Marketing Innovation for SMEs during COVID-19 Pandemic
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Marketing Innovation for SMEs during
COVID-19 Pandemic
A case study of the hospitality industry in Norrbotten
Simon Larsson
Simon Gustavsson
Business and Economics, bachelor's level
2020
Luleå University of Technology
Department of Business Administration, Technology and Social SciencesAcknowledgement This degree project was the last assignment in the process of completing our studies at Luleå University of Technology. For Simon Larsson, this means the completion of the program Economy Candidate, specialization in marketing. For Simon Gustavsson, this means the completion of the program International Economy Candidate, specialization international business administration. This study was conducted during the spring of 2020 (April - June) and provided an insight on how small and medium sized enterprises (SMEs) in the hospitality industry in Norrbotten was affected by the COVID-19 pandemic (coronavirus), along with how the SMEs adapted a new way of marketing during the economic crisis derived from the COVID- 19 pandemic. There are several people involved that have contributed to this degree project from the beginning to the end of the study period. First of all, we would like to thank and show our gratitude to our supervisor, Seyedeh Fatemeh Mostafavi Shirazi, who supported us with advice, expertise and experience. We would also like to thank the interviewed participants for their contribution to this degree project by providing their expertise. Furthermore, we would also like to thank our fellow students that during the term has given advice on how to improve our degree project. At least but not last, a big thank you to our families that has supported us during this study period. We are proud to say that we after a period of time have completed our Degree Project. Luleå, May 2020 Simon Larsson and Simon Gustavsson
Abstract As a global disaster, the COVID-19 pandemic (coronavirus) has an impact on the whole world economy. The pandemic threatens the survival of small and medium sized enterprises (SMEs) globally and nationally. It appears inevitable that this pandemic has created a difficult business environment for small and medium sized enterprises to operate in. The COVID-19 pandemic has caused a chain of events that have led to an economic crisis. The driving factor have been the Swedish government’s recommendations to the population to stay at home and exercise social distancing. This has led to a declining household consumption in Sweden and thus also reductions in production in the country. Thus, the purpose of this degree project was to examine how three small and medium sized enterprises businesses adapted their way of marketing in order to survive the economic crisis that came with the COVID-19 pandemic. The research has been conducted within the context of three small and medium sized enterprises (SMEs) in the hospitality industry in Norrbotten. To gain deeper knowledge on how SMEs in Norrbotten changed their way of marketing during this economic crisis, a qualitative research approach was pursued. A multiple case study was administered against three contrasting organizations in Norrbotten to collect data in order to delve into the chosen subject more. The gathered data was collected through interviews. The findings of this study prove that the three small and medium sized enterprises were affected by the economic crisis that came with the coronavirus. Overall, the main findings show that the three SMEs adapted and improved their marketing mix as a response to the crisis. The key factor in why the three companies had to improve their marketing mix was the change of the consumer buying behavior. The changed customer behavior was a result of the Swedish government and the Public Health Agency measures to prevent the spread of the virus: social distancing, traveling restrictions and closed borders.
Sammanfattning Som en global katastrof har COVID-19-pandemin (coronaviruset) en påverkan på hela världsekonomin. Pandemin hotar små och medelstora företags överlevnad både globalt och nationellt. Det verkar oundvikligt att denna pandemi skapar en besvärlig affärsmiljö för små och medelstora företag (SMFs) att hantera. COVID-19 pandemin har orsakat en händelsekedja som har lett till en ekonomisk kris. De drivande orsakerna har varit den svenska regeringens rekommendationer till befolkningen att stanna hemma och utöva social distansering. Detta har lett till minskning av hushållens konsumtion i Sverige och därmed också en minskning av produktionen i landet. Därav har syftet med detta examensarbete varit att undersöka hur tre små och medelstora företag har anpassat sin marknadsföringsstrategi för att överleva den ekonomiska krisen som medföljt COVID-19 pandemin. Forskningen har bedrivits gentemot tre små och medelstora företag inom besöksnäringens i Norrbotten. För att få djupare förståelse och kunskap om hur små och medelstora företag i Norrbotten förändrade sitt sätt att marknadsföra under denna ekonomiska kris (som kom från coronaviruset) genomfördes en kvalitativ forskningsstudie. En multipel fallstudie upprättades med tre små och medelstora företag i Norrbotten för att samla in data för att fördjupa sig inom det valda ämnet. Den insamlade data kom från intervjuer från tre respondenter i tre små och medelstora företag inom besöksnäringsindustrin i Norrbotten. Resultaten av denna studie visar att de tre studerade små och medelstora företagen påverkas av den ekonomiska krisen som kom från coronaviruset. Sammanfattningsvis visar resultaten att de tre små och medelstora företagen anpassade sin marknadsföringsmix som ett svar på den ekonomiska krisen. Den centrala orsaken till varför de tre företagen uppgraderade sin marknadsföringsmix var konsumentens förändrade köpbeteende. Det förändrade köpbeteendet var ett resultat av den svenska regeringens och folkhälsomyndighetens åtgärder att hindra smittspridningen av coronaviruset: social distansering, reserekommendationer och stängda gränser.
