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Habits and Down Markets

The U.S. and global economies are entering uncertain times and companies are scrambling to figure out how to respond. Exacerbating the financial meltdown is the uncertainty of the upcoming presidential election. It is likely that no current managers have ever had to deal with the prospect of a deep recession, restricted access to credit, and the prospect of democrats controlling all three branches of government. Predictably, managers have already begun to lay off employees and cut costs wherever possible.

In the midst of this crisis, managers must decide how they will approach marketing. Cuts to advertising and promotion are attractive because they go right to the bottom line, but at what future cost? Marketers have long contended that companies that invest in the 'trough' of a downturn will reap outsized reward when the market rebounds. But is the current situation part of a cyclical downturn or something substantively different?

It is possible to view the appropriate amount of investment from a far more practical and fact-based position. The habit-perspective posits that a company's most important asset is the habitual repurchase behavior of its customers. Accordingly, companies should invest sufficiently in their marketing efforts to maintain the habit-based behavior (inertia) their brands have created.

This level of marketing effort can be measured in real time by the utilization of relational databases.



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