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TV Advertising Effectiveness and Profitability

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Re: TV Advertising Effectiveness and Profitability

#151

Post by morei »

mbesto wrote: post #113
paxys wrote: post #3

Advertising is at its core a prisoner's dilemma. If every competitor in a certain space puts in $100 in advertising, they can all expect $0 in returns. However if a single company put in nothing they would be in a worse place because their competitors' returns would automatically become higher.

You mean zero-sum. Advertising is a zero sum game. I can't find the tweet but someone referenced the fact that if you lump traditional and digital media together, the TAM of advertising has basically been stagnate for decades. We just think its grown because FB/Google/etc have gobbled it all up.

It's not quite true that advertising is a zero-sum game. There are economic benefits from increased competition, and from improvements in presented choice.

It is definitely true that the economic benefits don't accrue to the advertiser! And it's also true that the economic benefits decrease as advertising saturates. But it's still not zero.

Re: TV Advertising Effectiveness and Profitability

#152

Post by captaincaveman »

whoisjuan wrote: post #69

Isn’t Credit Karma’s accelerated growth attributed to TV Ads? I wonder why something like CK can benefit so drastically from TV Ads while others are not even close to breaking even on that investment. Is it the quality of the ads or the nature of the product?

Certain demographics are cheaper, less demand high supply, daytime TV audiences ... so yeah maybe a sweet spot!

Re: TV Advertising Effectiveness and Profitability

#153

Post by tehjoker »

rangersanger wrote: post #147
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…

Okay, I agree with everything you've said. In a "Data driven" organization, how do you prove that your brand marketing is working in order to protect it? A new leader comes in and says "this isn't adding value, you cant prove it's adding value, I'm cutting it unless you can prove it." What's your response?

A data driven organization is too short sighted to value things that aren't easily measured.

Re: TV Advertising Effectiveness and Profitability

#154

Post by malshe »

s1artibartfast wrote: post #149
malshe wrote: post #136

Earlier quoted context omitted.

Can you elaborate your calculation more? Are you using $1 from the $2 profit to reinvest in advertising? Also are you getting an 80% return on that $1 meaning getting back $1.8? ($1 investment in advertising + $0.8 profit)

In short, %80 return means that if you spend 1.0, you only get back 0.8. You forever lose the $1 spent, but get more sales and worth $0.8 after costs. Here are more details (repeated for clarity) Assumptions: 20% corporate tax rate (assessed on total profit) 80% Marginal rate of return for advertising (next dollar you can spend) 1) You have $2 profit (before taxes). You can take it and pay $0.4 in taxes, leaving $1.6…

Ok, thanks for the explanation. I got confused because of your definition of ROI. Normally, ROI of 80% would mean you invest $1 and get back $1.8 in return. see https://www.investopedia.com/terms/r/returnoninvestment.asp. What you described will mean -20% return and not 80% return. But I get the point you are making and I agree with it.

Re: TV Advertising Effectiveness and Profitability

#155

Post by TremendousJudge »

MuffinFlavored wrote: post #105
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…

> is to add PENNIES (not dollars) to their sales every day How much growth has Coca-Cola seen on their specific "Coke" line of products? How many people who don't already drink Coke, Coke Zero, or Diet Coke are going to be influenced by a (probably very expensive) TV advertisement reminding them that Coke as a brand of sugary drink exists? I feel like if they ever wanted to save millions and millions of dollars, they…

They have to keep up the appearance that they are pretty much the only cola drink you ever want to buy. If they stop all their advertising, people would start seeing other brands (and I don't mean just Pepsi, all the other lesser known local brands as well) as viable options.

At least I think that's their logic.

Re: TV Advertising Effectiveness and Profitability

#156

Post by hogFeast »

andreilys wrote: post #32
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…

And for these reasons hard if not impossible to measure or control for confounders - but that doesn't mean it doesn't work!! One of the ways that advertisers and marketing people stay employed is they say that the output of their effort and money spent is not quantifiable.

It clearly is quantifiable. The market is changing but if you capitalize advertising costs in financial results then you see that long-term investment in advertising does produce results, and companies in these industries view this investment as their moat (and btw, if you sell a FMCG into a grocer, they will want to know what you are investing into the brand...they know it works too).

Now, to be clear, this isn't the same thing as saying that all TV advertising has a positive ROI. It doesn't, I would guess that most is negative. But it is also true that there are a small number of firms who have made it work (as in most things, 80/20), and most of this gain is not easily measurable over discrete periods...it is continuous investment over decades.

But the market has clearly changed. People are spending their time doing different things. I think TV advertising time at certain periods is maybe cheap, but almost all the rest is overvalued junk. AdTech online isn't particularly well developed for this kind of campaign, online advertising isn't particularly effective either (the move to intention doesn't fit the long-term strategy that FMCG and similar big buyers of TV ads have) but it is probably more effective. Maybe if TV costs go down this will change, but...I don't know (radio and door-to-door is undervalued imo).

Re: TV Advertising Effectiveness and Profitability

#157

Post by hogFeast »

mjburgess wrote: post #36
andreilys wrote: post #32

Earlier quoted context omitted.

And for these reasons hard if not impossible to measure or control for confounders - but that doesn't mean it doesn't work!! One of the ways that advertisers and marketing people stay employed is they say that the output of their effort and money spent is not quantifiable.

Indeed. When I walk into the store there are a very limited number of colas on offer: a can of pepsi, a can of coke, etc. What exactly is the advert for ? My choice has largely been made.

Exactly. The cost and effectiveness of advertising is why there are a limited number of choices. Your choice has been made for you.

Re: TV Advertising Effectiveness and Profitability

#158

Post by username90 »

5tyuft wrote: post #101
scsilver wrote: post #93

Earlier quoted context omitted.

Elon is one giant ad, and he has equity. Just because its not defined as traditional advertising, doesnt mean they dont promote the brand. They have physical car showrooms with large tesla logos. They litterally spent millions to put a tesla in space...

This was my first thought. Elon is constantly in the news or doing some memorable stunt. Tesla absolutely advertises it's just through Elon.

Has anyone calculated how much money he saved on ads doing that? Seems like a huge efficiency advantage compared to competitors.

Re: TV Advertising Effectiveness and Profitability

#159

Post by fukmbas »

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…

Both are an absolutely useless waste of resources for society

Re: TV Advertising Effectiveness and Profitability

#160

Post by nirushiv »

petercooper wrote: post #130
slg wrote: post #60

Earlier quoted context omitted.

>Brand advertising, in contrast, works on a spread-out scale of years or decades...The actual effect that a brand advertisement has, is to add PENNIES (not dollars) to their sales every day, for the next 100 YEARS. It's a long-term investment. And for these reasons hard if not impossible to measure or control for confounders - but that doesn't mean it doesn't work!! Car brands are the obvious example of brand adverti…

I love Mercedes, yet what got me to buy two cars in particular were YouTube videos by other owners showing just how fun they were.

It’s possible the TV ads influenced your watching of those videos :)
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