The article below has been copied from elsewhere. I do this because it was sent to me twice yesterday so it clearly was hitting home for some folks. It gives some interesting thoughts on whether to pull back or keep fighting during a recession.

Hanging Tough

In the late 1920′s, two companies-Kellogg and Post-dominated the market for packaged cereal. It was still a relatively new market so when the Depression hit, no one knew what would happen to consumer demand.

Post did the predictable thing: it reined in expenses and cut back on advertising.

But Kellogg doubled its ad budget and heavily pushed its new cereal, Rice Krispies. By 1933, even as the economy cratered, Kellogg’s profits had risen almost 30% and it had become the industry’s dominant player.

You’d think that everyone would want to emulate Kellogg’s success, but most companies end up behaving more like Post. They hunker down, cut spending, make fewer acquisitions and invest less in research and development.

They do all this to preserve what they have. But there’s a trade-off: numerous studies have shown that companies that keep spending during recessions do significantly better than those which make big cuts.

Even as recently as the 1981-82 recession it was found that sales at firms that increased advertising grew strongly compared with only slight increases at firms that had slashed their budgets.

Some other success stories…Kraft introduced Miracle Whip in 1933 and saw it become America’s best-selling dressing in six months; Texas Instruments brought out the transistor radio in the 1954 recession; Apple launched the iPod in 2001.

One way to view this is simply that recessions make the strong stronger and the weak weaker. But although deep pockets help in a downturn, recessions nonetheless create more opportunity for challengers, not less.

When everyone is advertising, for instance, it’s hard to separate yourself from the pack; when ads are scarcer, the returns on investment seem to rise.

That may be why during 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.

Chrysler’s fortunes in the Great Depression are a classic instance of this. Chrysler had been the third player in the U.S. auto industry, behind G.M. and Ford. But early in the downturn it gave a big push to a new brand-Plymouth-targeted at the low end of the market, and by 1933 it had surpassed Ford to become North America’s second-biggest automaker.

On a smaller scale, Hyundai has made huge gains in market share this year, thanks to a hefty advertising budget and a guarantee to take back cars from owners who have lost their jobs.

Tatts