Recently, I read an article that appeared in the New Yorker Magazine. It discussed how two well-known cereal companies, Kellogg’s and Post, dealt with the economic depression in the late 1920s. At the time, ready-to-eat cereals were relatively new and Americans didn’t view them as a real alternative to oatmeal or cream of wheat.
When the Depression hit, Post did what most companies do, reined in expenses, cut back on research and development and cut its advertising budget. But Kellogg’s did the opposite, it doubled its ad budget, moved aggressively into radio advertising, and heavily pushed its new cereal, Rice Krispies. Even when the economy cratered in the early 1930s, Kellogg’s profits rose 30% and used that momentum to go on and become the industry’s dominant cereal company.
Research has shown time and time again that companies that continue to spend on acquisition, advertising, and research and development during economic downturns do significantly better when the economy turns around.
You can read more about Kellogg’s in my book: “Branding Insights for Small Business” available on Amazon.com.
To read the complete article, click here. Special thanks to Gary Carr, an excellent media rep at Hanley Wood, for forwarding the article link to me.