Advertising impact Generaiizations in a Marketing Mix Context

THE MARKETING SCIENCE INSTITUTE (MSI) recently released Empirical Generalizations about Marketing Impact, the eighth volume in its Relevant Knowledge Series. The book contains more than 80 empirical generalizations (EGs), contributed by about 60 academics from around the world. Each EG is summarized and documented in a standard one-page format. To the extent possible, the EGs are quantified using a response metric that allows comparisons across business settings, for example, elasticity (i.e., the percent change in a performance variable X as a result of a percent change in a marketing driver X). As Editor of the MSI volume, I welcome this opportunity to comment on our knowledge of advertising impact in the broader marketing-mix context that is the subject of the MSI book. In what follows, I will refer to the two sets of EG collections as "JAR EGs" and "MSI EGs" (see overview in Table 1). I will use the term "products" to refer to either physical goods or services. Thanks to the diligence of numerous academic researchers and the increased availability of good data, we have learned a fair amount about advertising's role and impact on customer behavior. Specifically, several MSI EGs contributed by Robert Leone, Leonard Lodish, Gerard Tellis, and Demetrios Vakratsas—some of whom also contributed to the JAR EGs—teach us that advertising campaigns work fast, decay more slowly, and are subject to diminishing returns and competitive clutter. An MSI EG by Robert Leone establishes a typical impact duration interval of several months. not years. Another EG by Gerard Tellis puts the overall sales-advertising elasticity around 0.1, with new products enjoying higher response than established products. An MSI EG by Leonard Lodish reports a wide elasticity range for TV in consumer product categories: from -0.05 to 0.5. Demetrios Vakratsas contributed the following EGs: advertising impact differs for durables versus nondurables (up to 50 percent higher for durables), search versus experience products (higher for experience), and concentrated versus diffuse spending (higher for concentrated). The average advertising elasticity of 0.1 is small compared to that of other marketing levers, such as sales calls (average elasticity 0.35, as reported in an MSI EG by Sönke Albers, Murali Mantrala, and Shrihari Sridhar) and price (average elasticity -2.6 for consumer packaged goods, as per an MSI EG by Harald van Heerde). This modest average elasticity does not imply that advertising is ineffective, but rather demonstrates that substantial change is needed to create a visible economic impact. The variability in advertising elasticities also implies that execution matters a great deal, and this involves choosing which products to advertise at what point in time, pretesting advertising's sales power before engaging in substantial spending, carefully choosing media that fit the advertising task at hand, and investing in high-quality creative. At the broader marketing-mix level, the MSI EGs also reveal that advertising contributes economic value, not as an isolated activity, but rather as an amplifier of other activity in the marketing mix. For example, an MSI EG by Koen Pauwels