoning the current economic programme and the “anchor” system then being
practised. The interest rate started to climb, and a fierce dispute between the president
and prime minister shook any remaining confidence in the government and its
economic programme. This led to the unavoidable imposition of a floating exchange
rate system, and the dropping of the exchange-rate anchor (Gorvett, 2001, pp. 31-2).
The twin crises were the inevitable consequence.
Such a severe interruption to trade and the economy as a whole prompted a major
strategy re-think amongst the country’s businesses. Survival depended on being able
to implement radical changes in line with the new market conditions. Some strategic
initiatives were more successful than others, and some failed altogether.
This paper proceeds with a review of the literature and a statement of the
research questions, followed by the methodology, the findings, and conclusions and
recommendations.

Literature review
Economic crises hit consumers psychologically as well as economically. During such
times, they say that they feel less secure in their employment and argue more about
financial matters; they feel the need to work more just to maintain their lifestyle, and
that they no longer find any enjoyment in being a consumer (Shama, 1978). Consumers
also adapt their shopping behaviour and habits, to be able to adjust to the changing
economic conditions. Studies reported in the literature show how consumers affected
by crises in Asia and South America made adjustments accordingly (Ang, 2001a, b;
Ang et al., 2000; Zurawicki and Braidot, 2005).
Lessons learned from the past 25 years show that companies are also affected in
many different ways by economic crises. Some are forced to close down and others to
drop their production capacity because of insufficient consumer demand for their
products and services combined with fierce competition in the marketplace. Along with
the economic crisis, input prices go up and result in higher costs for companies, which
inevitably increase their prices to customers. All this negatively affects their
competitiveness in the marketplace. Companies are also forced to lay off some of their
personnel, and reduce wages, posing considerable managerial challenges (Zehir and
Savi, 2004, pp. 346-47). Managers are furthermore urged to delay or abandon
investment projects.
MIP Companies react to these changes in the marketplace by taking the appropriate
25,4 measures to adjust their corporate behaviour, as consumers adapt their consumption
behaviour. The best-known general measures include reducing costs, cutting
production, reducing investment, entering foreign markets, working more with
equity capital, improving efficiency, re-structuring debt, these can have no positive
impact on company performance unless they increase sales (Zehir, 2005; Laitinen, 2000;
328 Uslu, 1999; Beaver and Ross, 1999; Pearce and Michael; 1997). Whilst some of the
studies in the literature emphasize the general company measures taken in an
economic crisis and identify the importance of strategies to improve sales figures, there
is a distinct lack of investigation with respect to marketing strategy changes.
An economic crisis requires some changes to be made in the general marketing
strategies and particularly to the four main elements of the marketing mix: product,
price, place and promotion. In terms of general strategy, companies need to withdraw
from those markets in which they are not the main players and concentrate their
resources on those in which they are strong (Ang et al., 2000, p. 109). Entering
profitable foreign markets is an important strategic option, especially for firms
adversely affected by recessions at home (Rao et al., 1988). During the Asian crisis that
erupted in mid-1997, companies skilled at finding new foreign markets did relatively
well, even if their products were non-branded commodities (Goad, 1999, p. 38).
However, this is not a marketing strategy that can be accomplished immediately or
rapidly. It is suggested that increasing marketing expenditures, or at least maintaining
the same level as before the crisis, will increase company performance. According to a
study based on the PIMS database (Roberts, 2003, p. 33), those businesses that
increased marketing spending were not significantly less profitable during recession.
Furthermore, their profits increased dramatically faster once recovery had started,
unlike those of firms that had cut their marketing budget, whose profitability actually
fell despite the recovery. Furthermore, businesses that increased their marketing
budgets during a recession gained market share three times as quickly as those that
had cut them. The consensus, therefore, is that companies should plan their marketing
budgets for the long term and maintain spending in the short term, in order to survive
during the hard times and be profitable in the future.
It is said that the most basic company strategy related to product policy during
periods of crisis is to withdraw weak items from the market. Since, consumers place
emphasis on the durability of products at such times, characteristics such as economy,
