Marketers are under pressure as never before to demonstrate the effectiveness of the advertising campaigns they commission. They are constantly being challenged by finance departments to justify their ad spend and demonstrate its effects on sales.
Added to this challenge is the fact that traditional advertising is under threat from a boom in online media while a galaxy of television stations diffuse promotional messages across a range of ever-smaller audiences; not to mention that newspaper circulations are in decline and radio is in retreat.
To cope with these pressures and meet increasing demands for transparency, brand owners are turning to market research companies to tell them how much they should invest in TV advertising against other promotional spend.
At first sight, it seems straightforward enough. Simply correlate the advertising with the corresponding changes in sales. If sales go up sufficiently, then the campaign has been a success.
However, when analysing the influence of an ad campaign on sales, extraneous influences need to be stripped out. The brand owner must take into account the activity (or lack of it) of rivals, any promotions or price changes the advertised product has undertaken, how it has been received in the editorial media. On top of this, there is the question of how much advertising simply increases short-term sales against how well it builds long-term brand value and increases sales over a period of time.
But while ad agencies have been accused of creating self-serving measures of brand awareness to assess campaigns, market researchers are called up to address which form of marketing is most effective – short-term promotions and price cuts or long-term brand building through advertising. But finding the best ways to compare the two can be complex. There are so many metrics by which to judge an ad campaign’s outcome.
Given the complexity of modern campaigns, just looking at whether an ad leads to increased sales is too simplistic. One approach is to look at advertising awareness. Research company Millward Brown claims there is a proven relationship between advertising awareness and long and short-term sales.
The company has created its own tool, the Awareness Index, to measure this. Along with its measures of persuasion, Millward Brown claims it can provide a reasonably accurate picture of the likely increase in share of sales for an advertised product.
Long-term analysis shows that brands which increase their share of voice with powerful advertising stand a better chance of increasing their market share. Nearly nine out of ten products benefit from a long-term uplift in sales as a result of advertising and for a quarter of those the long-term impact is three or four times greater than the short-term impact and for one in five it is five times greater.
The research also shows that while motivating news tends to be more effective for smaller brands, creative advertising is more effective for larger brands. Meanwhile, advertising that generates an emotional response performs well on advertising recall. Over half the ads with the highest Awareness Index scores contain only emotional messages and nearly a quarter of these ads make no rational claim at all. Millward Brown concludes that creativity sells.
This will be music to the ears of creatives in advertising agencies, but they argue that market research spends a lot of time and money telling brand owners what is obvious. Creatives are ambivalent about research – they know their ads will be scrutinised for effect, but feel that research dampens creativity.
On the other hand, some believe that the use of market research in creating advertising campaigns does not go far enough. According to Verity Lambert, head of planning at marketing agency Iris, marketers have become confused about market research by the multiplicity of competing methods on offer. But she believes they could learn a lot from the direct marketing sector, where rates of response and conversion are closely watched and used to predict future campaigns. “Techniques favoured by direct marketers such as postcode profiling and control sells are starting to creep into the research tools used by advertisers and it is likely these will become more apparent in the future.
“While market research cannot be used solely to predict exactly the number of sales that will be generated as a result of a particular advertising campaign, with the right mix of research tools, marketers can get closer to the consumer – allowing an educated decision on the likely impact on sales to be made.”
Some rival researchers are sceptical of making a direct link between advertising awareness and sales. It is no great surprise that the more you advertise, the greater the awareness of the brand becomes. But a sustainable sales increase is as much down to the performance of the product as awareness of the brand.
One sceptic is Andrew Wiseman, director of consultancy Nunwood Market Analytics. He advocates combining the tracking of advertising and brand awareness with the more complex econometric measures, taking into account a wide array of factors such as price elasticity, the impact of different promotional activities on sales and the behaviour of rivals. From there, decisions can be taken about the best mix of advertising and promotion.
“By understanding the impact of media in the longer term, marketing decision makers are better placed to effectively allocate budgets across various activities. These measures, along with ad/brand awareness and persuasion measures, offer a more powerful means of securing budget for marketing expenditure than using econometrics or tracking alone and must be seen as the future of advertising evaluation,” says Wiseman.
Yet another approach is offered by TNS through its latest methodology called Ad Responders. This enables brand owners to see which type of advertising causes a change in purchase behaviour by panellists on the company’s Worldpanel. TNS recently won an effectiveness award for its work for Cathedral City Cheese, showing the effectiveness of television advertising in driving sales in the short term and leading to an increase in brand loyalty and profit in the long term.
According to Tracy Waring, media services director of TNS Worldpanel Media, there are several lessons that can be drawn from the company’s research into the effects of advertising versus promotions. “Promotions do not build brand loyalty but serve to drive short-term volume increases. Advertising has a short-term effect, not usually as large as a promotion which depends on factors such as brand maturity and the level of consumer interest in the product field.”
She adds that advertising also works in the medium term, about one year, continuing to drive brand sales after the initial response, and says advertising can work synergistically with promotions if timed correctly.
At the same time, brand owners are demanding increased transparency from their budgets. No longer are they willing to throw money behind an ad campaign and trust to their instincts. With the growth of procurement and the increasingly focused glare of the finance departments, proving ad effectiveness is no longer a choice.
Market researchers aim to answer some of brand owners’ most salient questions. Did the company spend too little or too much on the advertising? Did it achieved its goals and were they the right ones to begin with? How long should the commercial run for and when does it start to wear out? And what sort of advertising content makes an enduring contribution to the long-term health of the brand?