Economic Contractions and Effectiveness of Marketing Activities: a Case From the Automotive Industry

Abstract

Environmental and market factors play an essential role in shaping the evaluation of the strategy and performance of organizations as well as moderating these relationships. This study examines how the effectiveness of different marketing actions changes in the passenger car industry by considering brand-based data during economic contraction, which most countries experience, especially during and after the COVID-19 era. Different marketing activities' effectiveness means examining each action's impact on performance. Performance is measured by sales volume and market share through quarterly data between 2010 and 2018, while advertising, pricing, and distribution are considered marketing actions in this study. The model is estimated using the fixed effect panel estimated generalized least square. The results support that price competitiveness and investing in advertising, including social media during recessions, are two critical factors enhancing performance through sales volume in the car segment covered in the study. In addition, distribution intensity positively influences the sales volume of each car brand and model, while this effect does not change during the recession. In the case of performance measurement through market share, the total impact of advertising expense on performance during a downturn is found to be zero in contrast to the sales volume-based analysis. The price-related result is found to be in a similar direction, while distribution hurts performance during economic contraction. Unlike most studies in the literature, the study offers the opportunity to discuss the impact of economic contradiction, both in an understudied industry and in a sub-sector/segment where competition and sales are intense.