The best marketers will be upping, not cutting, their budgets

Roland Vaile completed his Masters at Harvard in 1924. It would be a quarter of a century before the young Californian, along with fellow marketing legend Reavis Cox, would publish the masterwork Marketing in the American Economy. For now, the 25-year-old was building his reputation and had headed West to become an associate professor at the University of Minnesota. Vaile wasted no time taking his Masters dissertation and publishing it in the Harvard Business Review.

He was lucky. Graduating from Harvard after the Depression of 1920 and 1921 meant that he was looking for a job just as the economy started to boom again. The 18-month recession, caused by the economic hangover of the First World War, also provided rich empirical territory to explore Vaile’s life-long obsession with advertising and its impact on the economy.

Vaile had spent his year at Harvard following the fortunes of 250 firms. Using secondary data and an occasional survey, he followed these companies through the recession and into the growth period that ensued. Tracking both advertising investment and annual revenues, Vaile was able to divide the firms into three groups: those that did not believe in advertising, those that cut back advertising during the Depression and those that increased it.

His results demonstrated that companies that increased their ad budgets during the recession grew sales much faster than their rivals – not only during the downturn but also beyond it. Companies that decreased their advertising spend saw their sales decline both during the recession and then for the following three years. In relative terms, these companies actually underperformed even those that elected to do no advertising at all.