4A'S WILL STUDY FINANCIAL RETURN ON AD SPENDING: MAX RESEARCH EFFORT TO DEVISE 'QUANTIFIABLE' WAY TO SET BUDGETS

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The American Association of Advertising Agencies this week unveils an ambitious multiyear research effort that seeks to quantify marketers' financial return on investment from ad spending.

Ralph Rydholm, chairman of Euro RSCG Tatham, Chicago, and chairman-elect of Four A's, will announce the initiative, dubbed MAX, during a speech April 11 at the association's annual conference in Turnberry Isle, Fla.

The conference opens April 9.

SEEKING OPTIMUM SPENDING

MAX-short for Maximum Advertising Expenditures for Financial Performance-will look for an optimum amount each advertiser should be spending and investigate when and how marketers should elect to use ad budgets.

Mr. Rydholm described MAX as a "quantifiable perimeter around a budgeting tool or process that could help clients across all categories."

The program also will attempt to define how advertising spending affects a company's financial performance.

"In a time when a CEO's focus is increasingly financial, we believe that such a tool will be welcome news," said Mr. Rydholm.

He said the project will "demonstrate the value of advertising" and "show the value to [company] CEOs, particularly in this financially driven climate when they are looking to build shareholder value."

Research will be done under the auspices of a not-for-profit independent researcher-Marketing Science Institute, Cambridge, Mass. The Advertising Research Foundation is also involved, as well as several marketers, ad agencies and universities.

The Four A's believes the involvement of MSI and these others will elicit broad industry support while eliminating any perception of bias in the study.

NOT SEEKING TO BOOST OUTLAYS

"What we're doing is creating a tool and a process for advertisers to better budget," said Mr. Rydholm. "The process is not to get advertisers to spend more dollars on advertising. It is how to best use the money advertisers are already spending."

The study won't seek to quantify brand value or shareholder value because of concerns such a valuation added to companies' bottom lines might adversely affect ad-tax deductibility issues, said one executive familiar with the research.

In a separate but related move, the Four A's is publishing an independent seven-year study by Corporate Branding Partnership that tracks the impact of advertising on stock performance.

The research will show how advertising affects stock prices through the link of corporate image. The study focused on a broad range of industries, from apparel,

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