Content area
Full text
Most past research has focused on how aggregate advertising works in field settings. However, the information most critical to managers is which ad works, in which medium or vehicle, at what time of the day, at what level of repetition, and for how long. Managers also need to know why a particular ad works in terms of the characteristics (or cues) of its creative. The proposed model addresses these issues. It provides a comprehensive method to evaluate the effect of TV advertising on sales by simultaneously separating the effects of the ad itself from that of the time, placement (channel), creative cues, repetition, age of the ad, and age of the market. It also captures ad decay by hour to avoid problems of data aggregation. No model in the literature provides such an in-depth and comprehensive analysis of advertising effectiveness. Applications of the model have saved millions of dollars in costs of media and design of creatives.
Key words: advertising response; wear-in; wear-out; carry-over effect; long-term effect; ad creative; ad cues
History: This paper was received August 19, 2004, and was with the authors 3 months for 2 revisions; processed by Gary Lilien.
Introduction
Firms spend billions of dollars each year on media advertising, yet much of this expenditure is made with limited testing of how or whether these expenditures will pay out in terms of sales and profits. Published studies on advertising's effectiveness have generally studied the aggregate effects of advertising on sales or market share. Most have focused on technical issues involved in efficiently capturing the unbiased effects of advertising using field data. The consensus from this research is that advertising does affect sales, though its elasticity is small and difficult to estimate (e.g., Sethuraman and Tellis 1993, Tellis 1988, Tellis and Weiss 1995).
One reason the elasticity is small could be that it reflects an average of many factors, including the medium, timing, repetition, age of the market, ad age (wear-in and wear-out), and ad creative cues (defined here as ad execution or content elements). Some of these factors might contribute to strong effects, while others might be weak or have no effect at all. Knowledge of the impact of these individual factors would greatly help managerial decision making. In particular,...