durability, and functionality should be given high priority in the development of new
lines (Shama, 1981). It will further be advisable to allocate extra effort to research and
development, in support of new products (Williamson, 2001, p. 31). During recessions,
companies that spent proportionately more on R&D were found to have performed
significantly than others (Morbey and Dugal, 1992, p. 45). However, this should again
be seen as a long-term strategy. DeDee and Vorhies (1998, p. 57) found that an increase
in product development capabilities, and careful control over the types of R&D
expenditures, were positively correlated to the change in the return on common equity.
If long-term sales growth is the goal of a company, managers must avoid the
temptation to cut back R&D activities during a recession.
Shama (1978, p. 50) explained that an economic crisis forces a significant change in
the price decisions of companies, mostly in the direction of reductions. The rationale is
to increase sales volume in the short term, but this strategy can cause serious damage
to a company in the long run by lowering profitability. It could also harm the brand Marketing
image, and customers might resist moves to return to former price levels when the strategies and
crisis is over. Bennett (2005, p. 124) found that maintaining price stability did not have
any effect on company performance during cyclical fluctuations in the construction performance
industry in the UK. Ang et al. (2000, p. 113) suggest two quality strategies related to
pricing in conditions of crisis: to apply the same prices for higher quality products, or
to offer the same quality product at lower prices. In the light of these insights from the 329
literature, pricing strategy should be integrated with other marketing mix initiatives
during the period of the crisis.
The changes companies make in promotion strategies during a crisis are also of
great importance. It has been shown that those increasing or maintaining their level of
advertising will increase sales, income and market share during and after a recession
(Kim, 1992, p. 15; Werner, 1991, p. 29). DeDee and Vorhies (1998, p. 58) found that firms
responding by reducing sales staff and cutting advertising expenditure fared worse,
in terms of return on common equity, than those that had maintained or increased
their promotional efforts. Since, consumers can be expected to shop more rationally
when experiencing a decrease in their purchasing power during a crisis, advertising
campaigns should emphasise such rational motives as safety, reliability, and
durability, rather than image and status (Shrager, 1991, p. 5)
Other positive initiatives might be to increase the usage of print media, and to profit
from decreased sales time by delivering training programmes on changes in consumer
shopping behaviour. Allocating some of the budget to sales promotion techniques,
from which the consumer gains value immediately, can affect company performance
more positively than, for instance, increasing the terms and levels of customer credit.
Moreover, winning the confidence of consumers is of vital importance. Shama (1992,
p. 48) found that, during a period of stagflation in the former Yugoslavia, companies
had widened the responsibilities of their sales personnel to emphasise listening to
customer needs and responding to them. The conclusion is that more proactive
personal selling can build a better customer relationship in times of crisis.
Turning to the “place” element of the marketing mix, elimination of unprofitable
intermediaries in the distribution channel members and reallocation of scarce company
resources to the better-performing channel members is the most appropriate strategy
in crisis conditions. However, since decisions of this kind often demand long-term
commitments, they should be taken carefully (Kotler and Armstrong, 2006, p. 363).
Ang et al. (2000, p. 117) suggest that the company should choose the best channel and
direct their efforts to discount stores or wholesalers. The chosen alternative
distribution channels, by lowering operating costs and improving cooperate within the
channel, can clearly affect company performance positively.
Against this background, the study reported here addresses the following research
questions:
RQ1. What are the outcomes of a crisis that negatively affect company performance?
RQ2. What are the effects on performance of particular changes in general marketing
strategy during periods of economic crisis?
RQ3. What are the effects on performance of changes in product strategy during
periods of economic crisis?
MIP RQ4. What are the effects on performance of changes in pricing strategy during
25,4 periods of economic crisis, particularly in combination with other
marketing-mix initiatives, during periods of economic crisis?
RQ5. What are the effects on performance of changes in promotional strategy during
periods of economic crisis?
330 RQ6. What are the effects on performance of changed strategy with respect to the
distribution channel during periods of economic crisis?

