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There are many ways advertising is judged; was it popular, did it win awards for creativity, are people talking about it or sharing it with friends? These are all valid, but nothing is as important as whether or not the advertising was effective in hard business terms. Did it actually work? If not, then it is hard to justify the investment.
Marketers instinctively know that advertising works and that investment over the long term helps develop and maintain brands, however there is increasing pressure to prove its value.
Thinkbox has been exploring the issue of television advertising payback in greater depth for many years by approaching it from several different angles. We have focused both on the long and short term effects of TV advertising using techniques like econometrics to help us understand the effect each medium has within a campaign.
Payback 3 looked to build on our previous research whilst also validating our preceding payback studies (please click here to read about the key findings from Payback 1 & 2)
Delivering objective data-driven advice
We commissioned Ebiquity to conduct an independent review of Thinkbox’s two previous Payback studies and expand on them using their econometrics database of over 3,000 models across 9 marketing categories based on their own advertiser clients' campaign data.
The database allowed Ebiquity to deliver independent, objective and robust findings comparing, on a like-for-like basis, the sales and profit impact during the last five years of five forms of advertising: TV, radio, press, online display (excluding VOD) and outdoor. By including online display data (it was not available in Payback 1 and 2), as well as having the ability to analyse the return of media investment by product category, Payback 3 was able to add new insight in addition to the previous findings.
The 7 key headlines
1) Ebiquity confirmed the conclusions from previous studies
Ebiquity were able to validate and update many of the findings proven in Payback 1 & 2. As they used their own database they weren’t, of course, able to confirm all the results but they did agree with everything that they could replicate.
2) TV is the lead effectiveness medium
Per impact or GRP, TV delivers 2.5 times the sales return of any other medium.
Ebiquity calculated effectiveness using the ‘adstock’ theory which mimics consumers' response to advertising not only during the campaign period but also beyond it. This is typically calculated as sales volume per TVR.
Because Ebiquity recorded this metric for almost all of the campaigns within their database over the last decade they were able to show that, over time, TV effectiveness has remained quite robust.
In fact, when Ebiquity extrapolated their channel level effectiveness learnings to all spend data in their database, TV represented 55% of all spend from their clients but a staggering 71% of all sales - 29% higher. Basically TV is punching well above its weight for advertisers.
3) TV has the strongest ‘halo’ effect
Ebiquity also found that, on average, 38% of TV’s total sales effect was felt by products not directly advertised creating a ‘halo effect’ across a brand’s entire portfolio. So, if a beauty brand advertises a shampoo product on TV, the campaign is likely to boost sales of its other products, such as body spray or moisturiser; if a bank advertises a mortgage product, its home insurance and current accounts will benefit.
4) TV’s profit ROI up 22% in the last 5 years
Despite the recession, TV’s effectiveness is on average 22% higher than five years ago. This was because the sales uplift per exposure had remained undiminished while the cost of advertising on TV had been falling in both absolute and relative (inflation-adjusted) terms thanks in part to record commercial TV viewing.
Essentially a £1million investment in TV when the study was undertaken would deliver hundreds of thousands of pounds more than it did five years before.
5) TV delivers the best return for your money
TV creates the most extra profit; an average return of £1.70 for every £1 invested. It is 15% more efficient than the next medium, radio which delivers £1.48 for every £1 spent. The average £0.70 net profit return on £1 invested in TV goes straight to your bottom line.
6) ROIs differ hugely by sector
For each £1 invested, TV advertising delivers an incremental £2.58 profit within retail and £2.37 profit in financial services, very strong returns. However, on average, each £1 invested in FMCG, will drive £0.61 in profit. Much of that is due to the size of FMCG brands. It is worth noting however that TV is twice as efficient than any other medium within this category.
Lower ROIs in FMCG are not a surprise and many studies have shown similar findings. The effect that advertising has on a brand as a whole down does not often get picked up via econometric modelling. TV advertising plays a key role in raising awareness, consideration and loyalty as well as helping achieve better in-store distribution to name just a few of its benefits.
It’s important to note that Ebiquity found no evidence of an over-reliance on TV. If anything, their theoretical models showed that there is some scope for increased investment in the current market. For example, for the finance brands within the Ebiquity database, around 48% of their total spend is on TV however the theoretical optimum is around 60%. These models are based on the database and are as a result hypothetical but they do give a good indication as to the optimum spend levels on TV within a sector.
