New Report Into Advertising Effectiveness

26 Jan 2017 | 02.44 pm

New Report Into Advertising Effectiveness

Core Media and AAI release Marketing Multiplied

26 Jan 2017 | 02.44 pm

Every euro spent on advertising in Ireland delivers a gross sales return of €8.26 and a net return on investment of €5.44, according to Marketing Multiplied, a new report prepared by Core Media and the Association of Advertisers in Ireland.

The publication also highlights how creatively-awarded campaigns are six times more efficient in growing market share, loyalty programmes have very little long term effect, and emotionally-based campaigns outperform rationally-based campaigns.

The report recommends that marketers should spend 60% of their budget on long term brand-building activity and 40% on short term sales activation.

Marketing Multiplied, says its authors, highlights marketing as a major driver of economic growth. It provides consumers with information, encourages innovation, promotes competition and leads to lower prices — all contributing to increased sales, higher employment and stronger economic activity.

The report includes case studies that quantify the significant influence that marketing campaigns can have on the growth and profitability of businesses and brands. Economists Chris Johns and Jim Power authored the report, together with Alan Cox (pictured), CEO of Core Media.

“Since the 19th century, economists have analysed and argued about advertising. But from both a theoretical and empirical perspective the position is clear — advertising is good for growth, promotes competition, helps innovation and leads to lower prices,” said Power.

“The point about growth is worth emphasising, as it is the least studied link to advertising. The evidence, however, strongly suggests that advertising is extremely important for the overall level of economic activity. It oils the wheels of economies, provides jobs and boosts growth in an unambiguously positive way.

“The evidence is clear that the influence advertising has on economic growth is extremely positive. The debate is mostly about the size of the effect. Researchers have found that €1 of advertising generates €5.70 for the Irish economy while other research, across different countries, finds similar, often larger, effects.”

A recent report from Deloitte found that advertising is a major economic engine, contributing €640 billion to GDP in Europe — 4.6% of overall EU GDP. Advertising also contributes nearly 6 million jobs across the EU.

Complementary Skills

Core Media chairman Patrick Coveney commented: “The absence of marketers from boards cannot be good for companies. It means that a critical part of the business is not being given sufficient voice or respect and it goes a long way to explain why marketing budgets are thought of as an expense rather than an investment. Boards tend to be dominated by people with financial or engineering backgrounds, who are not necessarily trained to understand the consumer, the competitor landscape and external environment in a way that a skilled marketer can.

“What’s needed is to configure senior management teams and corporate boards with complementary skills; to embrace diversity of thought; to balance creativity, analytics and performance discipline.”

Some of the other key points to emerge from the research are:

  • Creativity has a quantifiable influence on effectiveness, with creatively-awarded campaigns six times more efficient than non-awarded campaigns in growing market share.
  • Recruiting new customers is more profitable than trying to increase frequency of purchase. The evidence says that loyalty programmes have little effect and when they work, they do so mainly by recruiting new customers, not by reducing churn or by extracting more value from existing ones.
  • Emotionally-based brand campaigns outperform rationally-based activation campaigns on every business measure. They are significantly more profitable, they are better at generating awareness, they are stronger at creating differentiation and they form more durable memories of the brand in consumers’ minds.
  • Brands using paid media typically grow three times faster than those that rely on owned and earned media alone. Owned media typically increases the effectiveness of a paid campaign by 13% and earned media by 26%.

The report costs €50 either to download or as a printed paperback ordered from Core Media.

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