Research methodology
This study did not target any specific industrial sector, since the aim was to measure
the effects of changes on performance generally. However, a special effort was made to
attain a meaningful distribution of company size, as this significantly affects
recommendations concerning the use of marketing strategies. Since, the research
focuses on strategy changes during an economic crisis, companies included in the
sample had to have been in the market for at least two years. We randomly selected
1,000 companies from the list of 5,000 Turkish companies published in 2000 by
İGEME, the Turkish Export Promotion Centre, making sure the sample accurately
reflected the proportion of each size band in the total list. About 500 companies agreed
to cooperate in the study, in response to an initial e-mailing. The subsequent
questionnaire was returned by 237. After adjustments for missing, faulty or
meaningless data, data from 172 companies were available for analysis. The effective
return rate is thus 17 per cent of the sampling frame of 1,000. Frequencies and
independent t-tests were used to determine whether significant differences exist
between the responding and non-responding companies; no significant differences
were identified.
The first part of the questionnaire contained questions to collect descriptive data
relating to the companies. In the second part, respondents were presented with
25 marketing strategies – five product, one price, one place (distribution), 14 promotion,
and four general – were and asked to what extent and in which direction their
company had changed those strategies since the crisis periods in late 2000 and early
2001. Answers were recorded by means of a nine-point scale ranging from
“significantly decreased” to “significantly increased” through a neutral mid-point. The
third part of the questionnaire investigated changes in performance measures.
Respondents were asked to state the amount of change as a percentage of the level
before the crisis, using this ten-point scale: 1-4 per cent, 5-9 per cent, 10-14 per cent,
15-19 per cent, 20-24 per cent, 25-29 per cent, 30-34 per cent, 35-39 per cent,
40-44 per cent and $ 45 per cent. The purpose of using a numeric scale of this kind was
to obtain more precise answers than a verbal or open-ended option would provide. In
the final part of the questionnaire, companies were asked to evaluate the extent to
which they had been affected by the eight outcomes of the crisis compared with the
situation beforehand, using a five-point scale from “too much” to “not at all”.

Research finings
Sample profile
The profiles of the responding companies are shown in Table I. Small- and medium-sized
companies, employing up to 150 staff, make up 98 per cent of the Turkish economy
 Marketing
N Per cent T (per cent)
strategies and
Size performance
Small-sized company 33 19.0 19.0
Medium-sized company 84 48.8 67.9
Large-sized company 55 32.1 100.0
Total 172 99.9 331
Activity area
Regional 35 20.5 20.5
National 48 27.5 48.0
International 89 52.0 100.0
Total 172 100.0
Industry
Manufacturing 128 74.4 74.4
Trade 28 16.3 90.7
Service 16 9.3 100.0
Total 172 100.0
Foundation years
2-10 years 55 31.8 31.8
11-20 years 57 33.5 65.3
21-30 years 35 20.0 85.3
More than 31 25 14.7 100.0
Total 172 100.0
Export
None 60 35.3 35.3
1-10 per cent 24 14.1 49.4
11-30 per cent 23 13.5 62.9
31-60 per cent 31 17.6 80.6
61-100 per cent 34 19.4 100.0
Total 172 100.0
Regions
Aegean 99 57.6 57.6
Marmara 46 26.7 84.3
Central Anatolia 19 11.0 95.3
East Anatolia 8 4.7 100.0
Total 172 100.0
Foreign investments
Yes 154 90.0 90.0
No 18 10.0 100.0
Total 172 100.0
Structure of equity
Group company 58 33.7 33.7
Independent company 114 66.3 100.0 Table I.
Total 172 100.0 Profile of companies

versus two thirds (67.9 per cent) of the 172 respondents in this survey. Whilst their
operations were generally concentrated in the Aegean and Marmara Regions, company
characteristics did not significantly vary across the different regions. The Turkish
economy is dominated by manufacturing enterprises, which account for three quarters
of the sample. It can thus be confidently asserted that the research respondents are
acceptably representative of the Turkish business population. More than half of the
companies responding (53.5 per cent) had been in business for between ten and
MIP thirty years, so the responses related to a short period of crisis would generally have
25,4 been grounded in long prior experience.

Crisis outcomes
Factor analysis with varimax rotation was applied to the answers related to reasons
for being affected by the crisis, in order to reduce the data into a smaller number
332 of underlying dimensions. Two meaningful factors were determined, as shown in
Table II.
The first comprises various external economic factors: increases in foreign currency
exchange rates, inability to forecast the economic indicators, decrease in consumer
demand, high inflation, and the negative impact of uncertainty. The second factor
comprises internal company reasons, mainly financial. The most important finding
from the factor analysis is that the loading of the decreases in consumer demand is
high in both factor groups. This finding can be interpreted as showing that reducing
consumer demand was a result of both external and internal circumstances.
Table III shows the proportions of all answers accounted for by each reason given
for being affected by the crisis. The conclusion is that companies felt they had suffered
most from exchange rate increases, followed by, in decreasing order, the difficulty in

