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Research on the Impact Advertising Has on Sales and Revenues

Research on the Impact Advertising Has on Sales and Revenues

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Does advertising work? That’s a question many people who are looking for an advertising agency or digital marketing firm ask themselves.

The answer is … well, sort of.

The truth about advertising is that some of it works and some of it falls flat. But just because your advertising or digital marketing campaign didn’t have an immediate impact on sales doesn’t mean that the campaign was a failure.

In fact, research conducted several years ago by the Information Resources Institute (IRI) found that only about 20% of advertising pays out in the short term. The rest either pays out over the long term or doesn’t work at all.

But the secret to making your advertising or marketing campaign work is to test your way to success. After all, no advertising or marketing campaign works perfectly the first time. Instead, they improve over time via the constant tweaks and adjustments you make.

With all that in mind, let’s take a look at some of the findings about advertising effectiveness from the IRI research.

  1. TV Advertising Alone is Not Enough: Only about half of TV advertising heavy-up plans have a measurable impact on sales, although when it does work, it has a big impact. The research also showed that advertising effectiveness is often higher on new products or line extensions than on established brands.
  2. The Impact Advertising Has Lasts Longer Than the Campaign: Evidence shows the long-term positive effects of advertising last up to two years after peak spending. In other words, the flame keeps burning long after you stop adding fuel to the fire. What’s more, the long-term incremental sales generated are approximately double the incremental sales observed in the first year of an ad spend increase.
  3. Payout Statistics on Promotions are Dismal: About 16% of trade promotions are profitable. And the impact a promotional campaign has on sales are often short-term (except for new products).
  4. Allocating Marketing Funds Involves a Continuous Search for Marketing Programs That Offer the Highest ROI: If you have a reliable evaluation system that measures the ROI of your marketing, you can continuously optimize your campaigns as a way to extend your ROI.
  5. Long-Term Spending on Promotions is Not a Sound Strategy: There are strategic disadvantages for brands that rely on promotions for sales. These include losing control to the trade as well as training consumers to buy only on a deal. When all that is factored in, the case for establishing and maintaining a high-value brand makes economic sense. (Just ask Steve Jobs.)

In the end, any successful marketing program is going to involve a balanced, metrics-based approach. Relying too heavily on promotions or on short-term tactics will result in diminished returns over time.

Jamie Turner is the CEO of the 60 Second Marketer and 60 Second Communications, an Atlanta-based advertising agency and digital marketing firm that works with national and international brands. He is the co-author of “How to Make Money with Social Media” and “Go Mobile” and is a popular marketing speaker at events, trade shows and corporations around the globe.

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