Table of Contents
1. Introduction 1
1.1 Background 1
1.2 Problem Discussion 3
1.3 Purpose and Research Questions 4
1.4 Delimitations 4
1.5 Outline of Entire Thesis 5
2. Literature Review 6
2.1 Economic crisis impact on businesses 6
2.1.1 SMEs and the economic impact 7
2.1.2 Understanding consumer behaviour in an economic crisis 7
2.1.3 Significance of marketing in an economic crisis 8
2.2 Marketing Innovation 8
2.2.1 Marketing Innovation in Times of Crisis 9
2.2.2 Marketing Innovation for SMEs in Times of Crisis 9
2.2.3 Marketing Innovation in Hospitality Industry 10
2.3 The Marketing Mix 11
2.3.1 Product 12
2.3.2 Price 13
2.3.3 Place 13
2.3.4 Promotion 14
2.4 Frame of reference 15
3. Methodology 18
3.1 Research Purpose 18
3.2 Research Approach 19
3.2.1 Deductive Approach 19
3.2.2 Qualitative or Quantitative Data Collection 19
3.3 Research Strategy 20
3.3.1 Case Study 20
3.4 Data Collection 20
3.4.1 Interviews 21
3.5 Sample Selection 22
3.5.1 Selected Companies 23
3.5.2 Interviewed respondents 24
3.6 Data Analysis 243.7 Reliability and Validity 25
3.7.1 Reliability 27
3.7.2 Construct Validity 28
3.7.3 Internal Validity 28
3.7.4 External Validity 28
3.9 Summary of Methodology 29
4. Empirical Data 31
5. Data Analysis 39
5.1 The impact on SMEs 39
5.2 Measures taken by the SMEs 43
6. Findings and Conclusions 50
6.1 Findings and conclusions - the economic crisis impact on SMEs in Norrbotten 52
6.2 Findings and conclusions regarding changes in the marketing mix 53
6.3 Theoretical Implications 54
6.4 Practical implications 55
6.5 Implications for further research 56
6.6 Limitations of the research 57
7. References 59List of Figures Figure 1 - Economic crisis linked to the marketing mix 4 Figure 2 - Outline of thesis 5 Figure 3 - The Marketing Mix 12 Figure 4 - Summary of Methodology 30 Figure 5 - Overview of consequences and actions brought by the COVID-19 pandemic 51 List of Tables Table 1: Frame of reference for research questions 17 Table 2: Interview types 21 Table 3: Interviewed respondents 24 Table 4: Types of Validity Tests 26 Table 5: Experience of decreased production due to supply chain disruptions 40 Table 6: Experience of reduced workforce among the companies 41 Table 7: Economic crisis financial impact on SMEs 42 Table 8: Changing consumer behavior affection on the companies 43 Table 9: The number of companies that have made improvements in the market mix 44 Table 10: Product innovation as a response to an economic crisis 45 Table 11: Pricing strategy in an economic crisis 46 Table 12: Changes in the distribution chain toward the customers 47 Table 13: Adaption of marketing during an economic crisis 48 Table 14: Comprehensive table of marketing mix adjustments 49
1. Introduction
The following background will give an overview on how SMEs in the hospitality sector have to
cope with the current COVID-19 pandemic - from a marketing perspective. Moreover, a problem
discussion is presented in this chapter which allows the purpose of the research to be given,
along with the stated research questions. At last, an overview and outline of the entire thesis will
be provided.
1.1 Background
Companies are today managing businesses in a highly interrelated international business world
(Alhawari et al., 2012). Companies are therefore more exposed to abnormal and unexpected
events such as a crisis, since it constitutes new risks and an unpredictable business surrounding.
For companies that are not adequate to adapt in time of crisis, it can be challenging to have a
sustainable profitability or even survive (Darbonnens & Zurawska, 2017). As this thesis is written
the world is in the midst of an economic crisis derived from the corona-pandemic outbreak
(COVID-19), which is affecting businesses all over the world.
The coronavirus outbreak was officially declared as a pandemic in March 2020 (WHO, 2020)
and in early February the first case was detected in Sweden (Statista, 2020). As this thesis is
written, the country has 20 300 confirmed cases where the region Norrbotten has 243 confirmed
COVID-19 cases (Statista, 2020). The COVID-19 pandemic has caused a chain of events that
have led to an economic crisis. The driving factor has been that governments all over the world
have advised their population to stay at home and practice social distancing, which has led to a
declining household consumption and thus also reductions in production (Statistics Sweden,
2020).
In a survey by Norrbottens Chamber of Commerce (2020) it shows that the corona crisis has
caused damage to the business sector in Norrbotten and that over 70 percent of the firms have
taken measures to reduce their costs. The survey also confirms the image that the hospitality
industry (i.e. hotel, restaurant, tourism, travel, cafes) and small and medium sized enterprises
(SMEs) have been hit hardest so far. A SME is according to EU’s definition a company that
employs less than 250 people, and has either a turnover that is not more than EUR 50 million or
an annual balance sheet that is not more than EUR 43 million (European Commission, 2003.).
1Almost 80 percent of the SMEs in Norrbotten have already been affected directly or indirectly
by the coronavirus. Demand has decreased for two-thirds of the firms. Cashflow has already
negatively affected 60 percent of the firms and 68 percent of the firms see long-term negative
effects of the corona crisis (Norrbotten Chamber of Commerce, 2020).
99.9 percent of all companies in Sweden are small and medium sized companies. They create
employment for 70 percent of the total labour force and since 1990 they have created more than
4 out of 5 jobs every year (Yazdanfar et al. 2015; Yazdanfar & Öhman, 2018). SMEs are
considered to be an important factor in a market economy and a great source of national economic
growth (Haltiwanger et al 2013; Decker et al. 2014). However, SMEs are likely to be the ones
who are most negatively affected in times of crises. Since they are vulnerable with their, in
general, inferior financial- and human resources when it comes to responding to the
consequences compared to multinational corporations (Vargo & Seville, 2011; Cesaroni et al.
2020).
A suggested tool in order to deal with an economic crisis for firms with limited resources (many
times SMEs) is to adopt marketing innovation (Naidoo, 2010). Marketing innovation is defined
as the application of a new marketing strategy with changes in product design, pricing strategy,
packaging and product placement (Varadarajan, 2018). When a crisis hits the organizations, in
this case the hospitality industry, they might need to adjust and change their marketing strategies
(Karlsson & Tavassoli, 2016). In those cases, it is vital for firms to remember that the adaptation
of a new way of marketing should avoid cutting expenses of marketing (Köksal & Özgul, 2007).
A good first step to adapt the marketing strategy might be to reevaluate the marketing mix and
realign the value offered in order to please customers changed demand, due to the crisis (Karlsson
& Tavassoli, 2016; Falk, 2013). Empirical results also show that marketing innovation activities
positively influences the economic profitability for firms in the hospitality industry (Nieves &
Diaz-Meneses, 2016).
Although changes in the marketing mix (i.e. product, price, place, promotion) have been
proposed as a feasible strategy for companies that face a crisis, little research has been directed
at empirically proving this, at least in the context of SMEs (O'dwyer, Gilmore & Carson, 2009;
Naidoo, 2010).
