Strategize in Advertising Expenditures

“Half the money I spend on advertising is wasted. The trouble is I don't know which half.”
     So said Philadelphia department store tycoon John Wanamaker, at least according to retailing lore. Mr. Wanamaker died in 1922, in an era when social networking would have had a quite different meaning than it does now. But the questions still remain about the relative benefits of advertising versus, let’s say, word-of-mouth. Consumer behavior researchers at University of Texas-Austin and University of Southern California report that classic studies have found word-of-mouth to be about twice as effective as broadcast advertising and seven times more effective than print advertising.
     Recent research at Southern Methodist University and University of Southern California gives a more comprehensive look at the quantitative effectiveness of advertising and suggests where you’re likely to get the best relative return when you strategize your advertising expenditures. The researchers analyzed findings from 56 studies published between 1960 and 2008. Here’s some of what they and other researchers discovered:

• Advertising effectiveness is somewhat lower now than in the past. This is probably due to the explosive growth of social media. At the same time, there is no evidence that advertising effectiveness has been impacted by economic recessions.
• Retailers in Europe achieve a greater return on investment from advertising than do North American retailers.
• Advertising is more effective for durable goods than for nondurables.
• Advertising achieves a higher return for new brands—products and stores—than for established brands.
• Television advertising influence is generally higher than print advertising influence in the short term, but print advertising is more effective than television advertising in the long run.
• Long-term effectiveness of advertising is about twice as high as immediate effectiveness when it comes to increasing sales. Look at your advertising as planting a seed for the future. That’s true not only for print and broadcast, but also for internet campaigns. Based on their analysis of MediaMind data for results of banner ad campaigns worldwide, eMarketer reports that only about 20% of the conversions come after a click on the banner ad at the time it is first viewed. The remainder of the resulting sales—about 80%—come later, stimulated by viewing the ad, even though there was no click-through right then.
• The message counts. John Wanamaker, for one, had something to say in his ads. He’s known for having introduced the slogan “One price and goods returnable.”

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View Advertising as Planting the Seed