Businessweek reported on the “The Rewards of Research” in a down economy in their February 9th issue on newsstands this week. A study of companies during the 2001 and 2002 economic downturn (with at least $100M market capitalization) revealed that those who increased R&D expenditures by 10% or more during those years outperformed the S&P 500 index 2:1 in the subsequent 1 year, 3 year and 5 year marks following 2002.

These data are consistent with what we have seen within our business. While individual project budgets are highly monitored to maximize the R&D investment return, the overall volume of research we’re conducting on product development and market intelligence is on the rise. This indicates that companies are sensitive to the reality that they need to get the most out of every R&D dollar, while simultaneously realizing that now is the time to invest in innovation, not walk away from the development table.

Terry Lundgren, CEO of Macy’s, was quoted yesterday in the New York Times, “We want to be in place, we want to have our people trained, we want to have our structure set, we want to have the right brands in the store,” Mr. Lundgren said. “Now I think is the time to address all of those structural changes that are required.”

These times heighten the need for intelligent and strategic spending. We are fortunate to be in the business of behavioral insight during economic downturns. Being a research partner who supplies key insight on when, where and how to spend marketing dollars and how to develop products from a consumer centric perspective, places us in a position of extraordinary value to our clients. Reaping a 2:1 stock performance boost from investing in R&D during economic downturns is an ROI harvest that would be envied by most companies.