What ‘Cereal + Marketing + Recession’ Have in Common

July 10, 2024 Michelle Rupp

There is debate, is the US in a recession or not?

I think we can all agree prices have skyrocketed to the highest levels I’ve ever seen. We are paying more for less and some have cut back on their spending in general.

As business owners that’s a frightening situation. Revenue may be down while cost of goods may be up.

The next move of the business owner is predictable.

When the belt needs tightening, cut marketing/advertising/promotion. That is the singular worst decision a business owner could make.

That is the Number 1 thing NOT to do.

Have you heard the story between cereal giants Post and Kellogg? As the Great Depression of the 1930s hit, cereal giants Post and Kellogg had (just like you and me) a decision to make. Post did what most do, they reigned in their advertising spending. Essentially cutting their marketing efforts. Kellogg took the opposite approach. They DOUBLED their ad budget, flooded the radio airwaves with commercials and heavily pushed its new cereal, Rice Krispies. By 1933, even as the economy cratered, Kellogg’s profits had risen almost 30% and it had become what it remains today: the industry’s dominant player. Post played it safe and didn’t take the risk. Kellogg did. By the time the economy had improved Post was way behind and forced to play catch up if they wanted to still be competitive.

Research supports through the Great Depression, the recession during 1981-82, early 1990s and, most recently 2008-2009, companies that remained market leaders or became serious challengers during the downturn had increased their acquisition, R. & D., and ad budgets, while companies at the bottom of the pile had reduced them.

Okay so then why do companies cut back when times get tough?

It boils down to risk vs. uncertainty.

Risk describes a situation where there is a sense of a range and likelihood of possible outcomes. Uncertainty? Well, who even knows what might happen. The situation of possible outcomes is as clear as mud. Uncertainty is always a part of business but in a recession or tougher economic times, it dominates. No one knows how long the recession will last, what impact it will have on shoppers, will buying habits change? So it makes sense to focus on what you can control -- minimizing losses and improving short-term results. Even if in the long run it costs more.

Here’s an interesting brain nugget.

Our brains were designed to keep us safe and protected. Not to launch us forward. We get nervous and may experience flight, fight or freeze when uncertainty enters the picture. If our brain’s job is to keep us safe then taking a risk would seemingly be off the table. Even if that’s the best move a business owner could make.

Post and Kellogg aren’t the only major companies to fight this fight, Chrysler was third in the US automarket in the late 20. GM was first, Ford second. Chrysler introduced a new brand, Plymouth, and by 1933, Chrysler had overtaken Ford’s number 2 spot.

In the South there’s a phrase ‘you gotta risk it to get the biscuit’. Are you willing to risk it, double down on your marketing, promotions and going after positive publicity to set your business apart?

Or will uncertainty and fear scream at you to cut back in these areas and then spend more in the long run playing catch up. Assuming the business survives?

As a marketer, promoter, and lover of positive publicity, my heart wants YOUR business to be successful.

Your business can be Kellogg, your business cannot only thrive but also survive.

Why don’t we go after free media together?

Some information for this article was found in this 2009 article from The New Yorker.

No one likes the feeling of wandering aimlessly.

Memorable Results Media regularly comes alongside small businesses as a guide in supporting business owners craft their own roadmap. If this sounds like a great idea but you are at maximum capacity, drop me an email at michelle@memorableresultsmedia.com

I’d love to hear from you!