7) TV is the beating heart of a campaign
TV also consistently makes other elements of advertising campaigns work harder. Ebiquity found that TV’s effects are felt by all accompanying media, but are most starkly seen in combination with radio advertising, where radio’s effectiveness is increased by up to 100%, and with branded search where a typical TV campaign increases search volume by up to 35% per 100 TVRs. Ebiquity also have a mass of data which shows the effect TV has on in-store promotions, a sales increase of up to 20% in some instances.
What role does creativity play in business success?
Ebiquity’s findings help to prove that TV investment pays back but it is unable to tell us why. Thinkbox worked with researchers at Neuro-Insight to come up with evidence about the link between the creative effectiveness of commercials and their marketplace performance using a selection of campaigns from Ebiquity’s database.
Neuro-Insight used a unique brain-imaging methodology to assess how people respond to communication, analysing metrics such as emotional response and long-term memory encoding. Neuro-scientific techniques were used because simply asking people why they buy a certain brand over another is not enough. Many academic studies have found that over 90% of our decisions are made without any rational involvement whatsoever.
So for this study, eighteen TV ads were tested, from nine categories; in each category there was an ad that was known to have been commercially successful, and one that was known to have had a relatively weak impact on the brand’s market performance. By analysing these ads using a set of characteristics known to be associated with creative effectiveness we hoped to prove the differences between them.
All the ads were measured against five key elements but we focused on two of these, emotional intensity (approach/withdraw) and long term memory encoding. As most of the ads used would have been seen before, there was little point in using measures found in the left brain as this is commonly associated with the processing of new information. As the two measures we focused on are in very different parts of the brain there was no overlap of brain activity. The first element, approach/withdraw, broadly equates to like and dislike measuring the direction of the emotional response. The second was long term memory encoding (LTME), which is considered to be the most important; it measures what is going into our memory even on an implicit level. LTME is important because it correlates strongly with decision making and purchase behaviour.
As the graph above shows, Neuro-insight indexed the worst performing ads at 100 on each of the two measures and so was expecting the 9 better performing ads to sit within the blue semi-circle. This is exactly what happened, for all but one of categories the resulting analysis revealed very clear distinctions between the stronger and weaker performing ads. In particular, the more successful ads were associated with stronger levels of memory encoding and higher levels emotional intensity. We saw a clear correlation between brain response both creatively with these ads and their commercial performance.
If you’d like to know more about how creativity works in TV advertising please click here to read some of our previous neuroscience research in this area.
Payback 3: ad success in tough times
In August 2008, we commissioned PricewaterhouseCoopers to repeat and extend the innovative payback analysis from 2007. This study look at shifts in brand values in relation to changes in advertising investment across the seven market categories analysed in 2007, plus three new market categories. In addition, we also appointed Data2Decisions bring together two large datasets focusing on brand health and media spend. The objective was to unpick the relationship between media spend and brand health across a much larger range of categories and products. Data2Decisions also examined the impact of investing in brands during a recession.
This research, commissioned by Thinkbox and the IPA, and undertaken by independent marketing consultant Peter Field, analysed the correlation between campaigns' performance across a wide range of the worlds' most respected creative awards determined by The Gunn Report, and their performance in hard business terms recorded in the IPA Effectiveness Awards Databank. Updated in 2011, the analysis now covers 435 campaigns over a sixteen year period between 1994 and 2010. It revealed a direct correlation between strong advertising creativity and business success, and that high levels of creativity make advertising campaigns some 12 times more efficient at increasing a brand’s market share. Here you can find out about the project’s background, read the management summary and download the IPA’s full report.
Here you can view and download some handy slides with notes, that support the new booklet from Thinkbox and the Marketing Society, ‘Why TV is a brand’s best investment’; a brief yet far-reaching guide to what we know about advertising effectiveness and, in particular, TV advertising’s place at its core.
In 2011 we did further work into the area of effectiveness commissioning Ebiquity to carry out an independent econometric analysis of 3,000 ad campaigns across 9 different categories. Alongside this, Thinkbox worked with researchers at Neuro-Insight to come up with evidence about the link between the creative effectiveness of commercials and their marketplace performance using a selection of campaigns from Ebiquity’s database. Heather Andrew, Director of Neuro-Insight (UK) explains the findings using their unique brain-imaging methodology.