A Lesson On Thriving In A Recession

It Doesn’t Pay To Be Logical If Everyone Else Is Being Logical

The headline above is borrowed from Rory Sutherland of Ogilvy. Rory is a passionate advocate of behavioural science and counterintuitive thinking. It’s particularly pertinent in the current situation we find ourselves.

We are at the beginning of the biggest economic disruption in our lifetimes. Rescue packages of unprecedented scale have been cobbled together to protect businesses and jobs. Governments across the world are set to pay people’s wages directly. Businesses of every type, from every sector, are already closing and business owners are taking drastic steps to mitigate the impact and keep the lights on.

In particular, advertising budgets are being slashed and marketing activity is being put on hold indefinitely. Spending must be cut: it doesn’t make sense to advertise with consumer confidence falling through the floor. Let’s consolidate, weather the storm and wait for the good times to return. This is perfectly logical, a good idea. But the opposite of a good idea can also be a good idea.

Let’s look at an example from the Great Depression of the 1930s. In the US in the late 1920s two companies dominated the market for packaged cereal - Kellogg’s and Post.

When the Depression hit in 1929, the two companies responded differently. To borrow from the New Yorker:

“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 thirties.) By 1933, even as the economy cratered, Kellogg’s profits had risen almost thirty per cent and it had become what it remains today: the industry’s dominant player.”

From Kellogg’s website:

“W.K. Kellogg made an unprecedented move as the United States sank into the Great Depression. Instead of cutting back, he doubled his advertising spending - and Kellogg cereal sales increased.”

In summary, Post took the logical approach and Kellogg’s took the counterintuitive, illogical approach. It paid for Kellogg’s to be illogical while the rest of the market was being logical. This is just one example of course and both approaches will have their share of successes and failures.

The point, to borrow from Rory Sutherland again, is to test counterintuitive things, because no one else will. Not everything that makes sense works, and not everything that works makes sense.

If you want to thrive during these uncertain times, now could in fact be the time to act illogically and increase your advertising spend while the competition consolidates. Kellogg’s wouldn’t be the company it is today if it had acted logically in 1930.

Some food for thought.