21.2 Problem Discussion
When an economic crisis hits and the turnover rate declines, it might lead to bankruptcies
(Yazdanfar, Öhman & Homayoun 2019). The declining turnover also contributes to decreases in
innovative activities, mainly because new product innovation is expensive (Peric & Vitezic,
2016; Grewal & Tansuhaj, 2001). Nonetheless, the use of innovativeness in marketing could
present an attractive solution for cash-strapped firms in order to survive in an economic crisis
(Naidoo, 2010). However, there is not much previous research that has investigated or been able
to prove marketing innovations' impact on firm survival in an economic crisis (Naidoo, 2010).
As a consequence of the COVID-19 pandemic, governments all over the world have advised
their population to stay at home and practice social distancing, which has led to changed customer
preferences and firms have to adapt to that in order to stay profitable and competitive (Statistics
Sweden, 2020; Fernandes, 2020; Karlsson & Tavassoli, 2016). The changes in customer needs
is something that has affected every industry in the business sector (Statista Sweden, 2020). Since
marketing innovation is a tool for firms in order to adapt to consumer needs, and includes
innovations such as advertising innovation, distribution innovation, promotion innovation and
pricing innovation (Naidoo, 2010; Varadarajan, 2018). A successful implementation of that kind
of innovations will help firms to better match customer needs and in turn also help them to gain
a competitive advantage (Anning-Dorson et al. 2018; Karlsson & Tavassoli, 2016).
The marketing mix (i.e. the 4P’s) is the mechanisms the organization can use to create customer
satisfaction and to stay competitive within the market (Karlsson & Tavassoli, 2016). It is
considered to be a dynamic model since it adapts to change in consumer preferences, market
condition and government policies (Singh, 2012). Hence, it is a vital tool for firms in the
hospitality industry in order to adapt to the changes within the marketing environment and find
a new way of marketing to stay competitive and profitable (Karlsson & Tavassoli, 2016).
The coronavirus pandemic has created an economic crisis that so far has required actions that the
world has not experienced before (Fernandes, 2020). Since every crisis is more or less unique, a
firm cannot learn how to cope with it in advance and therefore firms encounter them with little
experience (Grewal & Tansuhaj, 2001). With that in mind the authors want through this study to
contribute with additional knowledge regarding how SMEs in the hospitality sector in Norrbotten
can survive the current crisis and also contribute to research that facilitates the management of
3future crises. To understand how SMEs can survive in the current crisis figure 1 was developed
below, which illustrates how SMEs can respond to an economic crisis by applying marketing
innovation activities (changes in the 4 P's in the marketing mix).
Marketing
Economic Crisis Changes 4P’s
Innovation
Figure 1 - Economic crisis linked to the marketing mix
1.3 Purpose and Research Questions
The purpose of this study is to examine how SMEs in the hospitality industry in Norrbotten have
been affected and how they are changing their way of marketing in order to survive in the
economic crisis that is derived from the COVID-19 pandemic.
RQ1: How have SMEs in the hospitality industry in Norrbotten been affected by the economic
crisis derived from the coronavirus outbreak?
RQ2: How can SMEs in the hospitality industry in Norrbotten adapt a new way of marketing in
times of crisis?
1.4 Delimitations
The conducted research in this thesis is delimited to small and medium sized enterprises in
Norrbotten, Sweden. The study is also delimited to a specific industry which is the hospitality
industry. Due to a limited timeframe for this degree project the approach for data collection will
be qualitative and the number of interviews conducted with companies will also be limited.
41.5 Outline of Entire Thesis
The main objective with this section is to give a comprehensive outline view of this study. The
gradation of this thesis is illustrated in figure 2 below. In the first chapter there is an introduction,
which contains a background, problem discussion along with the study’s overall purpose and it
will end with this study’s stated research questions. Delimitations of the study are also presented
in chapter one. Chapter two will discuss models, research and theories from previous research
within the field. Methodology is the third chapter. This chapter will present necessary
proceedings and course of actions on how the methodological choices that helped build this
thesis. Chapter four will present the empirical data with key citations from the interview with
the respondents. Chapter five presents an analysis of the gathered data from the interviews
towards theories from this study’s frame of reference, a so-called data analysis. At least but not
last, in chapter six, the main findings and conclusions will be presented and discussed.
Chapter 1 - Introduction
Chapter 2 - Literature Review
Chapter 3 - Methodology
Chapter 4 - Empirical Data
Chapter 5 - Data Analysis
Chapter 6 - Findings & Conclusions
Figure 2 - Outline of thesis
52. Literature Review
In this chapter, the study will review previous literature in the area of (1) economic crises and
(2) marketing innovation. The reviewed literature on economic crisis will assist the study to
highlight the challenges that businesses encounter in dealing with the outcomes of an economic
crisis. Further on in the chapter previous studies in the field of how innovation could be used in
order to deal with a crisis, within the context of: marketing innovation.
2.1 Economic crisis impact on businesses
Crises can come in various forms (natural disasters, technological disasters and economic crises)
and occur at the most surprising time, in a way one ever could imagine (Grewal & Tansuhaj,
2001). Pearson & Clair (1998) defines a crisis as a low probability, ambiguity, high consequence
decisions along with time pressure.
An economic crisis can affect companies in many different ways and if it is not managed correctly
it will be costly for the organization (Ghandour & Benwell, 2012). Some businesses are forced
to reduce the production (i.e. the supply) due to inadequate demand for products and services
combined with competition within the market environment. They could also be forced to lay off
personnel or lower the wages, and some companies are forced to shut down the business
completely (Köksal & Özgul, 2007). The financial suffering can also be in terms of disruption in
the supply chains (Ghandour & Benwell, 2012).
A supply disruption leads to decreased production and demand shortage which in turn causes
unemployment (Guerrieri, Lorenzoni, Straub & Werning, 2020). Thus, a disruption in supply
could damage the organization internally but also externally since the reputation and trust with
stakeholders is put to the test, since it affects the brand equity (Ghandour & Benwell, 2012; He
& Ran, 2015). In an article about the macroeconomic effects of COVID-19, Guerrieri et al.