Factors External reasons (factor 1) Internal reasons (factor 2)

Increases in foreign currency exchange rate 0.705 0.131

Inability to forecast economic indicators 0.835 0.190
Decreases in consumer demand 0.451 0.426
Debts incurred before the crisis 0.283 0.533
High inflation 0.789 0.197
Inability to plan due to uncertainty 0.715 0.062
Insufficient equity 0.282 0.722
Table II. Internal factors 0.031 0.871
Factor analysis related to Explained variance 0.299 0.253
the outcomes of the crisis Total explained variance 0.553
that negatively affected
the companies Note: P , 0.000

Level of effect (per cent)

Factors Av. N 1 2 3 4 5

General level of affectedness 2.69 159 15.9 29.9 34.8 7.9 11.6
Increases in foreign currency exchange rate 2.04 162 41.3 31.7 13.8 8.4 4.8
Inability to forecast economic indicators 2.11 163 35.1 32.1 21.4 8.9 2.4
Decrease in consumer demand 2.5 162 22.2 33.5 24.0 12.0 8.4
Debts incurred prior to crisis 3.1 159 16.5 17.7 25.6 19.5 20.7
High inflation 2.2 160 30.9 31.5 27.3 6.7 3.6
Inability to plan due to uncertainty 2.26 163 29.2 33.9 26.2 7.7 3.0
Table III. Insufficient equity 3.24 160 12.1 15.8 28.5 22.4 21.2
Outcomes of the crisis Internal factors 3.9 158 3.1 6.7 19.6 37.4 33.1
that negatively affected
the companies Notes: 1 – very much; 5 – not at all
forecasting economic indicators, high inflation, and inability to plan because of Marketing
uncertainty. Internal circumstances were in this case relatively insignificant. strategies and
Marketing strategy changes
performance
Factor analysis with varimax rotation was applied to answers relating to marketing
strategies, in order to reduce the data into a smaller number of underlying dimensions.
Table IV presents the results of principal component analysis. 333
The most important factors are those relating to the promotion element of the
marketing mix, collectively explaining between a quarter and a third of total variance
(29.2 per cent). They are: promotional budget, advertising budget, media usage,
sampling, quantity discounts, public relations activities, “rational” messages, after-sales
service. The second most important factor explains 10 per cent of the total variance, and
relates to product strategy. Its components are new product development, product
range, R&D budget, product quality, and marketing expenditures. Though the last of

Strategies (a) Variance (per cent) Factor loading

Promotion strategy 0.84 29.223

Promotion budget 0.592
Advertisement budget 0.568
Use of radio and media 0.599
Use of samples 0.753
Quantity discounts 0.540
Public relations activities 0.777
Giving more importance to rational motives 0.669
After sales service 0.442
Product strategy 0.78 10.096
New product development 0.793
Number of products 0.790
R&D budget 0.614
Quality 0.447
Marketing expenditures 0.426
Sales and distribution strategy 0.75 7.251
Number of sales force 0.663
Sales training 0.773
Distribution channels 0.475
General marketing strategy 0.70 5.614
Focusing on strong markets 0.825
Entering new markets 0.818
Marketing planning 0.745
Entering new business areas 0.343
Sales with credit – 4.758
Sales with credit 0.634
Sales promotion 0.50 4.468
Duration of product guarantees 0.440
Use of coupons 0.750
Concentrating on wholesalers and discount stores 0.727
Price – Table IV.
Price 4.140 0.792 Factor analysis results
Total variance (per cent) 65.550 related to marketing
KMO ¼ 0.083; Barlett ¼ 1655.5; P , 0.000 strategies
MIP those were discussed as “general marketing strategies” in the literature review,
25,4 respondents associated it with product strategy. This can be explained by the fact that
expenditures on products figure prominently in the marketing budget, and marketing
expenditures are seen to be for the benefit of the product range.
The remaining five factors collectively explain only a quarter of the total variance.
The three variables grouped under the heading of sales and distribution contribute
334 7.2 per cent. The four relating to general marketing strategy (focusing on strong
markets, entering new markets; moving into new business; marketing planning)
account for 5.6 per cent. A single variable relating to credit arrangements explains
4.7 per cent. Those grouped together as “sales promotion” (extended warranties,
coupon schemes and discounting) contribute 4.4 per cent to the total variance. Lastly,
and perhaps surprisingly, the “price” variable accounts for a virtually insignificant
4.1 per cent. It is noteworthy that the two factors related to finance, price and credit,
together explain well under 10 per cent of the total variance measured.
Table IV also shows that the Cronbach’s a coefficients for each factor, except price
and credit, vary between 0.49 and 0.84, while the whole factor analysis explains 0.65 of
total change. Thus, the convergent and divergent validity of the scale are high.
Table V presents the mean values for the respondents’ performance criteria
evaluations. “Successful” defines companies that displayed better than average
performance during the period; “unsuccessful” defines those with below-average
performance. The results show that net profit was most negatively affected by
the crisis, followed by sales and market share, in that order. “Average success” which
is an amalgam of the three criteria, sits between those two criteria.
It is clear that the successful companies increased their sales, market share and net
profit. Having the median value of sales above the median value of net profit indicates
that, even if companies are successful, the increase in sales is not transformed into net
profit. Success was achieved at the expense of lower sales prices or cost increases due
to reduced usage of capacity, or other reasons.
Simple linear regression analysis was used to analyze the effects on company
performance of the changes in the marketing strategies, to determine the relationships
between the dependent variables (performance criteria) and the independent variables
(marketing strategies). The Kolmogorov-Smirnov Test assessed normality within
respective groups. It was found that the error value indicates a normal distribution.

