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Accelerating into the curve

Various articles have surfaced in the media lately to remind us that while the 1930s were an economic disaster, they also saw the birth or rise to prominence of a number of companies that have become mainstays of American business (Hewlett-Packard and Disney, among others).

However, more interesting to me from an investing standpoint is a discussion by iMedia Connection columnist Dave Chase, which cites examples of Depression-era companies that not only survived but thrived because they increased their marketing efforts relative to their competitors.

A related article from Canada-based 1st on the List argues that when sales in an industry are flat, every dollar a company is able to add to its revenues is a dollar taken from a competitor. That potentially doubles the successful company’s market advantage–and the gap could be even wider if the competitor is simultaneously cutting back its own marketing efforts.
Together, the articles make a case that innovation and increased attention to marketing during rough times can set up a company to reap long-term benefits.

What does this have to do with investing? Anyone eyeing potential buying opportunities might check out spending on marketing and R&D (plus the cash flow needed to support them) as indicators of which companies may be positioning themselves now for an eventual recovery. And anyone in business themselves might think about how the “good marketing in bad times” concept applies to their own field.

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