More than a quarter century ago a famous study titled How Advertising Works found that advertising doubled long-term sales of products compared to sales of the product in the first few weeks of an ad campaign. But is that still true today?
The 2X multiplier was used by many marketing professionals to justify their ad budgets. Twenty five years later, a growing number of marketers are rightly asked the question: Has the fragmentation of media weakened the effect advertising has on sales?
A recent study by Nielson Catalina Solutions helps shed new light on this question that has plagued marketers since the proliferation of cable channels and the rise of digital and social media.
In what may come as a surprise to many marketers, the study found that advertising still impacts long-term sales of many products, with total sales of five packaged goods brands tested ranging from 1.8 to 4.5 times the sales registered in the first few weeks of the advertising campaigns. The results did show some variation by category, with a toothpaste brand tested seeing the lowest increase–1.8 times its original sales, while a boxed dinner brand saw a 2X multiplier and a soft drink brand’s sales multiplied 4.5 times what it was selling at the outset of the advertising campaign.
The study found also that brands that saw lower increases in sales were in categories with lower brand loyalty. But even for those brands the sales increases were comparable to the increases found in the 1989 study. When questioned about the results, a member of the research team speculated that the sales increases are often due to the fact that ads get consumers to try a product for the first time, and many people remain loyal to a product until they get tired of it or a competitor gives them a better deal.
While the latest study focused on packaged goods products, in subsequent testing, researchers plan to study a larger number of brands to see if the results hold up for brands in different categories and brands that use different styles of advertising creative.