Criteria N Median

Sales Total 169 2 1.9645

Unsuccessful 98 2 6.2449
Successful 71 3.9437
Market share Total 167 2 0.5449
Unsuccessful 79 2 4.3797
Successful 88 2.8977
Net profit Total 168 2 2.9464
Table V. Unsuccessful 98 2 6.1939
Distribution of successful Successful 70 1.6000
and unsuccessful Average success (sales þ net profit þ market share /3) Total 167 2 1.8900
companies according to Unsuccessful 89 2 5.3602
performance results Successful 78 2.0303
The second condition to be satisfied was the Durbin-Watson Test, useful for testing Marketing
whether the error values are independent from each other. Table VI shows that the strategies and
auto-correlation coefficient ranges between 1.52 and 2.01, and is therefore significant.
performance
General marketing strategy
As shown in Table VI, the f and t values of three strategies in the “general marketing
strategies” group are significant with respect to average success, sales and market share. 335
That is, important increases in average performance, sales, and market share were
recorded by companies that entered foreign markets, concentrated on those in which
they had a strong position, and increased marketing expenditures. The analysis did not
find any significant relationship between net profit and the strategy of concentrating on
those markets in which company’s position is strong. The findings also show that there
is no significant relationship between diversification of business and any of the
performance variables. These strategies explain the changes in the variations between
0.072 and 0.023. There is a strong relationship between entering foreign markets and
average performance, sales and market share, and a significant one between marketing
expenditure and net profit. Thus, entering foreign markets and playing to the company’s
strengths results in an increase in sales and market share, but has a limited effect on net
profit. Conversely, an increase in marketing expenditure improves net profit.

Product strategy
It was found that only the introduction of new products and product quality were not
significantly related to market share, while there is a strong relationship between the
other three performance variables and product strategies. According to Table VI,
increases in the R&D budget are significantly related to sales and net profit.

Pricing strategy
It was found that the effect of the price variable exhibited was not significant with
respect to sales, net profit or average performance. This result suggests that there is no
significant differentiation in the performance of companies that practise different
pricing policies during an economic crisis. The Scheffe Test found no difference in
sales volumes between companies that increased prices and those that decreased them,
in response to the crisis.
When the price variable is considered together with quality strategy, an important
element in the pricing decision, the levels of sales (t ¼ 2 1.95, p , 0.05), net profit
(t ¼ 2 1.92, p , 0.05), market share (t ¼ 2 1.88, p , 0.05) and average performance
(t ¼ 2 2.06, p , 0.05) were higher in the companies that did not change their product
prices during the crisis, and did increase product quality. Conversely, the sales, net
profits and average performance fell among companies that reduced product quality in
reaction to the crisis conditions. This suggests that companies in this situation must
maintain product quality if prices are lowered, or increase it if they are not.

