Advertising effectiveness

Jerry Thomas

The advertising industry, as a whole, has the poorest quality-assurance systems and turns out the most inconsistent product (their ads and commercials) of any industry in the world. This might seem like an overly harsh assessment, but it is based on testing thousands of ads over several decades. In Decision Analyst's experience, only about half of all commercials actually work – that is, have any positive effects on consumers' purchasing behaviour or brand choice. Moreover, a small share of ads actually appear to have negative effects on sales. How could these assertions possibly be true? Don't advertising agencies want to produce great ads? Don't clients want great advertising? Yes, yes, they do, but they face formidable barriers.

Unlike most of the business world, which is governed by numerous feedback loops, the advertising industry receives little objective, reliable feedback on its advertising. First, few ads and commercials are ever tested among consumers (less than 1%, according to some estimates). So, no one – neither agency nor client – knows if the advertising is any good. If no one knows when a commercial is good or bad, or why, how can the next commercial be any better? Second, once the advertising goes on air, sales response (a potential feedback loop) is a notoriously poor indicator of advertising effectiveness because there is always so much 'noise' in sales data – competitive activity, out-of-stocks, weather, economic trends, promotional influences, pricing variation, and so on). Third, some of the feedback is confusing and misleading: agency and client preferences and biases, the opinions of the client's wife, feedback from dealers and franchisees, complaints from the lunatic fringe, etc.