(2020) mentions that supply disruptions could cause supply shocks in an industry. Supply shocks
that initially only affect a single industry can spread quickly into other industries during a
pandemic. This means that goods become less available, whereupon the price of the products in
the specific industry increases, making consumption more high-priced and thus also less
attractive (Guerrieri et al. 2020).
6The economic impact derived from the COVID-19 pandemic is really something else for
businesses to handle. A valid comparison of the COVID-19 pandemic to previous crises, such as
the global finance crisis in 2008 and the SARS outbreak in 2003 simply cannot be made. This
time it is different: it is a global pandemic, it is not solely affecting poor income countries, interest
rates are down at record levels, and the whole world is going through a destruction of demand
and supply (Fernandes, 2020).
2.1.1 SMEs and the economic impact
Empirical results show that SMEs are the ones who suffer the most during financial turbulence
and are exposed to a higher risk of facing bankruptcy (Yazdanfar & Öhman, 2018; Vargo &
Seville, 2011; Quintiliani, 2017). Around 99 percent of all Swedish companies are SMEs and
SMEs creates jobs for about 70 percent of the whole labour force in Sweden (Yazdanfar, Öhman
& Homayoun 2019). The reason for why SMEs suffers to a larger extent compared to bigger
firms is because of their dependence on loaned money and overall limited financial resources
(Bourletidis & Triantafyllopoulos, 2014). The fact that SMEs many times have limited financial
resources leads to limited flexibility and therefore lack the ability to respond to environmental
changes, especially during an economic crisis (Yazdanfar, 2011).
2.1.2 Understanding consumer behaviour in an economic crisis
An economic crisis affects the purchasing behavior of consumers (Mogaji, 2020), in both
mentally and financial ways (Köksal & Özgul, 2007). Mentally, the negative impact on
businesses is that consumers become more eager to save money in fear of losing their job (Sharma
& Sonwalkar, 2013) and people that lost their jobs are the ones who are most financially
vulnerable (Mogaji, 2020). Financially, people reduce consumption due to a changed perception
of risk (Sharma & Sonwalkar, 2013; Mogaji, 2020). Most of all, during an economic crisis, the
household reduces its consumption which means that consumers prioritize necessary products
and switch to cheaper substitutes (Sharma & Sonwalkar, 2013). For a lot of businesses this means
that sales starts to drop (Srinivasan & Lilien, 2009). When the price elasticity curve changes the
organization needs to adapt to the customers redefined value in order to respond. In those cases,
it is common that leaders in charge think that cost rationalization and lowering prices are enough
measures to stimulate the organization again (Barwise & Styler, 2002; Piercy et al. 2010).
72.1.3 Significance of marketing in an economic crisis
However, one thing that should not be compromised in an economic crisis is the marketing
activities (Köksal & Özgul, 2007; Srinivasan & Lilien, 2009; Alananzeh et al. 2018).
Organizations that increased the spending on marketing during the economic crisis did not
increase the income in the economic downturn. However, the revenues increased quicker once
the recovery of the recession started in comparison to firms that solely focused on cost
rationalization (Köksal & Özgul, 2007; Srinivasan & Lilien, 2009). Empirical evidence shows
that firms who focused heavily or maintained the degree of marketing, the market stake increased
thrice faster when the economic downturn was over (Roberts, 2003). However, research shows
that it is more important to retain customers compared to chasing new customers. Thus, in an
economic crisis it is of great importance to retain the loyal customers, since they are the most
profitable and therefore marketing mainly should target the loyal customers (Grundey, 2009).
2.2 Marketing Innovation
Another marketing strategy that has proven to be successful in times of crisis is the adoption of
marketing innovation (Naidoo, 2010). Marketing innovation is a tool that assists the developing
and sustaining of competitive advantage (Anning-Dorson et al. 2018). Market innovation can be
described as the application of a new marketing strategy with changes in product, pricing
strategy, packaging style and product placement (Karlsson & Tavassoli, 2016; Hussain et al.
2020). It can also be described as the creation of value by using relevant information and
capabilities to implement an idea for a new marketing strategy or improvements in an existing
marketing strategy (Varadarajan, 2018). Marketing innovation includes innovations such as
distribution innovation, promotion innovation and pricing innovation (Varadarajan, 2018). The
objective with marketing innovation is to better meet customer needs, give the company’s
product a new position in the market or open up new markets (Karlsson & Tavassoli, 2016;
Medrano & Olarte-Pascual, 2016; Widjojo et al. 2020). Empirical studies have shown that
successful marketing innovation helps companies to gain or sustain a competitive edge (Line &
Runyan, 2012; Scaglione et al. 2009). An empirical study by Falk (2013) shows that firms that
focus on marketing innovation during a crisis have a higher chance of surviving.
82.2.1 Marketing Innovation in Times of Crisis
An economic crisis or recession will most definitely create changes in the business activity and
strategies for the organization (Gümüş, Geçti, F, & Yılmaz, 2019). Since product innovation
tends to be too expensive in the midst of an economic crisis the focus therefore shifts toward
market factors instead, such as demand management (Grewal & Tansuhaj, 2001). In an article
related to COVID-19 it is highlighted how companies need to figure out how the consumer’s
needs have changed (Bartik et al. 2020). People’s habits are changing, and millions of households
are capsized and therefore firms constantly need to work with marketing innovation to increase
customer satisfaction and to stay competitive (Medrano & Olarte-Pascual, 2016; Medrano et al.
2020). By employing a marketing innovation strategy, it is intended to shift the demand for a
firm's products or services from elastic to a more inelastic demand (i.e. less price sensitive
demand), by increasing the customer value and thus also the organization’s revenues (Naidoo,
2010; Hussein, et al. 2020).
2.2.2 Marketing Innovation for SMEs in Times of Crisis
Marketing innovation is ideally suited for SMEs who usually have limited resources and if SMEs
achieve competitive advantage it increases the likelihood of surviving a crisis (Naidoo, 2010;
Halpern, 2010). An explanation to why marketing innovation is well suited for SMEs is that an
economic crisis many times triggers a price war (i.e. a course of intense competition with price
reductions). Most of the time companies engaged in a price war take severe damage, especially
SMEs. The reason for that is the small margins for SMEs compared to big firms (Grundey, 2009).
