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When in Doubt, Double Down

June 26, 2009  

In a piece at The New Yorker, James Surowiecki recounts how two companies—Post and Kellogg—reacted to the Depression. "Post did the predictable thing: it reined in expenses and cut back on advertising," he writes. "But Kellogg doubled its ad budget, moved aggressively into radio advertising, and heavily pushed its new cereal, Rice Krispies."

The strategy paid off. "By 1933, even as the economy cratered," he continues, "Kellogg’s profits had risen almost thirty per cent and it had become what it remains today: the industry’s dominant player."

Surowiecki points to studies that suggest why a company that doubles down on advertising will tend to outperform competitors during economic downturns, and will often emerge stronger than before:

  • Recessions make the strong stronger, and the weak weaker. "[T]he strong can afford to keep investing," he explains, "while the weak have to devote all their energies to staying afloat."
  • When the weak scale back on advertising, the campaigns of strong companies have a greater impact.

To explain the urge to retrench, despite this evidence, Surowiecki notes the difference between risk and uncertainty. With the former, a business can make decisions based on a likely range of outcomes; with the latter—which becomes dominant during a downturn—no one knows what to expect. "So it’s natural to focus on what you can control," he says. "[M]inimizing losses and improving short-term results. And cutting spending is a good way of doing this."

According to Surowiecki, when companies worry too much about sinking the ship with a bad decision, they might be missing the boat by letting a good opportunity pass. Your Marketing Inspiration is to remember that Miracle Whip and the iPod were both introduced during recessions.

More Inspiration:
John Wall & Christopher Penn: Google Wave & Google Local Business Center
Stephanie Miller: What You Should Be Measuring
Paul Dunay: Can Twitter's Growth Continue?

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  • by BizConsult Fri Jun 26, 2009 via web

    As with most business/marketing issues - the answer of whether to advertise in a down economy "depends" on many factors:

    - Whether it makes marketing and fiscal sense to increase advertising: If category consumption is declining, and/or you’re in a conspicuous consumption category, advertising may not drive a reasonable increase in consumption or preference.

    - What your share of voice was to begin with: If you’re already out-shouting the competition and now they’re cutting advertising – do you really need to double down on a dominant SOV?

    - Stronger brands don’t necessarily come out on top in a recession: Recent articles are hyping how - in search of lower prices, or a different value equation - many consumers have been trading down from leading brands to store/private label and other price-driven brands.

    - What you’re selling matters: What does it offer in terms of differentiation/benefits? Where it is in the Product Life Cycle? What are the awareness and imagery?... This article points out that new products like the iPod and Miracle Whip were introduced during recessions – they met the USP, new product/benefits and other criteria. Likewise, the article starts by referencing that Kellogg’s had a “new cereal, Rice Krispies” to introduce (and help it succeed).

    Bottom line, each brand/category/competitive situation should be reviewed to determine whether increasing advertising makes marketing and economic sense!

    - Steve Udell

  • by Michelle Mon Jun 29, 2009 via web

    The Ad-ology Research report 'Advertising's Impact in a Soft Economy' proved this - asking TODAY's consumers how they feel. Overwhelmingly, consumers perceive that a company that reduces or stops advertising is struggling. And a company that continues to advertise is seen 'committed to doing business' and 'being competitive.'

    Companies have to get past the knee-jerk reaction to cut ad spending and be as aggressive as they can to grow their business for the future. Make advertising smart and realistic, and focus on the value of the product. That's what consumers are looking for today.

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