MANAGEMENT SLANT

  • A significant portion of advertising is wasted because of suboptimal media allocation that overlooks the impact of clutter, familiarity, and sales percentage difference on thresholds, ceilings, advertising goodwill, and market share.
  • Empirical data were used on sales and advertising expenditure from the South African automotive market over eight years. Clutter was a significant and large-scale determinant of sales’ rate of decay. At high levels of clutter, almost no level of advertising affected market share.
  • In a highly competitive environment, even when clutter is distributed throughout other media, all media returns are reduced significantly and materially.
  • In the absence of advertising, goodwill decays, and the model market share decays reasonably rapidly.

INTRODUCTION

Advertising effectiveness can be measured in many ways, but in retail, it generally is considered to be the highest sales response achieved for a given expenditure. “Advertising effectiveness” refers to the market response to a brand’s advertising (Tellis and Tellis, 2009). An important adjunct to previous measures of advertising effectiveness (Tellis and Tellis, 2009) is the efficiency with which advertisers achieve their market response—given the expenditure incurred. Recent figures suggest an average efficiency of 66 percent for the top 100 advertisers in the United States (Cheong, De Gregorio, and Kim, 2014), which points to billions of dollars of wasted advertising.