Neil Mortensen, Research and Planning Director, Thinkbox

The proof is in the payback

How do we know that advertising pays back; that it creates profit and is worth the investment? 

Advertisers instinctively know it works and they can see overnight the effect on sales.But beyond sales growth it is important that we identify and understand what it does for the bank account, especially during uncertain economic times. We need hard evidence that advertisers get out more than they put in and we need to know which parts of their marketing investment are doing what.

This is the context for Thinkbox's Payback studies, the third of which was published last week. Undertaken by Ebiquity, Payback 3 is a vast, independent econometric study. Its scope takes in 3000 ad campaigns across 9 ad markets during the last five years of economic woe. It compares, on a like-for-like basis, the sales and profit impact of five forms of advertising: TV, radio, press, online display and outdoor. 

Its findings should make compelling, and largely reassuring, reading for advertisers.

Firstly, Ebiquity found that all the different media it analysed paid back. On average, all were worth their salt. For obvious reasons, though, we were even more interested in what Ebiquity found out specifically about TV advertising.

It is at this moment that I want to re-stress that this was an independent and very robust study. If Ebiquity had come back with bad news for TV – or any other medium – we would have been in a rather awkward position but obliged to share the findings. Thankfully, they discovered the following:

TV advertising creates the most profit. Spend £1 on TV advertising and you will get back an average of £1.70 extra profit, more than from any other medium (the next best is radio with £1.48). This was the case for all but one of the market categories Ebiquity analysed (TV is a close second to press in retail, which is not too surprising as press is a traditional route for retail brands. This is even more the case during time of economic uncertainty, when there is an increased emphasis on short-term, price-lead retail promotions).

Moreover, Ebiquity found that TV’s return on investment (ROI)has increased by 22% in the last five years, due to the fact that its effectiveness (its sales uplift per equivalent exposure) is undiminished while the cost of advertising on TV has been falling in both absolute and relative (inflation-adjusted) terms.

The econometricians also found that TV advertising is 2.5 times more effective at creating sales uplift per equivalent exposure than the next best performing medium (press, which delivered 37% of the sales uplift TV creates).

So it is very good news for TV advertisers in terms of sales and profit. However, importantly, Ebiquity also identified the wider effects that TV has which are often overlooked by effectiveness studies.

They found that TV advertising creates a ‘halo’ effect across a brand or range of goods. In fact 38% of TV advertising’s effect is achieved on products not directly advertised. So, if a beauty brand advertises a shampoo product on TV, the campaign is likely to boost sales of its other products, such as body spray or moisturiser; if a bank advertises a mortgage product, its home insurance and current accounts will benefit.

TV is also consistently making other elements of advertising campaigns work harder. Ebiquity found that TV’s effects are felt by all accompanying media, but are most starkly seen in combination with radio advertising, where radio’s effectiveness is increased by up to 100%, and with branded search, which a typical TV campaign increases by up to 35%. In effectiveness terms, TV is other media’s steroid.

These may be our words, but they are Ebiquity’s findings. In the words of Andrew Challier, the Effectiveness Practice Leader at Ebiquity who oversaw Payback 3:“TV is weathering a perfect storm of economic downturn and increased competition from emerging media. Its unrivalled effect on sales and profit and its profound influence on other media make TV advertising both the most effective form of advertising and a powerful ally to other media and marketing mechanics, both on and offline.”

Our sincere hope is that businesses, as we face increasingly gloomy economic forecasts, pay heed to this study and the evidence it gives them that advertising – and especially TV advertising – is a proven source of profit in tough times.

Research and Planning Director, Thinkbox