Marketing Strategy and its role in Post-Recession Economic Growth

Paul Romer, a Professor of Economics at Stanford University, is best known for his work on economic growth theory. In his words, “Economic growth occurs whenever people take resources and rearrange them in ways that are more valuable.” Using the metaphor of cooking, Romer adds, “Economic growth springs from better recipes and ideas, not just from more cooking.” Where developing countries can enjoy economic growth by adopting ideas developed elsewhere, those in the developed world need “strong incentives for discovering new ideas at home.”

The Romer view was echoed in the latest edition of The Economist (October 3, 2009, p. 11), in which a number of recommendations were outlined for generating economic growth as the world starts to pull out of the current recession: (1) shore up demand without wrecking public finances; (2) contain unemployment without inhibiting the shift of workers from old industries to new ones; and (3) fostering innovation and trade. It is this third point, economic growth via innovation that I see as essential to any economic recovery. The only problem is that the benefits of investment in new product development are not likely to be felt in the short-term.

Marketing, but not marketing alone, plays a central role in flushing out better recipes and ideas. I suggest that for marketing strategy to contribute to post-recession economic growth, more attention needs to be paid to the way in which new ideas are identified. What this means is that instead of being impressed by sophisticated marketing research tools and techniques (some of which might be appropriate to the problem at hand), marketing managers should focus on research that allows them to unveil the underlying needs and wants consumers seek to satisfy when using a product.

Put another way, many research methods – in particular, quantitative research methods, do not allow for an in-depth analysis of “Why”, but instead ask questions to identify “What?”, “When?”, “How?” and “By Whom?”. By not asking “Why”, marketing researchers miss opportunities to identify other ways in which to satisfy the same needs and want and the organization runs the risk of not identifying new ideas and recipes.

It is easy to illustrate with examples. Think of any product you buy and then think about the underlying need and want you seek to satisfy by consuming the product. I used to buy CDs because I wanted to listen to music in the car and at home. I used to send a fax as a quick way of sending a copy of a document. I used to fly to meetings because I want to talk to someone face-to-face. I have satisfied the same needs with different products: iTunes, scanners and email, and Skype. The point is that marketing managers need to immerse themselves in the world of consumers in order to truly understand the needs and wants consumers seek to satisfy by consuming a product, identify the potential problems consumers have with current product offerings, and then ask how else consumer needs and wants can be satisfied. This is where new ideas come from.

Peter Drucker argued that organizations should strike a balance between serving those customers it currently has and creating new customers. Against this backdrop then, I suggest that marketing research tools and techniques can also be broken into two categories: those that allow us to monitor how well we serve existing customers and measure how well we deliver on our brand promise and those that allow us to develop new market insights. To develop new recipes and ideas that ultimately contribute to post-recession economic growth means paying more attention to the methods and approaches that will allow organizations to create customers, shape markets, and alter consumer behavior. Ideas that others will want to imitate.

By Jenny Darroch. She is on the faculty at the Drucker School of Management.



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