A recession is a terrible thing to waste

If history repeats itself, then what can be learned from prior recessions?  Studies have shown businesses that increased or maintained advertising, development and growth initiatives during a recession do significantly better during the recovery period than those that make big cuts. 

I read a recent article that compared the strategies of the two dominant packaged cereal companies during the Great Depression: Kellogg and Post.  With the uncertainty in consumer demand, Post reduced expenses and cut back on advertising. Kellogg decided to double its advertising budget and launch its new cereal, Rice Crispies. The profits of Kellogg increased over 30 percent during the depression and remains the dominant player today while Post still hasn’t recovered.

Trimming the fat and eliminating unnecessary costs is critical to survive a recession, but the past suggests it is also important to invest and try new things. In visiting dealers I have seen many creative and low cost ways to refresh and transform a business. There are also some noticeable differences in innovation and advancements across the major product lines and brands.  It will be interesting to watch the businesses and brands that have taken risk in this market versus those that have not.

We will soon see who performs better in the future.