How long does advertising last?

If you work in advertising - forever. But the rest of us can call their bluff with this info.

Do advertising investments show up quickly or take a long time to get going? And how long do the positive effects from advertising last?

I’ve noticed when I ask, ‘how long do these long-term effects last', no marketer is able to answer with any specific time frame, nor able to cite supporting data as evidence. Yet, every time when an advertising campaign isn’t going well, I’ll hear them say, ‘be patient - results take time’, ‘we’re building a brand’ etc.

Hanlon’s Razor says it’s wise to avoid attributing malice to that which can be explained with ignorance. And I think this is especially true when it comes to the claims marketers make about advertising’s long-term effect. Because it has been studied. Multiple times and the curves are mathematically predictable.

So when Antia asked me this question looking for answers, I decided it was time to gather a robust answer. Either use this to call someone’s bluff or use it to improve your advertising investments. The choice is yours.

The Cult of Long

There seems to be this weird binary split in the world of advertising between the long-term ‘brand builders’ and the short-term ‘performance’ crowd. While this false dichotomy is rife it can be dismantled with simple logic and understanding the history of the advertising/marketing function - listen to this in order to get up to speed.

The media landscape is so complex and fragmented now, it's no surprise tribalism has taken root. But what this means is you’ll rarely meet a marketer with a balanced view on the subject. They’re either on one side or the other.

Having personally worked in both worlds - traditional adland, digital, brand and direct-response - it’s your lucky day.

Brand Builders

The brand-building cult like to reference material from a book called, The Long and the Short of It’. A book written by two advertising industry workers from the UK, using data taken from an advertising industry group’s database (who all just happen to be large ad agency clients). With such a robust sample being used, and authors free from any commercial conflict - you can only imagine how interesting some of the conclusions are.

Marketers love to post this graph (below). It’s as directionally true as it is technically flawed. Lumping 65 different media into two categories also has its issues. But let's not open that can of worms. What it shows is that we need a mix of long term and long-term acting initiatives. And yes certain channels/initiatives will have different short and long-term effects. Some which are harder to detect or less obvious than others. That much is at least true.

On a completely unrelated note, if I owned a traditional ad agency and wanted to sell more high-priced traditional media style advertising campaigns to big-brand CMO’s, I would write a book very similar to this one.

Either way. the brand-builder crowd love to avoid accountability to their bottom-line impact by arguing how advertising's long-term impact is lengthy, and we must be patient if we don't see any immediate impact. This is both true and false. More on that in a bit.

Cult of CPG

I stumbled across some research published recently by a WPP affiliated firm that was interesting. Again, the sample is taken from their own cache of agency clients. But at least this time they're using a margin-based metric.

Source: “How long does it take for CPG ad spend to pay back?” Jon Webb, Managing Partner - Gain Theory. Published via WARC

If you look at the graph above it shows that the less the curve rises on the Y axis, the fewer long-term returns are being realized. The steeper the curve, the quicker they're being realized. The longer it takes to rise to 100% from it's starting point, the longer the payback period. But, also notice how much variation there is at the start-point (not all campaigns are equal from the get-go)

The main thing this study gets right is the conclusion that long-term performance mirrors short term performance. Meaning if the advertising doesn’t perform out of the gate well, it won’t perform well in time. So contrary to what advertising people might tell you, there’s no ‘wear-in’ effect. Which means, if the campaign is falling short of expectations early on, it’s probably best to jump ship quickly.

According to their research, we can expect financial payback from advertising investments as early as 61 weeks and as long as 150 weeks. The average tenure of a CMO is roughly 160 weeks however. Which means even if you do a great job, roughly half of the benefit of your work will be given to your replacement after you leave (or fired). And half you’re getting now is courtesy of your predecessor (reason #126 why the CMO role is almost pure politics).

Lodish Gave us a Load

Len Lodish did a lot of work measuring the trailing effects of advertising’s sales impact.

This table from one of his papers above shows we can expect a mean sales increase in the first year of 20.9%, 14.3% in the second year, and 8% in the third.