However, an adoption of a marketing innovation strategy facilitates the firm's ability to
differentiate and to secure a cost leadership. Derived from the differentiation and cost leadership
comes competitive advantage, which in turn is a major contributing factor to SMEs firm’s
survival in a crisis (Naidoo, 2010).
In addition to that, SMEs have a vital role in every economy as companies of such character are
said to be the central driving forces of economic growth, employment and innovation (Kossyva
et al. 2015). Furthermore, because of the organizational size, SMEs are considered being more
adjustable and flexible than bigger companies when it comes to introducing new products or
services in an economic crisis (Kossyva et al. 2015; Naidoo, 2010). That is also the case for
companies that are not a part of a group of companies, since those companies do not have to
adjust to the parent company and therefore remain more flexible (Medrano et al., 2016).
92.2.3 Marketing Innovation in Hospitality Industry
In times of crisis empirical results from a previous study proves that new technologies, foremost
the rise of the internet have had a great impact on the tourist industry and hotel industry marketing
innovations (Campo et al. 2014; Nicolau & Santa-María, 2013). The rise of the internet has given
firms access, at a low cost, to an indefinite number of consumers (Consiglio et al. 2018; Campo
et al. 2014). Firms web pages and social media activity are key elements for promoting services
and products. In addition, the website use as sales channels reduces the use of intermediaries,
making it cheaper for the hotel company and easier for the customer to reach information about
the company or a product (Hjalager, 2010; Consiglio et al. 2018; Campo et al. 2014) These
marketing innovations derived from new technologies has proved to be an important element for
firms in the hospitality industry to stay competitive and to increase revenues (Scaglione et al.
2009). Marketing innovation activities positively influences the economic profitability for firms
in the hospitality industry (Nieves & Diaz-Meneses, 2016).
Also, empirical results from a study by Campo et al. (2014) proved that hotels' ability to innovate
during the financial crisis in 2008 allowed an increase in customer service quality, satisfaction
level and greater value offer. These three terms are key elements in order to sustain and gain
competitive advantage and financial profits (Medrano et al. 2016; Anning-Dorson et al. 2018).
Due to that, firms that on purpose limited the investments on marketing innovation activities
when facing a crisis, should have reviewed their decision and done so instead, implementing
marketing innovation activities such as new process bettering’s and new services (Campo et al.
2014). Results from an empirical study reveals that companies in the hospitality industry
primarily should focus on marketing innovation in order to survive in times of crisis. The results
proved that firms in the industry mainly focus on applying innovative marketing ideas, followed
by better pricing along with improvements in promotional activities (Pappas, 2015).
In a paper that investigated how marketers in the hotel business managed the SARS epidemic in
Toronto (where around 75 percent of the businesses in the hospitality sector experienced a
downturn), the most common strategy way to rely on government assistance (Jayawardena et al.,
2008). Among the strategies where the company actually took action the most common tactic
was to offer price reductions in order to attract customers. However, a few hotels offered their
rooms for other purposes than accommodation, like renting their available rooms as offices
instead (Jayawardena et al., 2008). Solutions like the one mentioned can be effective for
10companies in a crisis instead of the common price reductions since price reductions do not
increase the profit in the same proportion. In order to stay profitable in the long-term companies
instead need to retain the spending on marketing (Köksal & Özgul, 2007). Since marketing
innovation suits the spending ability of SMEs and is defined as improvements and necessary
changes in the marketing mix. The tools available to create increased customer value are; place
promotion, product and price (Naidoo, 2010; Köksal & Özgul, 2007).
2.3 The Marketing Mix
The marketing mix can be described as the set of activities the organization applies to promote
its product or brand in the market. Another description could be as the mixture of different
marketing decisions that the organization uses to market its products or services. Which could be
used to innovate the organization out of the impacts of an economic crisis (Singh, 2012). It is a
dynamic and innovative model thus it changes according to the changes in preferences of the
consumer, market competition, market situation and government policies (Singh, 2012).
Managers in the organization need to evaluate the traditional marketing mix model when a crisis
strikes by reshaping it with tools in the marketing mix for marketing innovation (Naidoo, 2010).
It is essential to create and apply an appropriate marketing mix of the elements in it to gain
competitive advantage (Singh, 2012). To get the best profitable outcome from marketing
activities, the marketing mix should adapt according to the market condition and how the outside
world is changing (Singh, 2012). The four elements of the marketing mix: product, price, place
and promotion are presented in figure 3 down below.
11Product Price
The Marketing Mix
Place Promotion
Figure 3 - The Marketing Mix
Source: Adapted from Singh (2012)
2.3.1 Product
A product is what is actually exchanged. A product is a package of complex advantages that
please the customer. The customer gives money for the product or the service but what the
customer actually pays for is the experience the product brings and the level of satisfaction that
it has. Hence, the product or service needs to be accurate and suitable in order to match the need
of the customers (Salman et al. 2017).
That firms that focus on innovation are more likely to survive is commonly known (Falk, 2013).
However, new product innovation tends to be expensive and therefore it might not be a viable
tool for companies in order to survive a crisis, especially not SMEs (Grewal & Tansuhaj, 2001).
Instead it is suggested that innovation in a crisis focuses on the other components of the marketing
mix, i.e. price, place and promotion (Hamdani & Wirawan, 2012).
122.3.2 Price
What the customer must pay to receive the offered product is the price. The price of a product or
service relies on numerous factors and therefore the price is continuously changing. Due to that,
the price should be dynamic so that it can adapt to changes over periods of time (Singh, 2012).
The prices element in the marketing mix model is ruled by what is being debited for what it takes
to perform the service or buying the product. Pricing does not only influence the revenues for the
organization, it also influences the buyer perceptions regarding the quality of the product or
service. Therefore, pricing is vital to the organization’s daily business operations (Salman et al.
2017).
Hence, an economic crisis obligates companies to adjust the pricing, mostly downwards with
price reductions. The objective with price reductions is to increase sales volume in the short term.
