Snap, Crackle, and Pop
What can packaged cereals teach us about business strategy during Depression II? As it happens, today’s dominant breakfast cereals established themselves during Depression I.
As James Surowiecki points out in a recent column in The New Yorker, Kellogg and Post were battling it out for market share in the late 1920s. When Depression I hit, “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.” By 1933, Kellogg “had become what it remains today: the industry’s dominant player.”
The logic behind the strategy is fairly simple – when competitors back off, it’s time to pile on. As Surowiecki points out, it’s hard to stand out from the crowd when the whole crowd is spending a lot to stand out. When your competitors reduce their spending however, your spending buys more, works harder, and goes farther. Indeed, recessions create opportunity for challengers. Surowiecki cites a Bain & Company study about the 1990-91 recession: “…twice as many companies leaped from the bottom of their industries to the top as did so in the years before and after.”
If you’re a challenger with long-term ambitions to be a leader, now is not a time to sit on your hands. It’s a time to pick your winning products or services and make sure that your potential customers know about them. It’s a time to invest in greater efficiency and productivity. It’s a time to introduce innovative new products and capture the market’s attention. Most of all, it’s a time to turn the tables on the leaders in your industry and establish a new pecking order. As we’ve noted before, a crisis is a terrible thing to waste.
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