Promotion strategy
Promotional activities are an important ingredient of total marketing strategy, as was
indicated in the factor analysis (Table IV). It was found that five variables in this group
had a strong relationship with sales, explaining the changes in sales between 0.021 and
0.15. They are, in rank order, size of the sales force (0.39), advertising budget (0.239),
 25,4
MIP

336

Table VI.

performance
analysis related to
Results of regression

marketing strategies and

Average performance
(1 þ 2 þ 3)/3 Sales (1) Net Profit (2) Market Share (3)
Strategies R2 F b T R2 F b T R2 F b T R2 F b T

General marketing strategies

Focusing on
strong
markets 0.038 6.05 * 0.195 2.460 * 0.025 4.06 * 0.159 2.017 * 0.018 2.8 0.133 1.67 0.027 4.30 * 0.164 2.076 *
Entering
foreign
markets 0.072 11.69 * 0.268 3.420 * 0.065 10.83 * 0.255 3.29 * 0.028 4.50 * 0.168 2.123 * 0.068 11.29 * 0.261 3.361 *
Marketing
planning
activities 0.067 11.01 * 0.258 3.319 * 0.051 8.53 * 0.226 2.922 * 0.043 7.90 * 0.207 2.664 * 0.037 6.05 * 0.193 2.460 *
Entering new
business areas 0.002 0.34 0.047 0.583 0.004 0.62 0.062 0.790 0.005 0.85 0.073 0.92 0.001 0.10 2 0.026 0.323
Marketing
expenditures. 0.053 8.73 * 0.230 2.956 * 0.032 5.30 * 0.179 2.30 * 0.064 10.97 * 0.253 3.312 * 0.023 3.73 * 0.152 1.934 *
Product strategies
Introduction of
new products 0.043 7.211 * 0.208 2.685 * 0.034 5.83 * 0.185 2.415 * 0.051 8.84 * 0.227 2.974 * 0.016 2.70 0.128 1.64
Number of
products 0.065 11.051 * 0.255 3.324 * 0.046 7.80 * 0.214 2.794 * 0.062 10.70 * 0.249 3.271 * 0.047 7.97 * 0.217 2.825 *
R&D budget 0.085 13.836 * 0.292 3.720 * 0.080 13.24 * 0.283 3.64 * 0.064 10.39 * 0.254 3.224 * 0.046 7.32 * 0.215 2.706 *
Quality 0.033 5.47 * 0.182 2.340 * 0.047 8.08 * 0.217 2.843 * 0.032 5.47 * 0.180 2.339 * 0.006 0.97 0.077 0.985
Promotion strategies
Promotion
budget 0.104 17.46 * 0.322 4.179 * 0.010 1.57 0.101 1.253 0.132 23.42 * 0.363 4.840 * 0.058 9.48 * 0.242 3.079 *
Advertisement
budget 0.097 16.51 * 0.312 4.064 * 0.057 9.51 * 0.239 3.084 * 0.132 23.80 * 0.364 4.879 * 0.044 7.19 * 0.210 2.683 *
Size of sales
force 0.206 39.87 * 0.453 6.314 * 0.153 28.56 * 0.391 5.344 * 0.196 32.29 * 0.443 6.188 * 0.096 16.66 * 0.310 4.082 *
Sales training 0.077 12.78 * 0.277 3.576 * 0.046 7.54 * 0.214 2.747 * 0.104 18.29 * 0.323 4.277 * 0.032 5.14 * 0.178 2.268 *
(continued)
 Average performance
(1 þ 2 þ 3)/3 Sales (1) Net Profit (2) Market Share (3)
Strategies R2 F b T R2 F b T R2 F b T R2 F b T

