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Advertising through Recession

"It was the best of times, it was the worst of times..."

Numerous studies support the conclusion that a recession is the best of times for active advertising and the worst time to cut back on it. BDO Chartered Accountants have the following advice for South African business owners, "Don't stop advertising. This is the time to capture the hearts and minds of consumers... Robust businesses increase advertising in a recession to win customers away from their competition."

A Strategic Planning Institute study of the 1981-82 recession reported that "during recessionary periods these businesses [that advertised] tended to gain a greater share of market. The underlying reason is that competitors, especially smaller marginal ones, are less willing or able to defend against the aggressive firms."

A belief that "the rich get richer and the poor get poorer" is by and large accurate in the general case but the visible landscape can also undergo dramatic shifts as a result of recession. A Bain & Company study of the 1990-91 recession reported that as a result of advertising, twice as many companies leaped from the bottom of their industries to the top during recession years, compared to the years before and after.

since then have remained the dominant player in their industry...

You probably know the story of Snap, Crackle and Pop, but if not it's worth hearing. In 1895 C.W. Post founded Post Cereals and 10 years later Kellogg's Cereals was founded by W.K. Kellogg. By the late 1920s these two companies dominated the packaged cereal market but were still far less popular than the more traditional oatmeal and cream of wheat breakfasts. Under the circumstances, Post's decision to cut marketing costs during the Great Depression seemed sensible but at the same time Kellogg's doubled their advertising budget, moved into radio and aggressively advertised Rice Krispies with their well-known characters Snap, Crackle and Pop. By the end of the recession they had boosted their profit by 30% and since then have remained the dominant player in their industry. [source]

Kellogg's was the first company to do outdoor advertising on the Times Square billboard in New York City, theirs was the only cereal eaten aboard Apollo 11 during the first moon landing and Kellogg's is the official supplier of breakfast cereals to HM Queen Elizabeth II. In 2007, despite recession speculation, Kellogg's spent over $1bil on advertising for the first time and the second quarter saw their profits rise by 9% and sales by 11%.

this year Hyundai made huge market share gains

There are countless similar examples in history - Chrysler overtook Ford in the Great Depression, Stears stole market share from Wards in World War II, Revlon from Avon and Hershey in the 1970s recession, Taco Bell and Pizza Hut from McDonalds in the 1990-1991 recession and this year Hyundai made huge market share gains with their bold and optimistic advertising in the face of worldwide recession.

Many see advertising in recession years as an idealistic approach, but in the words of Victor Hugo, "The need of the immaterial is the most deeply rooted of all needs. One must have bread; but before bread, one must have the ideal."

Kellogg's literally ate Post Cereals for breakfast as a result of their aggressive advertising campaign during the Great Depression of the 1930s.

"Advertising is totally unnecessary.
Unless you hope to make money."

[Jef Richards]


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