Which means, even if your advertising has stopped running, the carryover effect can be significant but decays at a rate of roughly ~30% YoY. These are similar decay rates to Gain Theory’s findings mentioned earlier. In this study however, Lodish is measuring sales impact (incrementality) not gains relative to the cost of the advertising (payback).

But we have a problem. Both studies mentioned used samples consisting of large CPG/FMCG advertisers. What about the rest of us?

Enter Byron Sharp et al

Discounting the fact EBI also has an affinity with the CPG sector, in 2009 Sharp, Kennedy, Taylor, and Newstead investigated the long-term sales effects of advertising. And they found most of the sales impact is actually realized very quickly.

“From very different approaches, two common findings emerge: If advertising is to be sales effective in the long term, it must first work in the short term. Advertising typically has a half-life of three to four weeks.”*

Meaning that after a month, you’ll have received 50% of the returns and can expect the other half to dribble in a long-tail lag.

*Source: The Total Long-Term Sales Effects of Advertising: Lessons from Single Source, Journal of Advertising Research, 2009.

But the devil is in the detail

The problem with all of the work above is that it was done in a time before a lot of budgets were allocated to digital media.

Koen Pauwels published a more recent paper (2016) that looked deeper into different media. Something most studies just lump together into one cost center.

“Advertising effectiveness continues to be misunderstood, including Freakonomics podcasts popularizing the low and uncertain individual-level effects of TV Advertising and Digital Advertising. What matters is whether we can prove beyond reasonable doubt that our advertising investment has increased our sales performance, and by how much”

Koen is a world-famous econometric modelling expert who is an academic but industry freelancer also. He’s just finished a years long project creating a MMM product for Amazon. And his applied real-world experience closer to the factory floor means he has a more nuanced view of how advertising impacts revenue or not.

The table below from his paper shows advertising elasticity. In other words, the percentage sales increase for a 1% increase in advertising. 1.0 denoting a 100% return on spend. He’s grouped media into 3 categories. But goes one step further and also splits it out via industry sector. See the wild variations below between different media types and sectors. Meaning, some of the former studies are quite inaccurate in terms of their choice to lump all advertising together. Details and context really matter.

Source: The effectiveness of different forms of advertising’ International Journal of Research in Marketing 2016

It was curious to see how the FICs media category (broadcast etc) which most would associate with ‘long-term brand building’ producing such a weak sales effect. These findings also debunks advertising industry dogma that argues broadcast mediums like TV, radio etc, are somehow superior to “digital performance” channels.

“Online advertising triggered by consumer action (CICs) is 10 times more effective than offline advertising. In every of the five studied categories, online advertising is more effective than offline advertising. However, we see a substantial benefit of content-integrated online ads: They are over 4 times more effective than content-separated ads. Doubling spending on content-integrated ads gives you over 13% sales increase,” argues Pauwels.

This study provides strong evidence that retail media and other unglamourous media like point of sales, distribution/referral networks etc. shouldn’t be deprioritized if you care about revenue. And it's perhaps where we should be investing most of our budgets and exhausting any gains first before moving onto more marginal-return media. Isn’t it funny how often marketers prioritize the opposite?

What about B2B?

Similar patterns apply to B2B. We have to remember some B2B products have very long sales cycles (the time between when we first buy a product and have to buy it again). And some categories have really strong switching barriers too (like CRMs, data infrastructure etc).

But Dale Harrison aggregated applied experience together with some averages to give us a rough guide of what to expect. Which is roughly a 3 quarter lag (9 months) to realize 90% of the return from your initial efforts.

These curves will start to look familiar and predictable. Aint math beautiful?

Don't forget the Null Hypothesis

Just remember, that any of your advertising efforts should be measured in relation to the existing trailing effects. The benchmark that keeps you where you are regardless. To see just how powerful this is for big brands, the Ehrenberg Bass Insitute released a paper a while ago which showed how robust sales are for brands that go silent (stop advertising altogether).

What it shows is that big brands have a 3 year buffer before they start to see a noticeable decline whereas for small brands, it's noticeable quite quickly.