It is a course of action that could damage the organization in the long run, primarily by receiving
lower revenues from reduced prices, but it could also damage the image of the brand and
consumers might not accept returning to the normal price when the crisis fades (Köksal & Özgul,
2007). Ang, Leong and Kotler (2000) proposes two pricing approaches when in an economic
crisis: Use the initial price for quality products and services or offer quality products to a reduced
price (Ang et al. 2000). Yet, if the organization does not adopt pricing strategies, such as premium
pricing or lower pricing and does not adapt to the consumers purchasing behavior during an
economic crisis, the organization will probably be deprived of customers and struggle to survive
(Raggio & Leone, 2009). However, the selection of price during a crisis should be combined
with other marketing operations involving the three other P’s in the marketing mix (Köksal &
Özgul, 2007).
2.3.3 Place
The place element in the marketing mix model is mainly about the distribution channel methods
that the organization uses in order to support the facilities to its market in a way that satisfies
customer expectations (Salman et al. 2017). It also includes warehouse buildings and mode of
transportation since the place element is a process in which products and services are transported
from the organization to the customer (Singh, 2012). Mode of transportation (i.e. distribution)
has a large impact on the organization’s profitability. Hence, the organization should have a solid
supply chain and logistics management when it comes to distribution (Singh, 2012).
13In a study that examined how the hospitality sector dealt with an economic crisis the result was
the same as in most other industries, which is that companies put a lot of effort in trying to reduce
the costs (Pappas, 2015). In turn that is also in line with how the “place” element of the marketing
mix is typically dealt with. Since a suggested solution for how to deal with a crisis is to reallocate
resources and focus on improving the effectiveness in the distribution channel in order to reduce
costs (Kotler & Armstrong, 2006). The distribution has a vital role in every business model.
However, when a firm has to reallocate its resources it might not be prioritized, when firms
instead emphasize other parts of the business that are more directly connected to profitability
(Chesbrough, 2010; Kotler & Armstrong, 2006).
2.3.4 Promotion
Promotion involves all the elements that the organization can use to enlighten the customers
within the market with information on its product or service offering and includes advertising,
public relations, personal selling, direct marketing, publicity, sales promotional efforts and
interactive channels (Salman et al. 2017; Singh, 2012). These previously described features are
so-called promotion activities whose purpose is to communicate and persuade the selected
market to purchase the organization’s product or service (Singh, 2012). The promotion element
supports the organization when it comes to presenting the product or service to the customer in
an efficient way and encourages the customer to buy the company's products or services (Salman
et al. 2017).
The decisions the organization makes regarding promotion tactics during a crisis are vital. By
having the same degree of advertising or increasing the degree of advertising increases sales,
market share and revenue after and during an economic downturn (Köksal & Özgul, 2007). Also,
the customer buys more rationally with diminishing spending power during a crisis. Thus,
advertising should highlight the importance of safety, durability and reliability, rather than a
representable portrait of the brand (Köksal & Özgul, 2007).
142.4 Frame of reference
In the frame of reference, the most important theories from the literature review (collected from
previous research) will be summarized, in order to guide the collection of data. Since the
collected data will be compared to previous research in the field, the frame of reference also
works as a foundation to guide the analysis of the collected data, and in the end also guide the
fulfillment of the purpose of this thesis:
“to examine how SMEs in the hospitality industry in Norrbotten have been affected and how
they are changing their way of marketing in order to survive in the economic crisis that is
derived from the COVID-19 pandemic”
Hence, the reason why this frame of reference highlights previous research within the field of
economic crisis, marketing innovation and the marketing mix. The subjects that are emphasized
in the frame of reference will ultimately guide the data collection and data analysis into answering
the research questions of this thesis, which reads:
RQ1: How have SMEs in Norrbotten been affected by the economic crisis derived from the
coronavirus outbreak?
and
RQ2: How can SMEs in Norrbotten adapt a new way of marketing in times of crisis?
The purpose of the first research question is to examine how SMEs in the hospitality sector have
been affected by the COVID-19 pandemic and the following economic crisis. Since every crisis
is as Grewal and Tansuhaj (2001) mentioned; more or less unique. The purpose of this research
question is to examine how this crisis differs or what similarities it has in comparison to what
characterizes a crisis according to previous literature. According to Köksal and Özgul (2007) a
common consequence of an economic crisis is a reduction in demand, which in turn is a
consequence of customers' changed behavior during a crisis. The changed customer behavior is
according to Sharma and Sonwalkar (2013) a response to the fear of losing the job and therefore
customers have a tendency of prioritizing saving instead of spending money. Another reason for
a changed behavior during a crisis is found among those who actually lost their jobs and therefore
changed their way of consuming (Mogaji, 2020).
15However, a reduced demand is not the only thing that causes financial suffering for firms in a
crisis, it could also be brought by disruptions in the supply chain (Ghandour & Benwell, 2012).
Both supply disruptions and a reduced demand leads to decreased production and demand
shortage which in turn causes unemployment or even forces companies to shut down completely
(Guerrieri et al., 2020; Köksal & Özgul, 2007). According to studies made by Yazdanfar and
Öhman (2018), Vargo and Seville (2011) and Quintiliani (2017) SMEs are among those who
suffer the most during a crisis. Bourletidis and Triantafyllopoulos (2014) mentions SMEs in
general, high dependence on loaned money and overall limited financial resources as the main
contributors to their vulnerability.
In order to survive a crisis Naidoo (2010) and Falk (2013) suggests that companies should use
marketing innovation as a marketing strategy. Hence the reason why the second research
questions main purpose is to see if SMEs in the hospitality sector in Norrbotten have adapted
their marketing according to what is suggested in previous research, i.e. marketing innovation.
Marketing innovation can be described as the improvements that can be made in the marketing
mix: product, price, place, promotion (Medrano & Olarte-Pascual; Karlsson & Tavassoli, 2016).
Empirical evidence from a research by Naidoo (2010) proved that marketing innovation is a
suitable solution for cash-strapped firms (mainly SMEs) when facing a crisis. In addition to
Naidoo’s (2010) research, Line and Runyan (2012) and Scaglione et al. (2009) research
suggested that successful marketing innovation helps firms to keep the competitiveness.
