1) How advertising really works
The sales response to brand advertising
Purpose of brand advertising is to affect the buying behaviour of consumers
There is solid evidence that brand evidence does produce sales
effects of ads are difficult to see in sales trends
2 reasons why advertising’s sales effects are hard to see in weekly and monthly sales
figures
1. The aim of most ads is to maintain market share
o few companies spend enough to increase market share
o much advertising is aimed at preventing competitors’ ads from stealing future sales
2. Advertising’s sales effects are spread out in time
o changes in weight are more likely to make weekly sales figures of a small
brand move up and down
o Takes a dramatic burst to cause a week’s figure to increase
Changes in advertising spend and changes in overall sales are a weak association
Advertising causes sales even when sales figures don’t change
Movements in week’s or month’s sales figures don’t reveal the sales impact of advertising
o they are like the tip of the iceberg but we don’t know what proportion of the total
iceberg represents
For some advertising, the effect on sales occur immediately
o bv. “Sale ends this Thursday”
most advertising affects sales effects that are spread into the future
How advertising and price promotions cause sales in
different ways
Light buyers vs heavy buyers
Who is Coke’s advertising aimed at?
o at the millions of people who occasionally buy Coca-Cola
o why established brands need to advertise:
to hold onto their buyers and to give themselves a chance to grow
o remind us that Coke is fun and increase our probability of buying it tomorrow
Entire sales effect of a price promotion shows up in a week’s sales figures, while the
sales effect of advertising is spread very thinly into the future
o vb: chance to buy: 1/300 2/300; which means buying every 150 days instead of
300 effects spread over time
Sales effect = when brand’s advertising reaches low-probability buyers, then it nudges
their propensity to buy the brand
1
, Most of these extra sales will never occur before consumer even buys from the
category, he will be hit with competitor ads, but protection from the effect of
competitor activity
Reach of price promotions is very different
Very restricted reach to more heavy, regular buyers of a brand
In-store promotions only affect people buying from the category in the week of promotion
entire sales effect shows up in that week’s sales figures
Price promotions show clear effects
sales increase when price promotions are turned on
longer term effects of price promotions are minimal
our purchase probability returns to normal afterwards
Never mix price promotion effects and advertising effects
“single source data”: individual-level data that records continuously over time what
each individual buys and what advertising they are exposed to
“Advertising drives sales among those who are exposed to it.”
European styles of advertising; softness, indirectness, bizarre humour… are very effective
Experiments from other reliable methodologies:
o Advertising generates sales
o Some advertising copy is much more sales effective than others
o Creative copy without a persuasive message can still be very sales effective
o Media strategy that achieves greater reach is particularly effective
“Advertising works by reaching, nudging and its effect on memory”
Without noticing (and processing) there is nothing
Two hurdles (hordes):
1. an ad can’t build memory structures if it isn’t processed
2. memory structures can’t generate sales if they aren’t associated with the brand
that is being advertised
Advertising can work without us paying it much attention
o notice things at a very low, subconscious level
o better if advertising can generate more conscious attention and processing
Challenge is to generate that emotional reaction in the direction of acceptance
Primary task of advertising agencies
o To generate outstanding creative ideas that the viewer will notice and process
o This processing must be brand-centric: refresh the memory structures that relate
to the brand
2
The sales response to brand advertising
Purpose of brand advertising is to affect the buying behaviour of consumers
There is solid evidence that brand evidence does produce sales
effects of ads are difficult to see in sales trends
2 reasons why advertising’s sales effects are hard to see in weekly and monthly sales
figures
1. The aim of most ads is to maintain market share
o few companies spend enough to increase market share
o much advertising is aimed at preventing competitors’ ads from stealing future sales
2. Advertising’s sales effects are spread out in time
o changes in weight are more likely to make weekly sales figures of a small
brand move up and down
o Takes a dramatic burst to cause a week’s figure to increase
Changes in advertising spend and changes in overall sales are a weak association
Advertising causes sales even when sales figures don’t change
Movements in week’s or month’s sales figures don’t reveal the sales impact of advertising
o they are like the tip of the iceberg but we don’t know what proportion of the total
iceberg represents
For some advertising, the effect on sales occur immediately
o bv. “Sale ends this Thursday”
most advertising affects sales effects that are spread into the future
How advertising and price promotions cause sales in
different ways
Light buyers vs heavy buyers
Who is Coke’s advertising aimed at?
o at the millions of people who occasionally buy Coca-Cola
o why established brands need to advertise:
to hold onto their buyers and to give themselves a chance to grow
o remind us that Coke is fun and increase our probability of buying it tomorrow
Entire sales effect of a price promotion shows up in a week’s sales figures, while the
sales effect of advertising is spread very thinly into the future
o vb: chance to buy: 1/300 2/300; which means buying every 150 days instead of
300 effects spread over time
Sales effect = when brand’s advertising reaches low-probability buyers, then it nudges
their propensity to buy the brand
1
, Most of these extra sales will never occur before consumer even buys from the
category, he will be hit with competitor ads, but protection from the effect of
competitor activity
Reach of price promotions is very different
Very restricted reach to more heavy, regular buyers of a brand
In-store promotions only affect people buying from the category in the week of promotion
entire sales effect shows up in that week’s sales figures
Price promotions show clear effects
sales increase when price promotions are turned on
longer term effects of price promotions are minimal
our purchase probability returns to normal afterwards
Never mix price promotion effects and advertising effects
“single source data”: individual-level data that records continuously over time what
each individual buys and what advertising they are exposed to
“Advertising drives sales among those who are exposed to it.”
European styles of advertising; softness, indirectness, bizarre humour… are very effective
Experiments from other reliable methodologies:
o Advertising generates sales
o Some advertising copy is much more sales effective than others
o Creative copy without a persuasive message can still be very sales effective
o Media strategy that achieves greater reach is particularly effective
“Advertising works by reaching, nudging and its effect on memory”
Without noticing (and processing) there is nothing
Two hurdles (hordes):
1. an ad can’t build memory structures if it isn’t processed
2. memory structures can’t generate sales if they aren’t associated with the brand
that is being advertised
Advertising can work without us paying it much attention
o notice things at a very low, subconscious level
o better if advertising can generate more conscious attention and processing
Challenge is to generate that emotional reaction in the direction of acceptance
Primary task of advertising agencies
o To generate outstanding creative ideas that the viewer will notice and process
o This processing must be brand-centric: refresh the memory structures that relate
to the brand
2
