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Advertising in a tough economy: The Kellogg’s and Post story

Bowl of CerealIn difficult financial climates, you may think advertising and marketing budgets are a great place to slash budgets and reduce costs. But before you do that, you should consider this story from The New Yorker.

It's about one of the most famous brand rivalries in history: The feud between cereal makers Post and Kellogg's.

You see, in 1929 the two companies were in a close race to control the relatively new breakfast cereal market. Though it had been around for decades, most Americans were just beginning to see dry cereal as a viable alternative to other breakfast staples such as oatmeal and Cream of Wheat. So no one knew how demand would be impacted by any economic downturn, much less the Great Depression that struck that year.

After the stock market crash, Post did the predictable thing: it slashed expenses, especially in advertising. But Kellogg's reacted differently. They doubled their advertising budgets, branching out into new media, like radio, and soon created friendly characters Snap, Crackle and Pop to push Rice Krispies.

The result? Four years later, even amid the worst financial crisis in American history, Kellogg's saw its profits rise by 33 percent. And as a result of all that advertising, they became what they are today — the dominator in the breakfast cereal industry. When you think "cereal," you probably think of a Kellogg's brand or character first.

Kellogg's success occurred despite the lack of physical difference between their product and that of their rival. In fact, before breakfast cereal companies started coloring puffs of wheat and rice with artificial dyes and coating them in sugar, the products offered by Kellogg's and Post were nearly identical in every respect.

So what does this teach us? Slashing advertising costs may help balance your books, but it could hurt you in the long run. Think of advertising as an investment in your brand's future, as well as a way to move product in the present. Customers may buy less during a recession, but it's still worth the investment to shape their buying habits when tough times end. You'll see the benefits months, years and decades from now.

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