25% Expedia ad-to-sales percentage
Does advertising still produce a long-term sales lift like it did decades ago despite years of media fragmentation, relentless ad clutter and smartphones fueling short attention spans?
A new study presented at the Advertising Research Foundation Audience Measurement Conference in New York today suggests the long-term effect of ads may even be stronger than long believed.
A quarter century ago, researchers examined ads for more than 40 packaged-goods brands in test markets for the so-called "How Advertising Works" study. They found the long-term sales lift from advertising was on average double what occurred in the early weeks.
That "two-times" multiplier has since become engrained in marketing-analytics. It is widely used to help justify ad spending as marketers doubled what their marketing-mix models found to be short-term effects of ads to estimate the long-term effects.
Now, a new study by Nielsen Catalina Solutions involving Kellogg Co. and CBS finds the long-term effect (defined as more than a month) still exists, with total sales lifts ranging from 1.8 to 4.5 times the initial lift, said Leslie Wood, chief research officer of Nielsen Catalina.
For Kellogg, which agreed to have ads for its Special K brand tested and the results published, the long-term impact was actually 3.5 times what occurred in the first month after people were exposed to ads. Four other brands NCS tested showed long-term effects too, including 3.6 to 4.5 times for two soft-drink brands, a two-times multiplier for a boxed-dinner brand and a 1.8 multiplier for a toothpaste brand.
The original "Adworks" study conducted in 1989 and published in 1991 used matched test markets run by IRI to measure ad effects (where one market had the ads in question and the other didn't). The Nielsen Catalina study uses a combination of data from Nielsen TV ratings panelists whose household purchases can also be trucked using Catalina shopper loyalty-card data.
David Poltrack, chief research officer of CBS, who was also involved with the original "Adworks" study 25 years ago, said the original idea was for that to be a process of "continuous measurement" and that the long-term effect "is a major effect of advertising which can still be measured and should be measured." (It should be noted that CBS, and the other partners in the study, have a vested interest in results proving advertising's long-term effectiveness.)
For the soft drinks, "We see very high returns, where if you can get people started on liking your brand, you actually get a huge payout in the future," Ms. Wood said in an interview before the presentation. The boxed dinner and toothpaste brands with lower long-term ad impact were categories that tended to have less brand loyalty, she said.
"If you're a soda drinker, you really like your brand, where for a boxed dinner there are a lot of options," Ms. Wood said. Even for the brands with the lowest long-term effects, however, they were still in line with the average found a generation ago.
Ms. Wood said she suspects the long-term effect isn't so much about people remembering the ad as about the ad getting them to try a product for the first time, then continuing to buy it until an ad or deal from a rival product or just a desire for variety makes them stop.
Following the latest Congressional effort to consider treating advertising like a capital expense written off over years rather than expensed immediately, some marketing analysts had argued against it, suggesting that the long-term effect of advertising has diminished. And Ms. Wood said she came into the study expecting long-term effect of ads to be lower than 25 years ago because of all the changes in media. But Ms. Wood said, "It may be that we're so overloaded with ads now that once we find something we want, we stick with it."
Ms. Wood said NCS hopes to study a far larger number of brands to see if the long-term multipliers still hold up or whether different types of creative, categories, media and promotional dealing produce variations in long-term impact.
Because Nielsen can also do single-source studies like this outside consumer packaged goods using purchase data from credit card and bank statements, she also plans to work with that side of her joint venture on studies involving other types of brands.