Although the agency writes the advertising campaigns, these are also the concern of the advertiser. The advertiser’s contribution concentrates on the important managerial tasks of evaluating the agency’s proposals; using their judgement to plan the “business” of the campaign (especially budget and media); and, most importantly, measuring the campaign’s effects in the marketplace.
The specific jobs that should be carried out by the client in close co-operation with the agency should be five fold.
- Measure behavioral effects
- Pre-test to weed out ineffective advertisements
- Determine advertisement budgets strategically
- Media continuity, not concentration
- Use promotions tactically
Task 1: Measure Behavioral Effects
Advertising has three orders of effects ~ short-term, medium-term and long-term. These effects can be measured in terms of consumer purchasing (cognitive and attitudinal data are too soft and indirect to measure these effects robustly). One extremely important point is that each effect is a gatekeeper to the next. In particular, without a short-term effect, no other effect is possible.
Before the mid 1980s, it was impossible to measure accurately the short-term effects of advertising. These are felt within seven days of an advertisement appearing and such effects are highly volatile. Measurement is only possible with the use of a large scale and expensive technique called Pure Single Source Research, a type of investigation that has been used in a number of countries since the early 1990s. The measure of an advertisement’s short-term effect is market share change and is entitled Short Term Advertising Strength (STAS). In about 30% of cases this effect is very large. In about 40% of cases it is slightly positive. In about 30% of cases sales actually go down because the campaign is unable to protect the brand from stronger campaigns from competitors. STAS is driven exclusively by the creative quality of the advertising campaign.
The medium-term effect represents the repetition of short-term effects across the course of a year, but deducting the short-term effects of competitive advertising campaigns. This means that the medium- term effect is invariably smaller than each short-term effect. The medium-term effect of a campaign can be measured with reasonable precision using regression analysis. Many examples are available to show this technique in action. These cases quantify the proportion of annual sales that are accounted for by advertising and they also show the return on the advertising investment, measured in cents per advertising
dollar. The econometric analysis to determine medium-term effects with which I am most familiar and on which I have published, are the work of the prominent research organization Media Marketing Assessment.
Advertising is also capable of a long-term effect, which is manifested through a strengthening of the brand and in particular the growth in its added values ~ the positive psychological associations of the brand in the minds of consumers. If there is a long-term effect, this is shown by a gradual increase each year in the measured medium-term effect.
Long-term effect of advertising is measured in six ways:
- Rising penetration i.e. an increasing user base
- Increasing purchase frequency
- Reducing price elasticity of demand
- Above-average consumer price
- Increasing advertising elasticity
- Reducing advertising intensiveness i.e. An increasingly effective use of advertising dollars
When the long-term effect of advertising is added to the medium-term effect, advertising can be in circumstances shown to produce a return on investment (ROI) higher than the actual sum spent on it.
Task 2: Pre-Test to Weed Out Ineffective Advertisements
In view of the fact that only a third of campaigns produce strongly positive short-term results, it is very important that manufacturers should pre-test their advertisements to predict as accurately as possible whether their campaigns will be effective in the market place. A number of pre-testing systems are available in the United States. The method with the best track record is that named after the research organization Advertising Research Systems (ARS).
This method tests the commercial in a cinema in front of an audience of 500 people. These people see an entertainment program in which are inserted some commercials, including the one being tested. The entertainment program is preceded by a lottery, in which people are asked to allocate a sum of money among different brands (including the one being tested). After the program, there is another similar lottery. The measurement of the effectiveness of the tested commercial is determined by comparing the audience preference for the brand after the program with their preference before the program.
This testing system has been used for 50 years and there is a very large battery of test evidence of its effectiveness from a number of countries. This evidence for the predictive ability of the system is very strong and aggregated data are available to illustrate this. There are also a number of cases, which show the system in action for specific named brands.
Task 3: Determine Advertisement Budgets Strategically
In view of the long-term effects of advertising, manufacturers should normally set their advertising budgets in terms of competitive advertising expenditures within their category. In order to boost the long-term competitiveness of their brands manufacturers should not make tactical reductions in the budget in an attempt to boost profit.
Manufacturer’s advertising investments in any category can be described with a statistical regression known as the Advertising Intensiveness Curve (AIC). This shows that small brands must over-advertise (with their share of voice exceeding their share of market). On the other hand, large brands can afford to under-advertise (with their share of voice below their share of market). This is a measure of the above-average profitability of large brands. But there are strict limits. Any reduction below these limits will invariably lead to a loss in market share. Cases are available to illustrate this point.
Task 4: Media Continuity, Not Concentration
For many years the advertising industry followed a pattern of short-term media concentration to ensure that consumers saw three exposures of an advertisement before they were expected to buy a brand. This policy was based on an incorrect interpretation of available research.
Any policy of media deployment must be based on evidence of the incremental effect of extra advertising exposures on sales of a brand. The vast weight of existing evidence supports the view that a single advertising exposure can produce sales and more exposures generate diminishing returns. This means that short-term media concentration produces sales that are more and more expensive to achieve. This is therefore uneconomic. At the same time, any gaps in a manufacturer’s annual media schedule will leave the brand vulnerable to the competition from other brands in the marketplace. When schedules are based on short-term concentration, there are inevitably going to be long gaps between the periods of high advertising weight ~ a highly inefficient way of employing media budgets.
Since the mid 1990s, it has been realized by the majority of American advertisers that the most effective and economic media policy is to reduce the weight of the short-term bursts of advertising and to deploy the money on a relatively continuous basis across a year. A number of individual cases are available to demonstrate this point. And more recently, aggregated data from Media Marketing Assessment, based on rigorous econometric evaluation, have shown clearly that continuity is the best policy.
Task 5: Use Promotions Tactically
Manufacturers are subjected to a number of pressures to increase their expenditures on trade and consumer promotions. These pressures include the competition from other manufacturers who promote in order to boost their own short-term sales. But the regrettable fact is that the vast majority of promotions are totally uneconomic. Despite the high sales return they achieve, they generally cause an actual reduction in the manufacturer’s profit.
A basic problem with promotions is that they encourage a general disloyalty to brands on the part of consumers. An even worse problem is that promotions have no long-term effects. They are different from advertising in this respect, because advertising can produce a long-term effect, which can be added to its medium-term effect, with a beneficial effect on a brand’s ROI.
One proven system of improving the benefit of trade and consumer promotions is to use such promotions together with consumer advertising, in a mutually supporting role. Cases are available to demonstrate that this can be to the long-term benefit of brands.
All the analysis that are referred to here are based on manufacturers and advertising agencies using good and experienced judgment in developing their advertising plans. As already mentioned, such plans should also be based on the best research that the market research industry in the country is able to provide. In many cases, the research lessons learned at great expense in developed countries can also be applied at least approximately to less developed ones. This is generally the policy of the leading multinational advertisers.