To maintain competitiveness in times of crisis, Hamadan and Wirawan (2012) suggested that
innovation activities mainly should focus on the dimensions, place, price and promotion, since
product innovation is relatively expensive (Grewal & Tansuhaj, 2001). For instance, Köksal and
Özgul (2007) mentioned that the most common pricing strategy when in an economic crisis is to
lower the prices. However, Köksal and Özgul (2007) also underline the danger with lowering the
prices too much, as it can damage the brand image. Hence, the pricing strategy should be
dynamic, which Singh (2012) suggested. Kotler and Armstrong (2006) suggested cost effective
distribution channels, which Salman et al. (2017) explained as fundamental since the company’s
facility usually does not change location. One more suggestion is mentioned by Srinivasan &
Lilien (2009) regarding promotion is the importance of marketing during an economic crisis.
Alananzeh et al. (2018) supports Srinivasan & Lilien (2009) statement, which Grundey (2009)
meant is aimed at the most frequent and loyal customers, not new customer segments. Based on
16the knowledge and theories from previous studies mentioned above, a frame of reference was
developed, which can be seen in table 1 below.
Table 1: Frame of reference for research questions
Subject Factors References
Economic crisis Reduced production (Köksal & Özgül, 2007;
Ghandour & Benwell, 2012)
Supply disruptions (Guerrieri, Lorenzoni, Straub
& Werning, 2020)
Layoff and termination of (Köksal & Özgül, 2007;
personnel Guerrieri, Lorenzoni, Straub &
Werning, 2020)
Financial impact on SMEs (Yazdanfar & Öhman, 2018;
Vargo & Seville, 2011;
Quintiliani, 2017; Bourletidis
& Triantafyllopoulos, 2014)
Consumer behavior in an (Köksal & Özgül, 2007;
economic crisis Sharma & Sonwalkar, 2013;
Mogaji 2020)
Marketing Improvements in the (Naidoo, 2010; Falk, 2013;
innovation marketing mix Karlsson & Tavassoli, 2016;
Medrano & Olarte-Pascual,
2016; Widjojo et al. 2020;
Line & Runyan, 2012;
Scaglione et al. 2009)
Product (Grewal & Tansuhaj, 2001;
Hamadan & Wirawan 2012;
Kossyva et al. 2015; Naidoo,
2010)
Price (Singh, 2012; Köksal &
Özgul, 2007; Naidoo, 2010)
Place (Grundey, 2009; Naidoo,
2010; Kotler & Armstrong,
2006; Singh, 2012; Salman et
al. 2017)
Promotion (Köksal & Özgul, 2007;
Srinivasan & Lilien, 2009;
Alananzeh et al. 2018;
Grundey, 2009)
173. Methodology
In this chapter, research purpose, research strategy, research approach and methods used for
this research study are explained and discussed. All these method approaches down below are
chosen with the aim of receiving a deeper insight into the subject and to allow the reply of the
stated research questions.
3.1 Research Purpose
The research purpose depends on how the research questions are formulated which can be
formulated in either in a descriptive, explanatory or exploratory manner (David & Sutton, 2016).
A descriptive purpose is applied in case studies where the research problem is described in its
real-life context (Yin, 2014). A descriptive research purpose's main objective is to emphasize a
situation where, what, when and who. This is in the absence of an earlier or sufficient explanation
of what is going on (David & Sutton, 2016). An explanatory research purpose is about measuring
the examined situation but also to investigate how different elements are related to one another
and especially if one element impacts the outcome of another element (David & Sutton, 2016).
An exploratory research purpose is used in case studies when the situation that is being evaluated
has no perspicuous outcome (Yin, 2014).
This study focused on an exploratory research purpose because the objective and intent of this
study was to explore how SMEs in the hospitality industry in northern Sweden changed their
marketing activities in order to survive in the economic crisis that is derived from COVID-19.
Also, exploratory research is associated as an important element in qualitative research (David
& Sutton, 2016). Moreover, in an exploratory study the purpose is to explain what is going on in
a field of research where no previous or little exploration has been conducted (David & Sutton,
2016). Since a crisis is surrounded by uncertainty and the fact that every crisis is more or less
unique - an exploratory case study was best suited for this thesis.
183.2 Research Approach
There are two research approaches that can be used when conducting a research study: inductive
or deductive approach (David & Sutton, 2016). A deductive approach is used when a research
study is built on previous research theories and literature (Saunders et al. 2012). An inductive
approach is used when a research study is built upon observations (i.e. experiences) that have
been observed from the reality (Saunders et al. 2012).
3.2.1 Deductive Approach
This study used a deductive approach. A deductive approach is suitable when a study is based
on previous models, theories and literature (Saunders et al. 2012). Previous literature (theories
and models) within the field of study was discussed and analyzed in order to compose the
research questions of the study. The research questions were later on tested against previously
collected literature. (Saunders et al. 2012). From the collected models and theories, the frame of
reference was developed that was used when the empirical data was analyzed.
3.2.2 Qualitative or Quantitative Data Collection
During this study, the researchers made a decision if the gathering of data would be performed
in a qualitative or quantitative way. For the purpose and configuration of this study it was decided
that a qualitative data collection was most appropriate. In the qualitative research process,
emphasis is placed on the collection of data of the non-numeric nature, that is to say close
descriptions of events, in-depth interviews, documents and other artifacts (David & Sutton,
2016).
The method that was applied in this research was qualitative interviews, so called in-depth
interviews. The outcome of qualitative interviews is a deeper understanding of certain factors
(Saunders et al. 2012). Since the purpose of this study was to get a better understanding of how
SMEs in the hospitality sector can survive an economic crisis, the qualitative approach was well
suited.
193.3 Research Strategy
The research strategy is the plan for how the study is going to achieve its objectives (David &
Sutton, 2016). This study used a case study because it allowed the researchers to investigate the
selected organizations when going through a series of complex happenings (Baxter & Jack,
2008). Case study as a research strategy was the most appropriate strategy that could be used
since it allowed the researchers to investigate the complex measures the interviewed
organizations had to implement, in order to cope with the economic crisis derived from the
COVID-19 pandemic.
