University of Southern California

Does Advertising Really Work?
June 20, 2011
Category: 
Marketing

Advertising to mass markets became popular in the U.S. over a century ago. And for almost that long, researchers have been studying whether advertising works. Professor Gerard Tellis and his associates summarized the findings from hundreds of prior studies through a method called "meta-analysis." This approach ascertains the average effect of advertising in past studies and why it varies across contexts. What did they find out? Here are the highlights:

The effect of advertising is quite small – a one percent increase in advertising expenditures leads to .1 percent increase in sales or market share. In other words, the sales return to advertising is 1/10th of its input in terms of expenditures.

The effect of advertising has declined over the last three decades. This finding could be due to the growth of new online media for search, review, and buying and the increased tendency for consumers to make decisions at the point-of-purchase instead of in front of the TV.

Surprisingly, about half of all ads are ineffective. This result represents a large fraction of ineffectiveness. It may be because firms continue campaigns past their period of effectiveness, persist with ineffective ads, or just fail to test if their ads work.

Recession has little effect on advertising effectiveness. "If anything," the authors say, "there is a positive relationship between months of recession and long-term advertising elasticity. This result suggests that a firm does not need to cut back on advertising in a recession because it believes customers will not be responsive to advertising."

Print ads have stronger long-term advertising effectiveness, while TV ads have stronger short-term advertising effectiveness. "This finding calls for a careful consideration of cost and effectiveness when allocating budgets between the two media," the authors say.

Advertising effectiveness is generally higher in Europe than North America. This finding may be because of advertising wars or over-advertising in North America.

Marketing context can affect advertising effectiveness. Advertising tends to work better for durable goods than for non-durables and for new products than for mature products.

The Bottom Line: Advertising elasticity isn't what it used to be—and firms may want to align their advertising expenditures with these findings.

Gerard Tellis is the Jerry and Nancy Neely Chair in American Enterprise and Professor of Marketing. The author's paper will be published in Journal of Marketing Research and can be accessed at How Well Does Advertising Work? Generalizations from Meta-analysis ...