Are you pulling back on spending while business is quiet?

When things get a bit quiet often the temptation is to cut back on spending, and in many ways that makes sense. However, marketing, advertising, research and development (R&D) and other ‘less important’ aspects of business tend to get cut as well. This is not always the best move to make. This article will have a quick look at an example of a company who increased their spending on these things when times were tough, and what happened to them.

The example that will be discussed today will be that of Kellogg’s. They’re basically a household name and just about everybody’s heard of them. Back before the Great Depression in the 1930s, packaged cereal was a brand new concept and therefore there were few competitors in the market. Their main competitor at the time was a brand called Post. When money became scarce, Post did what most other businesses did and cut back on spending on ‘non-essentials’.

Kellogg’s, on the other hand, did the opposite of what you’d expect. Looking at the history page on their website here it can be seen that they actually doubled their spending on advertising and invested heavily in radio (which was a big thing back then). They grew through the Depression, increased their profits and consequently came out the other side as the dominant player in their industry. Post still do exist, however, they remain a less popular option and missed the fame now awarded to Kellogg’s.

This marketing technique is not without its risks. The New Yorker released an article in 2009 that discusses the approaches employed by Kellogg’s and Post. In the final paragraph the author mentions that companies are scared of two kinds of failure. The first is ‘sinking the boat’, which is taking a gamble and losing, and second being ‘missing the boat’, which is sitting back and watching opportunity pass you by. That article can be read here. If a business is backing off from investment in marketing, R&D, or other kinds of growth, they may well be ‘missing the boat’ to those businesses that are. Of course, they could take the gamble which leaves the door open for losses.

While things are quiet, opportunities are there to move forward while others are pulling back the reins. Obviously when this time comes companies don’t have bottomless pockets or huge reserves of cash lying around, so whether it’s spending money or it’s spending time, energy, effort or focus, it is essential to not neglect these things. They could be the key to giving your business a Kellogg’s boost.

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