Recession Marketing: Spending Will Make You Stronger
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Is it good business practice to reduce or eliminate marketing expenditures during a recession? The logical answer would be “yes,” as the revenue stream reduces to a trickle. History, however, has shown this practice to be counterproductive, even detrimental, to long-term success. Weathering the storm is certainly a priority, but the objective is to get back to port safely after the storm abates. History, with nothing but facts on her side, has never been proven incorrect. One thing is certain: Making decisions based upon awareness is good practice; basing them on fear is not.
A Tale Of Two Cereals
In the early twenties, both Kellogg and Post Cereals were not sure that they would overcome cream of wheat or oatmeal to the popular breakfast foods of the day: a hearty cooked breakfast, cream of wheat, or oatmeal. The two companies fought one another for market share dominance until the depression hit.
Each company took a different path. One braced for the economic storm, cutting marketing budgets, reining in expenses, and laying off workers. The other stepped into the storm, doubled advertising expenditures, aggressively took advantage of radio advertising, and focused all their strength behind a single product. By the early 1930s, the economy had fallen to it’s lowest point, yet one company showed a 30% rise in profits. Which cereal company came out ahead?
The answer: Kellogg Cereal, with their top-selling product, Rice Krispies. A bold decision made during crisis defined Kellogg Cereal’s future, and they’ve maintained industry dominance for the past seventy-five years.
But That’s Just One Case Study…
Okay, so that’s a single success story. A fluke. An anomaly. Fortunately, there are numerous examples: In February 1930, four months after the historic market crash, Henry Luce launched an expensive, “irreverent, and vibrantly-colored arsenal of human interest stories.” At $1.00 per copy, it was more than many could afford, and it kicked off with 30,000 subscribers. Seven years later, Fortune’s circulation was at a half million, and the company was in the black. Kraft Foods is another example. Kraft realized that consumers were downtrodden and needed something to help them through the depression, not to mention that Kraft’s mayonnaise sales were plummeting. So, Kraft decided to launch a new product called Miracle Whip (a dressing/mayonnaise) at the Chicago World’s Fair in 1933. “A sandwich just isn’t a sandwich with out the TANGY ZIP of Miracle Whip,” was the tagline for the new product, and six months after launch, Miracle Whip was outselling every single brand of dressing and mayonnaise available.
It’s Innovation, Stupid!
Innovation is the key. Kellogg Cereal focused on one product and doubled their marketing expenditures. Fortune filled a niche that was missing from The Wall Street Journal. Kraft introduced a new product. Other examples: Revlon,a start-up cosmetic company, introduced a classy polish for fingernails. Within years, they were the most well-known cosmetic company in the world. Two brothers began a company that marketed the first car radio successfully, and began a company later named Motorola. In England, a man came up with books that were affordable for the masses by making them entirely out of paper (no hardcovers). The man became the founder of became Penguin books, and “paperbacks” sold exclusively through Woolworths. Texas Instruments, Hewlett-Packard, basketball, The Pittsburgh Steelers, Allstate Insurance: all rooted in the depression. Studies completed during recessionary periods show that this was not a fluke; the same results are seen for companies that innovate and stay on course through the tough times: they emerge stronger and more profitable than those that remained static.
In a study of 600 business-to-business companies, McGraw-Hill Research found that businesses that maintained or increased their advertising expenditures during the 1981-1982 recession, averaged higher sales growth during the recession and in the three years following. By 1985, sales of aggressive recession advertisers (those that either maintained or increased spending) had risen 256% over those that cut-back on advertising. (Innovating Through Recession)
A few years ago, a small book came out; “Whatever You Think, Think The Opposite,” written by a former Saatchi and Saatchi Creative Director named Paul Arden. The book is a guide that points out that one of the most dangerous practices in life is playing it safe.
The first page is emblazoned with this quote: “It’s the wrong way to think, but the right way to win.” That leaves two paths from which to choose: the safe, well-traveled path, or the road less taken. The latter may be treacherous, but it will certainly be more fun: afterall, how often does a company get a chance to reinvent themselves?
Jeff Louis: Strategic Media Planner, Project Manager, and New Business Coordinator. His passion is writing, contributing to BMA as well as freelancing. He’d love to hear from you: linkedin.com/in/jefflouis or twitter.com/jlo0312.
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