When Ads Work

New Proof That Advertising Triggers Sales

David M Jones

• Publisher: Routledge
• Year: 2015
• Print ISBN: 9780765617385
• eBook ISBN: 9781317452119
• Topic: Business
• Subtopic: Business General
• Index: Business

The "accepted wisdom" in advertising is that ad campaigns are good for building brand recognition and good will, but not for immediate sales impact. "When Ads Work" argues the opposite - that well-planned and well-executed advertising campaigns can and should have an immediate impact on sales. Featuring numerous examples from recent ad campaigns, the new edition of this popular book is a model for any successful advertising research program. With a device he calls STAS (Short Term Advertising Strength) - a measure of the immediate effect of advertising on sales - the author demonstrates that the strongest ad campaigns can triple sales, while the weakest campaigns can actually cause sales to fall by more than 50 percent. He exposes sales promotions as wasteful, especially when they are unsupported by advertising, and also demonstrates the strong synergy that can operate between advertising and promotion when they are planned and executed in an integrated fashion. "When Ads Work" offers eye-opening research and practical information that no one who studies advertising or spends advertising dollars can afford to ignore.

II

Evidence for Part I

Seventy-eight Brands Dissected

——— 7 ———

Advertising That Works

The Alpha One Brands

Chapters 7, 8, 9, and 10 should be read as a coordinated sequence. Each is devoted to one of the groups of brands described toward the end of Chapter 2. The purpose of analyzing these groups is that they provide the supporting evidence on which the conclusions in Part I are based.

To help the reader, I shall repeat two definitions used in Part I. Mediumterm sales growth (or decline) is based on Nielsen data measuring a brand’s market share in the first quarter of 1991, indexed as 100. The average share for the second, third, and fourth quarters has an index number calculated to compare it with the first quarter’s figure. The short-term advertising strength (STAS) differential index is the stimulated STAS for each brand, indexed on its baseline STAS, which is measured as 100.

Three important variables, all controlled by the marketer, have a direct influence on sales. They are a brand’s advertising intensity, price index, and promotional intensity.

Advertising intensity is represented by the brand’s share of total advertising in its category (i.e., share of voice), divided by its share of market. This produces an estimate of the percentage points of advertising voice for each percentage point of a brand’s market share. In this way, we can compare brands of different sizes according to their relative investment in advertising. The calculation is explained in more detail in Appendix D; the measure of share of voice is based on Nielsen data.

Although Chapter 5 demonstrates that a brand’s advertising budget has little influence within the purchase interval so long as most consumers are exposed to at least one advertisement for the brand, it is a different matter when we are looking at more extended periods. Over a year, the continuity of a schedule is important, because continuous advertising reduces the number of sales down over the twelve months. Continuity is a question of the advertising budget, measured here as advertising intensity.

Table 7.1
Medium-Term Share Growth/Decline Index in Each Quintile in Four Independent Quintile Analyses

	STAS differential	Advertising intensity	Price index	Promotional intensity
Total	106	106	106	106
Top quintile	132	132	101	120
Second quintile	99	100	99	109
Third quintile	100	97	95	101
Fourth quintile	99	103	104	98
Bottom quintile	100	99	133	102

The price index is a measure of the average price paid by consumers for the brand, compared with the average price in the category (indexed as 100).

Promotional intensity is measured by the percentage of the brand’s volume sold on deal (i.e., at a special, reduced price), compared with the category average (indexed as 100). A brand’s promotional intensity is related to its price index, but the two are not the same. The price index is the brand’s list price less all the promotional allowances made to the consumer. The total amount of such allowances is measured by the index of promotional intensity, and this index signals the importance of the brand’s short-term price reductions as a tactical selling tool.

Note that the price index and promotional intensity are expressions of consumer promotions, intended to pull the merchandise through the retail pipeline. The analysis does not cover trade promotions, which are mainly financial incentives to the retail trade aimed at pushing the goods through the pipeline to the consumer. Even though this activity is not measured in my calculations, I do not imply that trade promotions have no influence on consumer sales. Trade promotions are often partially passed on to the consumer in the form of retail price reductions, which are of course covered in this analysis. (A common example is when stores double the value of manufacturers’ coupons.)

Table 7.1 is based on a quintile analysis. Brands are ranked in five separate groups from highest to lowest according to a specific measure. The table in fact describes four such measures: STAS differential, advertising intensity, price, and promotional intensity. For each quintile for each of the four measures, I have worked out the medium-term growth in sales and presented it in indexed form. This is an attempt to tease out what inputs—STAS, advertising intensity, price, and promotional intensity—actually contribute most to increasing sales.

Table 7.2
Composition of the Four Groups of Brands

	Number	Percent
Total	78	100
Alpha One	26	33
Alpha Two	19	24
Beta	20	26
Gamma	13	17

There is only one clear finding from Table 7.1. The top quintiles of STAS differential, advertising intensity, and promotional intensity are associated with high sales increases, and there is the expected relationship between price and sales, with the highest price associated with low sales growth. Beyond this, the picture is too complex to provide meaningful answers. We must therefore subdivide the brands in a different way, as is done in Table 7.2.

The number of brands in each of the four groups discussed in Chapters 7, 8, 9, and 10 respectively is shown in Table 7.2. I have followed the normal statistical convention of putting the percentages in parentheses to warn readers that they are calculated from a total of only seventyeight brands. The percentages represent a statistical projection, which would not be the case if the total were 100 or more.

From now on, each group of brands will be treated separately, starting with Alpha One. These are the majority of the brands with both a positive STAS differential and medium-term share growth over the course of one year. A small number of large brands, those in the Beta group, also had these c...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• Tables and Figures
• Preface
• I. Facts Replace Theory
• II. Evidence for Part I: Seventy-eight Brands Dissected
• III. Appendixes
• Index
• About the Author