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January 07, 2021

Two recent Freakonomics podcasts are provocatively titled Does Advertising Actually Work? Ah to be in a simple world where the answer to this question is yes or no. The podcast comes down on the side of mainly no. It showcased speakers reporting on studies that conclude advertising spend, with its weak or non-existent effect on sales, is largely a waste of resources that are better returned to customers or shareholders.

Like many (in my LinkedIn feed at least), I listened with frustration about the inclusions and omissions. Now, I could list missed research, make counter arguments, pick apart the research cited, but this all misses the point – the question itself is of limited value. A better question is – Why doesn’t advertising work more often?

Before answering that question, remember – advertising is not just about getting new sales, it's also about keeping the sales we have in the face of memory decay and competitive activity.
Why advertise?

If you believe the primary outcome of advertising is to persuade people to buy things they normally wouldn’t, then advertising will mostly disappoint. Yes, advertising can persuade, sometimes, for some people, in certain conditions, it just doesn’t do this often. You certainly would have a hard time justifying advertising budgets on these rare occasions where someone was persuaded by an ad (in the real sense of persuade, that is induce someone to do something). But that is not the most common benefit a brand gets from advertising.

Humans might be made from stardust, but brands are made by memories. Advertising is just a broad name for company-controlled creative activity (in any media) aimed at shaping buyer memories in the brand’s future favour. A buyer’s memory is one of the most efficient sources of information (even for a google search you need to remember what to type). Advertising can freshen memories for a specific brand, to make the brand easier to retrieve. Andrew Ehrenberg called this role of advertising Creative Publicity – a way to publicise the brand, remind people of what it does and when to buy it, and on occasion, share some new news such as informing about a new variant launched.

For advertising to work and freshen brand memories and in turn help brands grow, a number of pieces need to be in place. This machine can break down in a number of places and failure means advertising either doesn’t work or its effects on buyer memory do not translate into sales. Here are three fails to fix to help advertising to work more often.
When does advertising fail?

The three areas where advertising is likely to fail are:

  1.     Failure to reach – for brands to grow they need to reach out to as many category buyers’ brains as possible. The podcast highlights the challenges with digital advertising not delivering the reach it promised, and (lack of) viewability statistics should give marketers pause. But often reach failure happens before that, at the planning stage, where marketers don’t plan for reach in the first place. It also happens after that, at the creative stage where the plan might be in place, but the creative just doesn’t get any attention. For advertising to work, we need to fix these advertising distribution issues of planning, delivering, noticing, failures in reach.
  2.     Failure to brand – the brand name anchors the exposure in the right part of memory, without the brand, any noticed ad is a creative endeavour with little useful ROI. Much of the paid for reach is wasted because it failed to brand. Whether via the brand name or distinctive assets, we need to get better at branding in every media environment so advertising can work for the brand.
  3.     Failure to be buyable – the best advertising in the world doesn’t translate into sales if physical availability is lacking, and the brand is not easy to find and buy. Presence in as many channels/retailers as possible is a start, but you need the prominence to be found in competitive clutter, and a portfolio item suitable for that buying occasion.

The vast majority of ad spend modelling doesn’t adjust for these factors. It's no wonder then, overall, the story for advertising looks a bit murky. It would be nice if future modelling improved that, as currently it’s like trying to judge employee performance just by how many hours they worked. Oh and if marketers could stop claiming it is a good thing to spend large amounts of money on advertising that is not aimed at generating sales (short or long term) – that would help too! One of the biggest own-goals of the advertising industry is the invention of the ‘Brand-building' campaign.

The good news is the failures that stifle advertising effectiveness are often own-goals, and therefore fixable. Through addressing these areas, we can set up more advertising to succeed. At the Ehrenberg-Bass Institute, we have research programs in these and related areas. Examples of projects in process include what happens to different brands when they stop advertising for a long period of time (which is a better test than just stopping advertising for a week or a month), how to use distinctive assets to brand better in different contexts, and how to construct better portfolios to realise revenue from good advertising.

In the long run our aim is to help advertising be more effective more often. That is, until something comes along that is more effective in building brand memories cost effectively, at the scale needed to grow brands.

About Author: Jenni Romaniuk - Ehrenberg Bass Institute for Marketing Science

Additional reading

  • Ehrenberg, A., Barnard, N., Kennedy, R., Bloom, H. (2002). "Brand advertising as creative publicity." Journal of Advertising Research 42(4): 7-18.
  • Kennedy, R., Sharp, B., Hartnett N.. (2017). Advertising. Marketing: Theory, Evidence, Practice. B. Sharp. Melbourne, Oxford University Press: 438-493.
  • Newstead, K. and J. Romaniuk (2010). "Cost per second: The relative effectiveness of 15- and 30-second television advertisements." Journal of Advertising Research 50(1): 68-76.
  • Sharp, B. (2010). How advertising really works. How Brands Grow. B. Sharp. Melbourne, Australia, Oxford University Press: 134-152.
  • Sharp, B. (2010). "Ehrenberg's view of advertising." Journal of Advertising Research 50(4).     
  • Taylor, J., Kennedy, R., McDonald, C., Larguinat, L., El Ouarzazi, Y., Haddad, N. (2013). "Is the multi-platform whole more powerful than its separate parts? Measuring the sales effects of cross-media advertising." Journal of Advertising Research 53(2): 200-211.                  
  • Wood, L. (2009). "Short-term effects of advertising: Some well-established empirical law-like patterns." Journal of Advertising Research 49(2): 186-192.

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