No Guarantees When It Comes to Ad Impact

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Advertising does have a long-term impact, but it's not guaranteed. Nor does price promotion's impact always end as soon as the promotion is over.

Those are the findings of Information Resources Inc., which conducted research for a consortium of eight package-goods marketers. The study spanned five years of data for 10 categories, including salty snacks, household cleaners and air care.

Like past research using marketing-mix models, the study shows advertising generally has double the long-term return on investment (1.8 times in this study) that it has during the initial run.

But that long-term return isn't a guaranteed lifetime annuity, according to Sunil "Sunny" Garga, president-global services of IRI. "You can't just turn the advertising off and get the effect forever," he said, adding that the multiplier shrinks or disappears if ad support stops.

At the same time, while retail price promotion often has no long-term impact on sales and increases consumer price sensitivity for brands, those impacts aren't universal.

Price promotion, particularly when it comes with a product launch, can have a long-term sales impact. And some promotions create less price sensitivity than others.

Generally, more frequent promotions create more price sensitivity than less frequent ones, Mr. Garga said.
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