The New Yorker “Financial Page” is always a favorite of mine, but the April 20 page written by James Surowieki presents a typical but false dichotomy between two possible reactions to the recession - “rein in expenses and cut back on advertising” or “double the ad budget and move aggressively on new brands."
In the 1930s, Kellogg's took the "high road" and doubled its advertising, and pushed new brands like Rice Krispies while Post slugged the depression out by going defensive and hibernating. The result according to Surowieki: Kellogg's became what it remains today - “the industry’s dominant player.”
He also uses the example of Chrysler’s behavior at the onset of the depression. It promoted its new brand, Plymouth, heavily and vaulted past Ford by 1933.
Kraft introduced Miracle Whip in 1933 and saw it become a #1 seller. Texas Instruments introduced the transistor radio during the 1954 recession. Apple launched the iPod in 2001.
These are all wonderful examples, but they are at best anecdotal and at worst misleading as they relate to Surowieki’s thesis that it pays to advertise.
Just because two events happen at roughly the same time does not mean that one caused the other. Perhaps the great advertising and the great product research that vaulted Kraft to #1 were both instigated by the same factors – tenacity and great labor relations, for example.
Staffing companies finding the climate tough right now need to look beyond adages like “it pays to advertise” and carefully determine if conventional wisdom applies to their market.
I’ll be arguing in future posts that business model innovation will play a much bigger role than ad spend in determining which companies emerge as the top players in the decades to come.