After sales
service 0.083 14.11 * 0.288 3.756 * 0.043 7.10 * 0.206 2.666 * 0.076 13.16 * 0.277 3.629 * 0.064 10.83 * 0.253 3.292 *
Public
relations 0.045 7.41 * 0.213 2.724 * 0.021 3.50 * 0.149 1.87 * 0.065 11.05 * 0.255 3.325 * 0.024 3.93 * 0.155 1.985 *
Usage of radio
and media 0.030 4.69 * 0.174 2.156 * 0.002 0.30 0.044 0.548 0.027 4.17 * 0.163 2.043 * 0.038 5.89 * 0.194 2.428 *
Giving more
importance to
rational
motives 0.030 4.71 * 0.175 2.171 * 0.004 0.62 0.064 0.788 0.027 4.16 * 0.163 2.040 * 0.051 8.26 * 0.226 2.874 *
Usage of
samples 0.021 3.82 * 0.146 1.812 * 0.002 0.30 0.044 0.548 0.015 2.35 0.123 1.53 0.027 4.35 * 0.166 2.087 *
Usage of
coupons 0.012 1.69 0.108 1.30 0.011 1.61 0.105 1.269 0.015 2.19 0.122 1.481 0.002 0.26 0.043 0.518
Quantity
discounts 0.001 0.25 0.038 0.475 0.000 0.02 -.01 -.16 0.009 1.41 0.094 1.18 0.002 0.25 0.040 0.509
Duration of
guarantees 0.015 2.329 0.124 1.526 0.005 0.75 0.070 0.866 0.008 1.18 0.088 1.08 0.024 3.64 * 0.154 1.91 *
Sales with
credits 0.013 2.14 0.116 1.463 0.002 0.39 0.050 0.631 0.010 1.58 0.099 1.26 0.012 2.01 0.111 1.41
Distribution strategies
Concentrating
on wholesalers 0.001 0.11 0.028 0.341 0.000 0.06 0.020 0.249 0.000 0.017 -.01 -.13 0.006 0.91 0.077 0.95
Distribution
channels 0.144 25.08 * 0.380 5.008 * 0.101 17.13 * 0.317 4.139 * 0.094 15.68 * 0.306 3.961 * 0.094 15.72 * 0.306 3.96 *
Price strategies
Price 0.001 0.13 0.029 0.371 0.001 0.096 0.024 0.310 0.002 0.29 0.042 0.542 0.000 0.002 0.004 -.04
Note: Significant correlations at the *p , 0.05 are shown in italics
performance
Marketing
strategies and

337

Table VI.
MIP sales force training (0.217), after-sales service (0.206) and public relations (0.146). It is
25,4 interesting to note that the sales variable is significantly related to the advertising
budget, but less so to the promotional budget. This suggests that the respondents, as
representatives of marketing practitioners in general, mostly considered “promotion”
to mean “sales promotion”. This conclusion is supported by the absence of any
significant relationship between sales and such other sales promotion activities as
338 quantity discounts, sampling, coupon schemes and extended warranties. Furthermore,
the advertising budget shows an important relationship to sales, while media usage
does not. This suggests that the respondents were thinking of wider promotional
options.
Similar conclusions can be drawn with respect to net profit. The promotional
strategies significantly associated with net profit are, in rank order: size of the sales
force (0.44), advertising and promotion budgets (0.36), sales training (0.32), after-sales
services (0.27), public relations (0.25), media usage (0.163), and rational message
appeals (0.163).
It was found that the market share is significantly and positively associated with
most of the promotion strategies, with the sole exception of credit arrangements and
quantity discounts. The significant associations in this case are, in rank order, with:
size of the sales force (0.31), after-sales service (0.25), promotional budget (0.24),
rational message appeals (0.22), advertising budget (0.21), media usage (0.19), sales
force training (0.17), sampling (0.16), public relations (0.15) and extended warranties.
The study also found that average performance has a strong relationship with nine
varieties of promotional activity: size of the sales force (0.45), promotional budget
(0.32), advertising budget (0.31), after-sales services (0.288), sales force training (0.27),
public relations (0.21), rational message appeals (0.175), media usage (0.174), and
sampling (0.14). Although there is a positive relationship between the market share and
sales with credits, the usage of coupons and quantity discounts, these relationships are
not strong.
A general overview of the promotional strategies suggest that the size of the sales
force is the one that has the strongest impact on performance, with the highest
relationship to all four performance variables. Others of general importance are
budgeting for advertising and promotion, and after-sales service.

“Place” strategy
Table VI shows that there was no significant relationship between any performance
variable and the policy of distribution via discount stores and wholesalers. However,
the effect of the number of distribution channels on “average success” is 0.14, on sales
it is 0.10, and on both net profit and market share 0.094. Thus, increasing the number of
distribution channels can be expected to have a positive effect on overall performance
in times of crisis.

