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TV Advertising Effectiveness and Profitability

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Re: TV Advertising Effectiveness and Profitability

#61

Post by handmodel »

nickff wrote: post #49
handmodel wrote: post #43

Earlier quoted context omitted.

I think I have the opposite reaction from the same data. The reason I can't get my own sugar water on a grocery store shelf is because the grocery store doesn't want to give space to something that only sells half as well. And, they are humans too, so I'm sure they are biased by the ads/perception of what they think other people want. I think a lot of the long-term bonus of ads is to simply build a moat that other co…

I think you're overlooking a couple of grocery-specific issues. Many major retailers will require that new brands invest a certain amount of money in advertising product to their region/market before stocking the product. It's also common to 'lease' shelf space to manufacturers.

I think we largely agree. I know people who have launched food items (bug snacks) that were piloted in a dozen or so Whole Foods. They didn't sell enough in the trial period that they weren't given offer/lease to return.

It was a super niche product they were making but were up against a couple products that I've at least seen ads for online. I think, theoretically, if those other companies didn't have a brand presence then perhaps my friends snacks would have had a slightly better shot at staying on the shelfs. However, from the other products data they may have seen no short-term gain from their ads.

Re: TV Advertising Effectiveness and Profitability

#62

Post by fighterpilot »

vikramkr wrote: post #57
fighterpilot wrote: post #23

Earlier quoted context omitted.

Well it assumes a zero-sum game from the perspective of the competitors. The combined advertising effort of all competitors could grow the entire pie that they each share. Even though their percentage of the pie stays the same, the magnitude of the slice could be bigger, and that improvement in magnitude could outstrip the advertising cost, thus making it worthwhile.

In heavily saturated markets (notably cigarettes as the main well known case study), advertising can be more zero sum than not. No model is perfect, but the prisoners dilemma model for advertising is at least useful in a couple well known cases.

The assumption being made here is that the market will remain saturated even if all advertising is pulled.

Re: TV Advertising Effectiveness and Profitability

#63

Post by tlogan »

hammock wrote: post #27

There is a fundamental misunderstanding (intentional or not) with these types of studies and claims. Limited-time promotions, e.g. a 10% off sale, work on short timescales that are easily measured. You can easily say what the ROI is of an advertised promotion, and it is often positive. (Side note, these promotions have a more-difficult-to-measure detrimental effect on your long-term profitability, closely related to…

This is exactly the problem: it is impossible to measure how much advertising helps. And maybe there are some measurements but they are not known.

You might be right or you might be wrong. For example, I do not see Tesla commercials on TV so I wonder if they will sell more cars in next decade if they advertise as other car companies? Is Tesla making a mistake?

Re: TV Advertising Effectiveness and Profitability

#64

Post by btilly »

handmodel wrote: post #47
echelon wrote: post #31

Earlier quoted context omitted.

> Source: Been on the leading edge of marketing and advertising for over 12 years Would you say that might be a source of bias? Look at SpaceX and Tesla. They barely advertise and have huge brand recognition. I'd buy Sennheiser over Beats. Krispy Kreme over Dunkin. Costco. My partner loves Zara. I don't have a high opinion of brands that advertise.

I think its fair to say that the reasons a rocket company does not need to advertise dont apply to companies that people buy weekly/monthly on a grocery store shelf. Besides, the advertising budget of other government contractors/satellite companies is also close to zero. The better question is "If I ran Pepsi today - would I drastically lower the advertising budget". I'm not sure what my move would be but I don't th…

And yet https://cometcleaner.com/ is an enduring consumer brand that has been around for decades and does basically no advertising.

A story that I remember from the 80s is that the brought in a consultant to improve sales. Rather than advertising, they opted to add one more hole to their cans. Sales went up 20%.

Re: TV Advertising Effectiveness and Profitability

#65

Post by Niglodonicus »

Imagine how low it would be if all internet users actually employed ad-blocking of some sort. Honestly remarkable how many people, faced with the prospect of sitting through extremely annoying video ads, or having their search results and webpages cluttered with useless ads, do nothing instead of spending one minute to install the appropriate blocker. Obviously not everyone is aware these exist, but you would think their curiosity would lead them to find out once they get fed up with having their time wasted by having their activities interrupted constantly and having manure shoved down their throat.

Re: TV Advertising Effectiveness and Profitability

#66

Post by evancox100 »

mlyle wrote: post #30
singhrac wrote: post #26

Earlier quoted context omitted.

Not necessarily. The thing to measure is the marginal ROI at zero advertising spend. Derivatives are not bounded by their average value across a range.

The claim was: "67% (2/3) have negative net ROI, and so would presumably be better off with zero advertising." If they truly have negative net ROI, they would be better off with zero spending than their actual spending. The claim holds. > The thing to measure is the marginal ROI at zero advertising spend. Derivatives are not bounded by their average value across a range. OK, so if we're going to get super pedantic...…

Furthering the pedantry, even assuming monotonically decreasing ROI as ad spending increases, as long as ROI of the first dollar was positive, there would be some optimum between zero and current levels. But my original statement still holds, zero would be preferable to current levels of spending for those brands.

Re: TV Advertising Effectiveness and Profitability

#67

Post by zeusk »

rhizome wrote: post #35
singhrac wrote: post #26

Earlier quoted context omitted.

Not necessarily. The thing to measure is the marginal ROI at zero advertising spend. Derivatives are not bounded by their average value across a range.

I'm not an MBA nor even a math person really, what is the "I" in this equation when the ad spend is zero?

You just take the interval (0, inf). So you analyze it as limit spend -> 0+ in that region.

My personal opinion however is that ad industry is a big scam.

Re: TV Advertising Effectiveness and Profitability

#68

Post by mihaaly »

echelon wrote: post #31
hammock wrote: post #27

There is a fundamental misunderstanding (intentional or not) with these types of studies and claims. Limited-time promotions, e.g. a 10% off sale, work on short timescales that are easily measured. You can easily say what the ROI is of an advertised promotion, and it is often positive. (Side note, these promotions have a more-difficult-to-measure detrimental effect on your long-term profitability, closely related to…

> Source: Been on the leading edge of marketing and advertising for over 12 years Would you say that might be a source of bias? Look at SpaceX and Tesla. They barely advertise and have huge brand recognition. I'd buy Sennheiser over Beats. Krispy Kreme over Dunkin. Costco. My partner loves Zara. I don't have a high opinion of brands that advertise.

They actually make their products more expensive than necessary by making the client pay for something they have no use for: advertisement - making it less competitive by this extra price. I avoid heavily advertised product when I have a choice (and when not, then it has just no benefit for the company to pay for advertisement: I'd buy it without adverts for the same price.)

Re: TV Advertising Effectiveness and Profitability

#70

Post by ksec »

hammock wrote: post #27

There is a fundamental misunderstanding (intentional or not) with these types of studies and claims. Limited-time promotions, e.g. a 10% off sale, work on short timescales that are easily measured. You can easily say what the ROI is of an advertised promotion, and it is often positive. (Side note, these promotions have a more-difficult-to-measure detrimental effect on your long-term profitability, closely related to…

Very rare high quality comments on Ads.

Do you ever find annoying that the current narrative on the internet ( and on HN ) that All advertisement are bad? Approaching to the point of finding people working inside Ads industry as witch hunt?

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