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Gini Dietrich

What Kellogg’s and the Great Depression Can Teach You About PR and Marketing

By: Gini Dietrich | November 17, 2009 | 
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Snap Crackle PopA few weeks ago, my friend Steve McKee wrote in his BusinessWeek column about companies doing their growth a big disservice in a down economy when they cut their advertising and PR budgets. You can read the article and comments here.

Then, when I asked each of you what you’d like to read about in future blog posts, my friend John emailed me and asked, “Why is it that during tough economic times, most companies reduce marketing budgets? If marketing is of real value to a company and if marketing works for that company, wouldn’t you increase spending in tough times?”

This brings me to one of my favorite case studies: How Kellogg won the cereal wars of the Great Depression. Forbes, The New Yorker, and several other national media highlighted this story earlier this year, when it looked like the economy wasn’t likely to get better anytime soon. Following is an expert I refer to a lot when people ask me the same question John asked.

In the late nineteen-twenties, two companies—Kellogg and Post—dominated the market for packaged cereal. It was still a relatively new market: Ready-to-eat cereal had been around for decades, but Americans didn’t see it as a real alternative to oatmeal or cream of wheat until the twenties. So, when the Depression hit, no one knew what would happen to consumer demand. Post did the predictable thing: It reined in expenses and cut back on advertising. But Kellogg doubled its ad budget, moved aggressively into radio advertising, and heavily pushed its new cereal, Rice Krispies. (Snap, Crackle, and Pop first appeared in the 1930s.) By 1933, even as the economy cratered, Kellogg’s profits had risen almost 30 percent and it had become what it remains today: The industry’s dominant player.

With social media you can now heavily push your brand, your company, your service, or your product at half the cost of traditional methods. If you listen, build your communities, let your brand ambassadors spread the word, and provide value, your business will come out of the Great Recession as a dominant player, no matter your size.

So my question for you is: If you decrease your spending and no one knows you’re still in business, which creates a drop in revenue and profits, doesn’t it make sense to spend money and time on the new forms of marketing, advertising, and PR?

About Gini Dietrich


Gini Dietrich is the founder and CEO of Arment Dietrich, an integrated marketing communications firm. She is the author of Spin Sucks, co-author of Marketing in the Round, and co-host of Inside PR. She also is the lead blogger at Spin Sucks and is the founder of Spin Sucks Pro.

12 comments
JeannieV
JeannieV

Another reason Kellogg's won over was their loyalty to their people. They did not fire people during their hard times in the 30's. They also shipped their products in rations to troops over seas who stayed loyal when they returned home.

Gini Dietrich
Gini Dietrich

Troy - Isn't the WSJ the ONLY newspaper in the top 25 not to have a declining circulation?

Doug - BRILLIANT quote, "Cutting your marketing budget right now is like saying your cardio vascular system isn’t performing well so you’re going to cut your cardio training budget." I'm stealing this.

Great comments, as always! Maybe we'll be able to change the perception that companies can do without PR, advertising, and marketing in a down economy.

Dee Gardner
Dee Gardner

There is just so much opportunity to be had. I talk to business owners every week that are taking advantage in this down economy and growing their businesses. I will retell this story over and over again. Such a good example.

Elizabeth
Elizabeth

I completely agree! Those companies who spend the money on marketing during hard times are going to be the ones who rise to the top both during the hard times and after.

Frank Strong
Frank Strong

Great anecdote! In good times, awareness programs are akin to having a conversation in a crowded room. You have to focus and stand relatively close to someone to listen and contribute to a given conversation. As a downturn gains steam, the conversation in that room dwindles as budgets slim, until fewer people are talking. However this is the worst possible reaction: at a time when businesses need to be having more conversations with customers and prospects, they instead choose to have fewer.

Doug Davidoff
Doug Davidoff

As I've thought about this post since my last comment, I realized that I missed one key point - the complete agreement I have that this is not the time to cut marketing budgets. Marketing done properly builds asset value and creates revenue. Cutting your marketing budget right now is like saying your cardio vascular system isn't performing well so you're going to cut your cardio training budget.

Andy Donovan
Andy Donovan

Thanks for this post Gini - it seems to me that everytime we've seen a dip in the markets there has been a discussion on cuts, cuts and more cuts to marketing and communication budgets/departments.

Makes one scratch their head while at the same time taking advantage of competitor miscues and enhancing one's efforts to enhance "top of mind" awareness as a result of ill advised cuts. Like the old saying goes - every challenge creates an opportunity - those who survive long term not only know this they live it each and every single day.

Julio Ricardo Varela
Julio Ricardo Varela

This is the time to act. The tides are shifting, and the players will change. History has always told us this, and this time is no different. Excellent, excellent post!

Troy Costlow
Troy Costlow

The Wall Street Journal took this advice & they were the only newspaper to report an increase in circulation - which is especially important considering the precipitous drop in the rest of that industry.

If smart recession advertising can save a print-journal, it can save almost anything.

Doug Davidoff
Doug Davidoff

Gini, I absolutely agree with the theme of this post. There's a big barrier though. As you say:

With social media you can now heavily push your brand, your company, your service, or your product at half the cost of traditional methods. If you listen, build your communities, let your brand ambassadors spread the word, and provide value, your business will come out of the Great Recession as a dominant player, no matter your size.

The problem is that too many companies take a pushing approach and are merely using "social media" as another means to push, peddle and annoy. They've never stopped to ask themselves questions like:
- Who's our core market?
- What is it that our core market needs that they don't already have?
- What are we doing to earn their attention

They take a solutions approach, instead of doing the really hard of work first understanding their buyers - better than their buyers understand themselves. When these questions are asked, and this hard work is done, then (and only then) social media becomes an ideal resource to "be the next Kellogg's."

Lindsay Brown
Lindsay Brown

Companies immediately default to cutting budgets they think they can do without. But if companies were to think strategically, they'd see that advertising and marketing are budgets they absolutely need.

Look at the GM over the past year. They had to do something to dig themselves out of that hole (or at least try). That something was introduce ways to sell cars through offering ridiculous deals. The only way to get the word out about those deals was through advertising and marketing using both traditional methods and new, social mediums.

Not only that, but if numerous companies are cutting back on those budgets, you can expect to see those same companies get lost in the shuffle. Companies should take advantage of tough times and advertise like crazy because they can get more for their money both quality and quantity-wise. Ad prices drop and key ad spots open up.

Just because times are tough doesn't mean the message isn't working...

Deb Dobson
Deb Dobson

Agree, agree, agree. I've watched, in the legal industry in particular, companies and firms cut marketing, PR and training budgets. In fact, usually these are the first to get cut. One firm slashed marketing/PR and any training, yet spent thousands on a new phone system when there wasn't an urgency to spend that big money in-house on something that the clients and prospects wouldn't even notice. All the client or business prospect cared about was someone answering the call and helping them in time of need.

A great post Gini as always.

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