New Economics of Advertising

by Jack Loechner

The Ehrenberg-Bass Institute for Marketing Science, at the University of South Australia, has collaborated with the Wharton School, at the University of Pennsylvania for the Empirical Generalizations in Advertising Conference. The aim of the conference was to take stock of what we do, and don’t, know about advertising, as a base to try to understand how advertising might work in the future.

A Research”Brief” cannot do justice to the output of a sophisticated, extensive conference on Generalizations in Advertising. And, the Center For Media Research makes it a point to not editorialize on research, white papers and newsletters, but rather let the reader pursue the excerpted data presented in greater depth for analysis and independent conclusions. However, the potpourri of fascinating, interesting and likely important conclusions drawn from the Conference and summary report is perceived by us to justify the suggestion that using the link included at the end of this Research Brief will open up new avenues for continued understanding of the value of research in the use of media.

The Empirical Generalizations in Advertising Conference brought together an outstanding group of researchers and practitioners in diverse areas of advertising who presented 44 different papers that summarize research-based knowledge in the field. Presented here are random excerpts of various papers.

Does it Make Sense to Count Clicks Anyway

Gian Fulgoni

“Consumers who delete cookies from their computers can skew advertising data,” said Gian Fulgoni, Chairman, comScore, Inc. “If a cookie has been deleted you think you are reaching a new machine when you are really just delivering additional exposure. This results in an overstatement of up to 2.5 times in unique visitors and an understatement of frequency.”

Robert Gunther spoke on the subject:

Fulgoni’s research found that online ads have a positive impact even without clickthroughs. There is a lift in site visitation of 4 to 6 percent from display ads, even without a click. The increase in lift over a control is 65 percent in the first week and 45.7% in weeks 1 to 4.

“Even with no clicks or minimal clicks, online display ads can generate substantial lift in site visitation, trademark search queries and lift in both online and offline sales. The only reason we have the focus on clicks is that they can be measured. The Internet measures came out of the minds of technical people, not advertising people,” Gunther says.”

How Important are ads for brands

Robert Gunther

This paper looks at “quantity premium” – how much more a brand sells compared to similar brands, and  “margin premium” – Brand marketers want to see a high quantity premium and a high margin premium

  • Advertising and distribution increases quantity premium; discounting hurts
  • Strategy and price premiums: distribution and discounting reduce price premium; advertising increases it.

Simulating Advertising’s Impact

Bruce Tedesco

Advertising analysis requires modeling methods based on dynamic principles. Dynamic models which have been around for some time but only recently applied to marketing, simulate what happens among consumers in a virtual marketplace. Running not a single simulation, but many, we are able to gain empirical direction from studying the effects and interactions that arise when inputs, like advertising, are varied.

Simulations are really about “emergent behavior… rather than calculat(ions),” says Tedesco

Search and Display Advertising Synergy

Gian Fulgoni

Display ad click rates are under 1%, on search they run about 5%. Sales impact of a search ad is greater than that of a display ad. Fulgoni summarized a number of comScore studies exploring the effects of search and display ads on site visitation and sales.

  • Display ads impact site visitation. Impact is greatest during the first week, an effect which lasts over the four weeks following the first exposure. This is true across categories.
  • Combination of search and display leads to greatest sales lift. Search and display synergy: 119% sales increase vs 82% for search and 16% for display only.

Advertising and Word of Mouth

Robert Gunther

Ed Keller, CEO of the The Keller Fay Group, said approximately 20 percent of word of mouth is stimulated by advertising. Influencers are three times as likely to talk about ads. Their studies, based on interviews since 2006 where individuals where asked what they talked about the day before, found 21. 6 percent of conversations included some reference to advertising. Ad-influenced WOM is about 20 percent more likely to include an active recommendation to buy or try the product.

“While people talk about online impressions, there are 3.5 billion brand impressions created every day through word of mouth,” said Keller.

Implications:

  • The rise of WOM does not portend “the end of advertising.”
  • 20% of WOM is stimulated by Advertising. Influencers are 3x as likely to talk about ads
  • Ad-influenced WOM is about 20% more likely to include active recommendations to try/buy product.
  • About 1/2 of Online WOM i is teenagers. From a marketing standpoint, need to keep that in mind.
  • 75% of WOM is face to face; 15% is phone; 3% texting; 3% email; 1% chat rooms. About 3.5 billion brand conversations per day.

Digital Signage

A discussion summary of Digital Signage included these observations:

  • Shoppers are most responsive to “news” and least responsive to traditional brand messages.
  • Digital signs, whose messages could change by time of day, lifted store sales.
  • In an experiment with Eddie Bauer, store traffic increased 23 percent and sales increased over 10 percent when paper signage was replaced with digital signs that change during the day.

Focus on Multicultural Consumer

David Burgos

Principles:

  • Basic advertising principles are generally valid across cultures
  • Culturally targeting advertising tends to work better than non-targeted communications
  • Accept multicultural when relevant, and distinguish those areas where multicultural is the same as the wider society

When Advertising Works

J. Walker Smith and Bill Moult

Generalizations:

  • Recently recalled ads were more likely to have left a positive impression than if they were on digital media
  • Prior awareness of the brand is related to positive impression of the ads. Key implication – you can improve the effectiveness of ads by doing things to help make people aware of the brands

Clutter May Have Less Impact Than We Think

Erica Riebe of Ehrenberg-Bass Institute for Marketing Science

1. When more advertising is aired, audiences recall more ads in both “low clutter” and “high clutter” conditions.

2. Audiences remember a larger percent of ads they are exposed to when they see/hear less ads in total. There were advantages to the low clutter situation.

3. Audiences are not better able to identify the brand when the ads are in a less cluttered position.

4. Ads recalled in high clutter are of better quality/more likable on average… “Creative is very important.”

Six Degrees of Engagement

Mike Bloxham, Mike Holmes

More than half of all media exposure occurs concurrently with a non-media life activity, such as eating, change a diaper, etc.

When TV is the primary medium, it dominates consumption. But when another medium is added, TV takes on a secondary role, becoming a background medium. The switch from foreground to background has implications for advertising.

TiVo, Friend or Foe

Joel Rubinson, CRO of The Advertising Research Foundation

Penetration of TiVo and other DVR players has reached 25 to 30 percent. Half of all DVR owners fast forward through ads and 50 percent of television viewers multitask, Consumers who fast forward through ads on TiVo may actually pay more attention to them.

“To fast forward ads you must give attention,”  Erik du Pleissis said. “Users have to pay attention to when they start and stop the process, and they see compressed versions of the ads. This quick glimpse can be as effective as a full ad, he found in studies with subjects in theaters and other research… If an ad has been seen before, a fast forward ad is as effective as a full ad.”

On the other hand, Duane Varan, Director, Interactive Television Research Institute, Murdoch University, said that studies of multitasking also show that the distraction of other activities can be  “devastating” to advertising impact.

Importance of Creative

Robert Gunther

A study of television advertising effectiveness by Len Lodish and colleagues concluded that If television advertising doesn’t work in the short term, it doesn’t work in the long-term either. If it works in the first year, its impact is doubled over the next two years. The implication is that companies should generate more than one campaign (3-6 campaigns in 3-5 test markets were indicated by studies at Campbell’s ) and screen with pretests to choose the best one to run.

More information about the Empiracle Ad Generalizations EG Conference can be found at the Ehrenberg-Bass Institute here, or the Wharton SEI Center here

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