PR 101

It is no secret that the recession is deeply affecting marketing, public relations and advertising agencies. In the last two months, at least a dozen marketing communications people I know have lost their jobs. It is nothing they have done or haven’t done. It’s just that clients are just not spending.

I can attest to the recession’s effects on my own small business. Clients have cut spending, gone away completely, or taken longer to make decisions on new marketing efforts. I don’t blame them. There is a lot of fear out there. We have not been through anything like this since the end of World War II. None of us know what to do.

So companies are doing what seems logical. They are retrenching, laying off people, and slashing their marketing budgets. The thinking seems to be that we need to hoard our resources or we won’t survive. Right now, we cannot worry marketing. Besides, the thinking goes, consumers aren’t buying right now anyway. They too are retrenching.

On the surface, that seems like the course to take. Prudence and frugality should rule until the whole thing is over. do. But it’s not the course companies should be taking. and I can prove it. Let’s first consider the cereal giant, Kellogg.

“So, when the Depression hit, no one knew what would happen to consumer demand,” James Surowiecki wrote in the April 20, 2009 issue of 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.”

Surowiecki also wrote “… a major study, by the Strategic Planning Institute, of corporate behavior during the past thirty years found that reducing ad spending during recessions did improve companies’ return on capital. It also meant, though, that they grew less quickly in the years following recessions than more free-spending competitors did.”

It is understandable that many executives are scared to gamble on introducing and marketing something new. I think they see themselves as captains of the Titanic. If they go too fast, they risk running into the iceberg. Going slow allows them to miss the obstacles. But remember this about the Titanic: it wasn’t speed that sank it; it was the failure to see the iceberg that did in the ship. Neither lookout had binoculars and didn’t see the massive piece of ice until it was too late.

Fearing that iceberg, executives don’t see the value in stoking the engines up. But, as long as there are good look-outs with the right equipment, the ice can be avoided. Some companies know that. Let’s look at some the products introduced and marketed during economic hard times:

• Kraft introduced Miracle Whip in 1933. Through both radio and newspaper ads, it became the top salad dressing in the United States.

• In 1933, Proctor & Gamble went on the radio with the first soap opera – “Ma Perkins,” sponsored by Oxydol.  P&G was so satisfied with the sales increase, they went on to introduce “Vic and Sadie” for Crisco, “O’Niells” for Ivory Soap and “Forever Young” for Camay.  By 1939 the Cincinnati-based company was sponsoring 21 radio programs. It doubled its radio-advertising budget every two years during the Depression.
• Also during the Depression, General Motors used intensive advertising to pass Ford as the number auto company. I find it interesting that Ford is now gearing up its marketing efforts, while GM sits on the sidelines.
• Apple introduced the IPod in 2001, around the bottom of the last recession. Apple is a master of viral marketing. We all know what happened to the Apple’s profits as a result. In addition, Apple has used the cache built by IPod to increase its market in areas such as laptop computers.

I could on, but the point is, cutting back the wrong thing to do. Of course, it’s a gamble.

As Surowiecki concluded: “The academics Peter Dickson and Joseph Giglierano have argued that companies have to worry about two kinds of failure: “sinking the boat” (wrecking the company by making a bad bet) or “missing the boat” (letting a great opportunity pass). Today, most companies are far more worried about sinking the boat than about missing it. That’s why the opportunity to do what Kellogg did exists. That’s also why it’s so nerve-racking to try it.”

Of course, I have an answer for that – social media. I know I am obnoxious about this, but I firmly believe that social media is going to replace traditional advertising, marketing, and public relations within the not-to-distant future. Think of social media in the same Proctor & Gamble thought of radio in the 1930s. A lot of the company’s shareholders were opposed to using the new medium, especially during The Great Depression.

Think of social media as the new radio. As radio was to P&G, social media could be to a smart company willing to take a chance. A lot of companies are starting to dabble in it, but few have made a total commitment. I think there is both fear and unfamiliarity with the new medium. A survey by the blog überceo found that the majority of CEOs whose companies are on the Fortune 100 are – the blog’s words – social media slackers. They don’t understand it or know how to use it.

That’s where someone like me enters the picture. It is my job to show executives why it is smart to market using social media. Just let any savvy marketer who understands media into the room and we will show why this recession could be the best thing that ever happened to your company.