Advertising Effectiveness Essay

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By the term ‘advertising effectiveness,’ we mean what changes advertising creates in markets. Beyond changes in markets, advertising also creates changes in consumers’ awareness,  attitudes, beliefs, and intentions.  In  the interest of focus and parsimony, this entry concentrates on the effects of advertising only on market behavior. This topic has been the subject of research from the time firms began to advertise, over a hundred years ago. Scientific research has begun to accumulate especially in the last 50 years (Tellis 2004; Tellis & Ambler 2007). This research falls within one of two paradigms: behavioral research and econometric research. Behavioral research uses theater or laboratory experiments to address the effects of  advertising  on  awareness, attitudes, beliefs, and intentions. On the other hand, field research uses field experiments and econometric models  to  assess the  effects of advertising on market behavior. We can classify field research into  three  groups: contemporaneous  effects of ad intensity, dynamic effects of ad intensity, and effects of ad content. These subjects are the focus of the next three sections.

Contemporaneous Effects Of Ad Intensity

Weight studies examine the effect of differences in ad budget across time periods or regions on sales. The main focus of such studies is to determine whether an increase in budget translates into a proportional or profitable increase in sales of the advertised product. Research leads to the following four important and surprising findings. First, changes in weight alone do not cause dramatic or substantive changes in sales. Second, prolonged cessation of advertising sometimes leads to deleterious effects on sales. Third, if advertising is effective, its effects are visible early on in the life of a campaign. Fourth, changes in media used, content of the ad, product advertised, target segments, or scheduling of ads are more likely to cause changes in sales than are changes in weight alone. These results have three implications. First, firms could be over-advertising; as a result, cutbacks in advertising do not lead to a loss in sales. Second, advertising may have delayed or even permanent effects, so that continued advertising at the same level is not always necessary. Third, a firm’s budget increase or  original budget itself may be more fruitfully employed in changes in media, content, target segments, product, or schedule rather than in weight alone.

Research on advertising elasticity, i.e. the percentage change in sales for a 1 percent change in the level of advertising, leads to the following important  findings. First, across all studies, the mean estimated advertising elasticity is about 0.1, i.e., about one-twentieth the corresponding price elasticity. Second, advertising elasticity has been declining over time. Third, advertising elasticity is higher in earlier than later stages of the product life cycle, and  for durables than  non-durables. Fourth, advertising elasticities are higher for aggregate data than for disaggregate data, probably due to data-aggregation bias. These results suggest that  price  discounting  may  lead  to  a greater increase in sales than does an advertising increase; however, whether that increase is profitable would depend on the level of price cut, which consumers use it, and how much of that gets to the ultimate consumer rather than being pocketed by distributors. They also suggest that advertising may be more profitable for new products, while price discounting may be more profitable for mature products.

Research on advertising frequency leads to the following five findings. First, the effects of advertising exposure are less prominent and immediate and more fragile than those of price or promotion on brand choice. Second, in general, increasing frequency of exposures increases probability of brand choice at a decreasing rate. Third, for mature, frequently purchased products, the optimum level of exposure may be relatively small, ranging  from  one  to  three  exposures a week. Fourth, brand loyalty may moderate response to ad exposures, in that established brands have an earlier and lower peak response to ad exposures than newer brands. Fifth, brand choice may be more responsive to the number of consumers the ad reaches than to the frequency with which it is repeated. These results suggest, among other things, that advertisers need to target loyal and nonbuyers of their products with different levels of exposures.

Dynamic Effects Of Ad Intensity

The carryover effect of advertising is that effect it has on sales beyond the moment or time of exposure.  Econometric  studies  have  typically estimated  the  size and  duration  of the  carryover effect. Research leads to the following main findings. First, advertising typically has some carryover, so that all its effectiveness does not occur in the contemporaneous time period to its exposure to the consumer. Second, the estimated effect of advertising depends on the level of data aggregation. Estimated carryover effects tend to be longer with the use of more aggregate data. In general, the more disaggregate the time period of data, the less biased is the estimated effect of advertising carryover.  Further,  the  effect of  advertising may last for fairly short periods – hours, days, or weeks – rather  than  for long periods  such as months or years. Third, advertising’s effects vary by region, city, and time of the day. Fourth, the carryover effect of advertising is as large as its current  or instantaneous  effect. These findings suggest, first, that advertisers should neither assume their advertising has only contemporaneous effects nor assume that is has very long-term carryover; second, advertisers need to evaluate the carryover effect of their advertising and do so with as temporally disaggregate data as they can find or collect; third, advertisers need to analyze effects by region and time period rather than rely on simple generalizations.

Ad campaigns wear out if run  long enough. Wear-out occurs more slowly for ad content that is complex, emotional, or ambiguous, for ads that are  less rather  than  more  effective, for  infrequently rather than frequently purchased products, for exposures spread apart rather than clustered  together,  for  light rather  than  heavy viewers of TV, and for campaigns with increasing variety of ads or ad content. A break in a campaign may lead to an increase in effectiveness of the ad; if that happens, the ad wears out even faster than it did the first time around. in rare cases, possibly  for  new  products,  advertising seems to  have permanent  effects. That  is, the effect of advertising persists even after the advertising is withdrawn. One of the implications of these findings for advertisers is that an ad which is ineffective early on  should  be discontinued. Also, whenever resources and time permit, advertisers should test their ads for wear-in and wear-out and accordingly decide on the duration  of the ad campaign.

Effects Of Ad Content

Research on ad content seems to suggest the following preliminary findings. First, changes in the creative, medium,  target  segment,  or  product itself sometimes lead to changes in sales, even though  increases in the level of advertising by itself does not. Second, informative appeals may be more important  early rather than late in the product’s life cycle. Conversely, emotional appeals may be more effective late rather than early in a product’s  life cycle. These  findings  have  two important  implications for advertisers. First, to increase effectiveness, advertisers should modify content more than increase weight or frequency. Second, advertisers need  to  test  and  typically vary the content of their advertising with the life stage of the product.

Bibliography:

  1. Eisend, M., Langner, T., & Okazaki, S. (2012). Advances in advertising research. vol. III: Current insights and future trends. Wiesbaden: Springer Verlag.
  2. Rosengren, , Dahlen,  M.,  &  Okazaki,  S. (2013). Advances in advertising research. vol. IV: The changing roles of advertising. Wiesbaden: Springer Gabler.
  3. Tellis, G. J. (2004). Effective advertising: How, when, and why advertising works. Thousand Oaks, CA: Sage.
  4. Tellis, G. J. & Ambler, T. (eds.) (2007). The Sage handbook of advertising. Thousand Oaks, CA: Sage.

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