When in Doubt, Double Down

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.

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