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How Businesses Can Survive Recession

Marketing professor Vijay Mahajan explains his research on the strategies used by family-owned companies that have outperformed non-family corporations during recessions.

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In a blog post on the Harvard Business Review, McCombs School of Business marketing professor Vijay Mahajan explains his research that reveals “Why Family Businesses Come Roaring out of Recessions.”

Mahajan and his research partner and former Ph.D. student Saim Kashmiri (now an assistant professor at the University of Mississippi), compared the performance of 148 publicly listed family-owned companies between 2000 and 2009 with that of 127 non-family businesses.

marketing professor Vijay Mahajan

Vijay Mahajan 

“We found that family businesses handily outperformed non-family companies during both the 2001 and 2008 recessions in terms of a key metric, Tobin’s q,” Mahajan and Kashmiri wrote in the post, which was published in April. (Tobin’s q is the ratio between a company’s market capitalization and the replacement cost of its tangible assets.)

They continue by outlining some pronounced differences in how the two types of companies tend to adjust marketing strategies during downtimes:

We also found three differences in marketing strategies, which may account for the performances of the two types of companies.

  1. Family-owned businesses did not hold back on new product launches during the recessions. Not only is it easier to differentiate brands when there is less competition, but also, products introduced during recessions will enjoy a first-mover advantage as the economy recovers.
  2. Family businesses maintained almost the same levels of ad-spend during the recession years as they did during normal times, helping them do better than the professionally managed companies, which reduced ad-spend when the times got tough.
  3. Family businesses maintained their emphasis on corporate social responsibility regardless of the state of the economy. Customers penalize companies when they don’t maintain high social performance levels, especially in uncertain environments.

Read the full post for more details about the researchers’ results.

Mahajan is an expert in marketing strategy and is the author or editor of 12 books, including “The Arab World Unbound,” “Africa Rising” and “The 86% Solution.” He has received numerous lifetime achievement awards including the American Marketing Association (AMA) Charles Coolidge Parlin Award for visionary leadership in scientific marketing. He has consulted with various Fortune 500 companies and has delivered executive development programs worldwide.