Long Term vs Short Term?

Transcription

1 Long Term vs Short Term? Published May 2013

2 Introduction In 2012, the Institute of Practitioners in Advertising (IPA) joined with Thinkbox in the UK to conduct an in-depth study on advertising effectiveness, comparing long-term investment with a short-term promotional approach. Headed by Les Binet and Peter Field, the research examined the business effects of 1,000 advertising campaigns across 83 categories.

3 Key findings The study found that: 1. Reaching a mass audience is most effective 2. Long-term brand building campaigns generate greater profit 3. TV advertising crucial to long-term profit 4. Emotional advertising is more efficient than a rational approach Source: Advertising Effectiveness: The Long and Short Of It, IPA 2012.

4 1. Reaching a mass audience is most effective

5 Reach is key While many advertisers are focusing on building deeper relationships with their customers, findings from the study suggest that reaching as many people as possible both current and new customers is the most efficient way to succeed in the long-term. Source: Advertising Effectiveness: The Long and Short Of It, IPA 2012.

6 Reaching mass most efficient Campaigns which reach a mass audience of both existing and new customers are more efficient. Brands which target the whole market achieve 3 times as many large business effects (e.g. increased profit, sales, market share, and a reduction in price sensitivity) as those that focus on existing customers. Business Effects by Target Tight audience targeting, whilst desirable for activation, does not help longterm success. 2 1 Target existing customers Target new customers Target whole market Source: Advertising Effectiveness: The Long and Short Of It, IPA UK 2012.

7 2. Balance activation and long-term brand building for greater profit

8 Greater profit from long-term Long-term (3+ years) brand-building investment in advertising delivers double the profit of a short-term approach (less than 1 year), but investing in both delivers even higher returns. The largest part of an advertising budget (at least 60%) should be invested in media with a mass reach and long-term effects, such as TV. The remainder should be spent on shorter-term activation channels to provide a response mechanism to capitalise on the effects of the brand-building activity. Note; these figures can vary by market category. Although price promotions can maximise customer response rates and stimulate shortterm sales, they can also increase price sensitivity and erode long-term profits. Source: Advertising Effectiveness: The Long and Short Of It, IPA UK 2012.

9 3. TV advertising is crucial to long-term profit

10 TV creates larger business effects None of the 1,000 ad campaigns included in the study achieved substantial long-term profitable growth without investing in TV advertising. TV advertising remains the most effective way to build a brand and creates larger business effects than other forms of advertising. Increase in Business Effects As A Result of Advertising 40% 30% 20% 10% 0% TV Radio Press Posters Internet Sponsorship PR Source: Advertising Effectiveness: The Long and Short Of It, IPA UK 2012.

11 TV = 6 times efficient TV advertising is proving even more effective due to growing synergies with online and increased viewing reducing the cost of reaching mass audiences with TV. Including TV advertising in a campaign increases the campaign s efficiency six-fold. Source: Advertising Effectiveness: The Long and Short Of It, IPA UK 2012.

12 4. Creative advertising and scale are crucial

13 Emotive delivers twice the profit Emotional advertising is twice as efficient as rational, and delivers twice the profit. Highly creative advertising is the most effective of all, but even the best creative work will fail if it does not have sufficient scale. Increase in Profit Effects by Style of Advertising 30% 20% 10% 0% Rational Only Rational and Emotive Emotional Only Source: Advertising Effectiveness: The Long and Short Of It, IPA UK 2012.

14 For more information on the IPA research click here