Lessons from the recession

It's been a horrible year for packaged good firms. Procter & Gamble recently reported profits for the last quarter down 18%, while for Unilever it was a 17% fall.

There was however an interesting exception, Reckitt Benckiser.

They reported a 14% increase in profits for the second quarter compared with the previous year, and for several years have been growing substantially faster than P&G and Unilever.

How do they do it? What is interesting is that they seem to be doing pretty much the opposite of what most of their competitors are doing.

Reckitt increased spending on marketing by 25% last year, while most of its competitors were cutting back.

While everyone has been adjusting their product lines and looking for new versions with different combinations of cost and value, Reckitt has gone in completely the opposite direction to the competition. While most are rushing to introduce cheaper basic versions, Reckitt has been launching substantial enhancements.

The latest version of its Finish dishwasher detergent is Quantum, a very high end version costing twice as much as the most basic one. It has introduced an air freshener with a motion sensor to tell it when to release perfume, at a price 20% higher than the ordinary version.

On top of that, Reckitt can innovate faster. A flat structure allows it to turn ideas into products in nine months, at least three months faster than the competition.

Marketing pays;
Innovation pays;
Significant product enhancements pays - in words of Reckitt's CEO, "We've proven that in a downturn, consumers don't walk away from better products".

What's significant here is that none of the above is limited to recessionary times. In fact, I suspect that it will probably work even better as the economy improves

Would you like to grow profits right through a recession? Would you like to outgrow your competitors by 50%? If so, you know what to do.

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