Concluding remarks
The study makes some significant contributions to theory and practice. First, it
investigates the effects of marketing strategy changes on company performance
during times of economic crisis. Although there are studies in the literature focusing on
the general measures taken by companies to lessen the negative effect in such
situations, they fail to explain the outcomes on performance indicators. Such tactics as
lowering production capacity, reducing the workforce and so on have only short-term Marketing
effects on company performance. strategies and
The study reported here takes a more radical path, in investigating the effects of
marketing strategy changes on company performance measures. The performance performance
measures set as the dependent variable are sales, market share, and profitability. The
purpose of such a rigorous analysis is to provide decision makers and marketing
planners with full evidence for the most effective strategy changes to implement 339
during an economic crisis. Thus, equipped, companies can survive and be profitable
even during such a situation by modifying strategy accordingly and appropriately in
response to radically changing environmental conditions.
The study concludes that companies increasing their sales volume cannot raise their
profits by the same rate. This result calls into question the benefit of price reductions
typically made by companies during crises. Price changes alone, in either direction, do
not affect company performance and should, therefore, be examined in concert with the
other factors identified. It was also found that such strategies as market diversification
and distribution through discounters have no effect on performance.
The size of the sales force and the number of distribution channels are both vitally
important. Companies should enlarge the former towards an optimum size (Ang et al.,
2000) and can further facilitate market penetration by increasing the latter.
Moreover, providing additional training for the sales force, related to the effects of
the crisis conditions, will have a positive effect on performance. Bennett (2005) found
that companies that did continue to train their marketing staff during recessions
attained superior performance.
The study finds that increasing the R&D budget, in spite of all the financial
limitations imposed by a crisis, has an important impact on performance. It will be
useful to focus R&D on the development of products that capture niche markets, and
technology and production methods that save costs. This finding is consistent with the
literature. For example, DeDee and Vorhies (1998) found that small- and medium-sized
companies that increased their emphasis on improving new product capabilities
during an economic downturn achieved a better return on common equity than others,
while Roberts (2003) concluded that new product introductions during a recession are
crucial to strong recovery in profitability and growth.
Entering foreign markets is one of the key strategies for counteracting the negative
effects of the economic crisis (Rao et al., 1988). However, companies must implement it
as a long-term strategy, with good planning, as distinct from more short-term,
competitive export marketing strategies.
Communication with consumers is of special importance. Lost consumer interest, due
to reduced discretionary income, can be reacquired through promotion activities. By this
means, companies can also attract floating customers to their brands, since consumers
tend to change their brand preferences more frequently during crises than at other times.
The most striking element in the promotion activities is advertising. Ang (2001a, b)
reached a similar conclusion when noting that, during the Asian economic crisis,
Singaporean businesses adapted more by increasing their promotion budget, especially
the advertising budget, than US companies had done during the oil crisis. He added that
such increased advertising should be accompanied by a change in advertising style
towards rational appeals in place of imagery. In the same way, media advertising and
public relations are significant elements of the promotional mix in these situations.
MIP When consumers are more sceptical about advertising, reliance on apparently
25,4 non-commercial vehicles – such as newspaper and magazine write-ups – increases
(Ang et al., 2000). Among sales promotion tools, the most useful was found to be
sampling.
One of the research findings is that the number of product introductions should be
increased. Also, offering higher quality products at the same price, or the same quality
340 at a lower price, has a positive effect on performance in times of crisis, while reducing
price and quality, a tempting response, negatively affects performance. As Ang et al.
(2000) have explained, product quality decisions should always be made in concert
with pricing decisions.
Finally, it seems clear that a promotion-centred general marketing strategy is
effective in increasing company profits, one focusing on both product and promotion
has a beneficial effect on sales, and one majoring on promotion and distribution has
a positive effect on market share.
Thus, to be successful during an economic crisis, decision-makers and planners
need to focus on promotional strategy, but in a resipe with other strategies, as
suggested by the findings of this study.

Limitations and directions for future research

The research has one key limitation. Managers’ subjective perceptions of
performance measures were preferred to objective financial data. That research
design decision was based on the fact that most of the small and medium-sized
companies included in the were not required by law to disclose their financial data
unless they were listed on the stock exchange, meaning that a request for privileged
information would be required, and would be likely to reduce the response rate.
Undoubtedly, however, it would have strengthened the findings to be able to include
financial data in the analysis.
Future studies might test strategy choices during an economic downturn in relation
to such company characteristics as size, industry sector and market scope. Given that
competitive advantage and company resources and skills affect strategic marketing
decisions in such conditions, their effects on company performance should also be
examined.

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