Before we get technical, what this means is that when measuring the effects of a new campaign, you need to discount the trailing effects from all previous advertising campaigns which may still be contributing in a positive way.

Do you do this? I can almost guarantee you don't.

The Plot Thickens

John Little specified back in 1979 that any model of advertising should include things aside from immediate sales effects.

In a recent newsletter Koen Pauwels explains there are 3 side effects that need to be considered…

“1) delayed ad effect: consumers take a while to act on the ad

2) customer holdover: consumers act on the ad, and repeat purchase

3) distribution: retailers may react to ads by giving the brand better shelf space

The delayed ad effect is typically tied to the purchase cycle, e.g, customers may not be currently in the market for the product, or consumers have to wait for a doctor's visit to ask for the advertised prescription medicine. In such situations, ads can build memory structures and/or keep the brand top of mind when the purchase occasion arises.”

He points to a paper which looks at promotions and how long the sales effect takes to peak and then decline.

And goes on to reference the importance of understanding adstock, a term coined by Simon Broadbent. Which assumes that certain promotional channels build awareness or 'goodwill' in the minds of the consumers which influences their purchase decisions in different ways. Therefore, some channels have a longer and stronger effect than others.

“This mathematical model of exponential decay is more broadly known as the Koyck model, created by Dutch economist Jan Tinbergen and developed by the economist Jan Koyck.

What is the likely decay rate of adstock and its impact on future sales?

The rule of thumb is that the long-term effect of an ad is twice the short term effect, which implies an exponential decay parameter of 0.5 (1/1-0.5 = 2). This doubling was first observed in single-source field experiments were households were exposed to a heavier ad schedule for 1 year, and continued to show higher sales after the schedules were equalized. It was confirmed by Wildner and Rodenbach (2015) in their analysis of 204 German TV ads:”

So it’s important not just to consider how much advertising you are doing and for how long. But the nature of the channel investment mix also. Making cross-comparisons difficult.

TL:DR - What you need to know

• No matter what kind of adverting you run, how good your creative is and what media you use - you should remember that memories aren’t forever. People forget. And we also forget they forget. Combat this by advertising as frequently and consistently as possible across the entire length of the average buying cycle before you start measuring returns. And yes there is typically a significant long-term return (circa 50%) from advertising that's subtle and hard to measure. Therefore underappreciated and probably not measured well.
• If your advertising isn't working short-term, it’s not going to work long-term. Try to avoid falling for the sunk cost fallacy, placing all your bets on a lofty promise from your Head of Marketing or agency vendor. It’s also wise to test and iterate before going all in. So don’t be afraid to fold your hand and move on if it’s not working (fail fast). Probabilistic thinking for the win
• Beware of the political and cultural incentives which reward investments in certain media over others. Get the basics right first and exhaust them before layering on more marginal, lower elasticity media types. Meaning you probably need to spend more on direct response, packaging, point of sale, sales collateral, referral networks, distribution, product marketing, search, retail media etc.
• If your advertising initiative isn’t going well and you hear excuses like I’ve mentioned above - be skeptical. Marketers will naturally avoid their work being measured against any bottom-line metric. They'll prefer to reference measures that sound good, confuse people and/or are hard and expensive to measure. E.g. brand awareness, salience, metal availability, etc.

Hope this helps answer your question Anita.

If anyone has a question they want answered in the next issues, just comment below, email or DM me.

And if you need help with independent, conflict free measurement for your firm, get in touch.

Further Listening/Learnings

Champagne Strategy podcast episodes I recommend you listen to related to measurement if you want to go a bit deeper.

1 - Koen Pauwels - Econometric models & theory vs humans & practice… S3 Ep20

2 - Michael Kaminsky - Modern Marketing Mix Modelling - S3 Ep21

3 - Edgar Baum - Brand tracking - S3 Ep22

4 - Jon Rolley - Advertising Media Management - How politics creates unwise choices S3 Ep24

5 - Mike Taylor - Marketing Measurment Sytems in Practice - S3 Ep 25