You are in business remember? You have chosen to be an entrepreneur! What do entrepreneurs do whe there is a head wind? Do they let go and say "it's too hard"?
- Fact: In business, staying stationary does not work: before you know it you are going backwards
- Questions: What industries fared relatively better and worse in terms of pricing and demand during the Great Depression of 1929? Do the industries reflect a hierarchy of demand from essential consumables to deferrable purchases to capital goods? What specific companies did well in any industry and what distinguishes those companies.To begin, not all was gloom and doom during the Great Depression. It was a time when those who knew what they were doing made great economic strides and the very nature of the depression itself was aneconomic boon for them. It was a time when several companies benefited from aggressive marketing while their rivals cut back. A good example of that would be Kellogg besting C.W. Post during that time. Consumers didn't totally stop spending during the depression, most just looked for better deals and the companies providing those better deals came out stronger after the depression ended. When spending picked up, consumer loyalty to those companies remained.To state a generality, those companies who not only survived but did well and grew during the Great Depression are those who continued to act as though there were nothing wrong and that the public had money to spend. In other words, they advertised. These are industries who didn't wait for public demand for their products to rise, they created that demand even during the most difficult of times. Because so manycompanies cut spending during that era, advertising budgets werelargely eliminated in many industries. Not only did spending decline, these companies actually dropped out of public sight because of short sighted decisions made about spending money to keep a high profile. These advertising cutbacks caused many customers to feel abandoned and associated the effected brands with a lack of staying power. This not only drove customers to more aggressive competitors but caused a certain amoung of financial mistrust when it came to making additional investments in the no longer visable companies. Both anecdotal and emperical evidence support the case that advertising was the main factor in the growth or downfall of companies during those years. To put it bluntly, the companies which demonstrated the most growth and which rang up the most sales were those which advertised heavily. The Great Depression offers classic examples of the power of brand advertising even during times of economic crisis. Proctor and Gamble - This is a company which has a philosophy of not reducing advertising budgets during times of recession and they certainly did not make any such reduction during the Depression. P&G has made progress in every one of the major recessions and that is no accident. When their competitors were swinging the budget axe, P&G actually increased their spending. While the Depression caused problems for many, P&G came out of it unscathed. Radio took P&G's message into more homes than ever.
- Chevrolet - During the 1920s, Fords were outselling Chevrolets by 10to 1. In spite of the Depression, Chevrolet continued to expand its advertising budget and by 1931, the "Chevy 6" took the lead in its field and remained there for the next five years.
- Camel Cigarettes - in 1920 Camel was the top selling tobacco product. American Tobacco Company then struck back with the Lucky Strike brandand by 1929 Lucky had overtaken Camel as the number one brand. Two years later in the heart of the Depression, Chesterfield also overtook Camel. Camel countered with a massive increase in advertising spending and by doing so demonstrated the power of advertising during depressed times. By 1935, it was back on top. Now, these examples count as anecdotal. But in addition to these examples, studies have demonstrated that during times of recession, companies that maintain advertising during these periods experience higher sales and profits during the downturns and afterward than companies who cut their advertising budgets. It was also the very nature of this advertising that spurred the growth of two other industries during the Depression. The first of which was radio broadcasting.
Let's return to Proctor and Gamble for a while. P&G first turned toradio in 1923 advertising Crisco on a New York station. Other products such as Ivory and Lava soap were advertised on 'product oriented' shows which were similar to todays infomercials. But in the heart of the depression P&G took a step which changed not only that company but the broadcast medium forever while creating great demandfor its products. The president of P&G at the time was Richard Deupree. In spite of the fact that shareholders were demanding that he cut back on advertising, he knew that people were still buying essential household products. So he created radio programming that did not focus on a product. Because of that, we now have a cultural attribute known as the "soap opera." - In 1933, P&G went on the air with its first "soap" - "Ma Perkins,"sponsored by Oxydol. P&G was so satisfied with the increase of sales, they went on to introduce "Vic and Sadie" for Crisco, "O,Niells" for Ivory Soap and "Forever Young" for Camay. By the time 1939 rolled around, P&G was sponsoring 21 radio programs and they doubled their radio advertising budget every two years during the Depression.
- Radio was one of the fastest growth industries of the depression. P&G virtually built day time radio with its advertising budgets and programming. Two industries were thriving from the advertising budget of one.The print media was also a growth industry during the Depression. To give some reason for this, we now return to Chevrolet. the first adsf or Chevrolet appeared in print in 1914. In 1927, they began to increase their print advertising budget. As the country moved into the Depression a couple of years later, Chevy did not let its commitment to print advertising falter and its car ads not only kept some publications afloat, it helped many to grow. In as much as theterm "print media" covers many outlets, they pioneered the outdoor advertising medium, billboards.
- Chevrolet also went into radio and sponsored such Depression Era classics as Fred Allen and Jack Benny. Chevy's print ads appealed to the "emotional" side of a buying decision which was a great move in light of the economic uncertainty of the time.So once again, those companies which took advantage of the Depression and came through in good form were those who kept their name in frontof the public in spite of a lack of purchasing power.
- My opinion: Whilst I agree with most of this article, two things have changed since the early thirties. The first one is the incredible number of competitors for each and every industry, which was not an issue in the 30s. The second one is a result of the first one: the exponential increase in the cost of "Branding" and advertising.
So if you want to stay proactive in the economical downturn you have to use direct, street-smart and cost effective marketing, unless you have millions to spend in "keeping your name out there" kind of stuff!
In Chinese the word "crisis" also means "opportunity"! What was proven in previous recessions will apply to this one even more: All the basic principles that make a business successful regardless of economical conditions MUST be implemented systematiacally.