3.3.1 Case Study
When a study contains of more than one single case, a multiple case study is needed (Yin, 2014)
Since this study investigated and selected three SMEs in the hospitality industry in Norrbotten,
a multiple case study was used. A single case study is used to observe only one case (Yin, 2014)
and was therefore not suitable for this study due to the selected sample of this study. Since this
study implemented a multiple case study, comparisons between similarities and differences could
be made in between the three cases (Baxter & Jack, 2008). Another advantage of the selected
multiple case study is that it investigates two or more cases which gives more convincing and
reliable empirical data (Eisenhardt & Graebner, 2007).
It is also important to decide if the case study is holistic or if it contains embedded units. If a case
study examines numerous units (e.g. subgroups in a firm) of analysis it is embedded (Yin, 2014).
On the contrary, when a case study looks at only one unit of analysis, the case study is holistic
(Yin, 2014). This study looked at one unit of analysis, since the study focused on one individual
within several cases and that individual's opinions on how the case is believed to be (Yin, 2014).
Hence the reason this study was a holistic multiple case study.
3.4 Data Collection
When the research strategy had been established, the next part of the process was to gather
empirical data. There exist two kinds of empirical data: primary or secondary. Primary data is
data used in research that is originally obtained from the researchers via surveys, interviews or
observations (David & Sutton, 2016). This study collected primary data collected from
interviews with SMEs in Norrbotten with the purpose to answer the stated research questions, to
receive an in-depth understanding about the subject of interest and to better comprehend existing
20theory and models. Secondary data is research that has previously been collected before for other
purposes and is data that can be accessed by receptors (David & Sutton, 2016). This research
applied secondary data from statistics firms and several authorities in Sweden.
3.4.1 Interviews
Interviewing can be described as the process of asking people questions. However, interviewing
is just as much about listening cautiously to the answers that are given. There exist several
interview techniques. Either an interview is structured or unstructured. An interview can also be
semi structured, which corresponds to a mix of a structured and unstructured interviews method.
A structured interview tries to highlight the significance of a respondent’s exclusive response by
applying surveys with prearranged questions. A structured interview is normally applied and seen
in quantitative research. When it comes to qualitative research, an unstructured or semi structured
interviews method is more appropriate. Thus, the qualitative interview is a more unstructured
and unstandardized interview technique. In that way, the interviewer lets the respondent state
their version of what is being asked as more flexible answers are desired (David & Sutton, 2016).
The three mentioned interview methods are described in table 2 below.
Table 2: Interview types
Semi Structured Unstructured Structured
● Used in qualitative ● Non-standardized ● Used in quantitative
research ● Open answers are research
● Central questions sought ● Questionnaires with
made in advance ● Questions not advanced formulated
● Gives room for predetermined questions
additional questions ● Used in qualitative ● Standardized
research questions
● More open and
flexible answers from
interviews
Source: Adapted from David and Sutton (2016, pp. 114-115)
21This study used a semi-structured interview approach to the respondents. One of the central
strengths that the semi structured interview has is the interview technique’s flexibility. The
interview technique allowed this study to ask certain questions in a different way for every
interview, which gave a deeper insight into the thesis investigated area. The method also gave
this study the opportunity to ask to follow up questions about interesting subjects that arose when
the interview was conducted. Additional knowledge that the study might not have anticipated in
the first place and that is for sure a key strength of this qualitative interview method (Saunders
et al. 2012).
Furthermore, the study accomplished the interviews with the respondents from the small and
medium sized enterprises Nordic Lapland and Varvet Luleå face to face (i.e. personal meetings
in real life context). Meeting in a personal meeting and being engaged personally with the
respondents leads to a better response rate rather than performing quantitative research in sending
out a questionnaire. Also, participants are less likely to fully commit their time in answering a
questionnaire (David & Sutton, 2016). The interview with the respondent from Treehotel was
conducted through a telephone interview. Due to prevailing circumstances (coronavirus), the
respondent expressed the desire to conduct the interview by telephone. Since it is important that
the respondent feels safe and secure during an interview in order to get reliable answers (David
& Sutton, 2016), the researchers accepted the request.
As mentioned earlier in this chapter, an interview means more than just asking questions since it
is just as much about listening cautiously to the response that is given. For that reason, the
interviews were recorded and transcribed which contributed to a solid collection of data to
analyze (David & Sutton, 2016). Something that will be further discussed in section 3.6, data
analysis.
3.5 Sample Selection
To gather samples, researchers usually use one of these two sample methods: probability
sampling or non-probability sampling. Probability sampling is built on the principle that
everyone in the population has the same opportunity to participate, while non-probability
sampling is characterized by the opposite, there is no certainty of an individual to be a part of the
selected sample (David & Sutton, 2016). However, probability sampling is more used when
performing quantitative research. A non-probability sampling can be used when time or cost
22restrictions make it impractical to investigate a widely dispersed population (David & Sutton,
2016). Since this study applied a qualitative research and was time restricted a non-probability
sampling method was applied.
Within non-probability sampling there exist more underlying sampling methods to choose from.
One of those methods is purposive sampling. In a purposive sampling the sampling selection is
made in line with the researcher's own ability and perception of which individuals might be
appropriate for the research. It places demand on the researcher’s since they are using their own
diligently in order to select the most appropriate sample (David & Sutton, 2016). In this study,
the researchers chose three individuals in Norrbotten, with positions such as CEO, part-owner
and media and press responsible. The researchers assessed that the selected respondents had
specific knowledge that could answer this study's research questions. The selection was based on
the researchers' perception of who is the most suitable research person to choose (David &
Sutton, 2016). Therefore, this study used a purposive sampling.
3.5.1 Selected Companies
The selected organizations were Nordic Lapland Resort, Varvet Luleå and Treehotel. Nordic
Lapland Resort is a tourism company located in Axelsvik, outside Kalix. Varvet Luleå is a
restaurant located in Luleå. Treehotel is a hotel company located in Harads, outside Boden. The
small and medium sized enterprises were selected since all represented the hospitality industry
in Norrbotten. The hospitality industry is the most affected business industry in Norrbotten (due
to the coronavirus) which was another reason why companies in that industry were selected. The
firms offered a clear view on how small and medium sized enterprises in the hospitality industry
were affected financially by the economic crisis derived from the coronavirus. The selected
companies also offered a clear view of how SMEs in the hospitality industry in Norrbotten
adapted their way of marketing as a response to the economic crisis coming out of the
coronavirus.
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