PDI: Measuring Advertising's Long Term Effects on Behavior

Jun 09, 2000, 01:00 ET from PDI

    CINCINNATI, June 9 /PRNewswire/ -- Although marketing executives have
 always felt that good advertising has long term effects on behavior, during
 the past decade corporate management has continued to cut ad spending at the
 expense of trade promotion expenditures.
     The reason for this trend is simple: though fortunes have been spent to
 create memorable ad campaigns for brands, it has been very difficult to
 quantify the long term effect of advertising on sales.  Without a clear
 understanding of this relationship, it has been easier to shift monies to
 trade promotion activities, to which the sales response is usually immediate
 and measurable.
     PDI, a leading marketing research firm headquartered in Cincinnati whose
 clients are major consumer packaged goods companies, has now created a way to
 assess and quantify the relationship between advertising's long term effects
 and sales.  PDI has accomplished this by blending technologies used by
 retailers with mathematical modeling in developing its new Lifetime Value of
 Marketing(TM) model.
     "The work of PDI is a big step forward in continuing the steady
 advancement in measuring the impact of advertising over the past ten years,"
 states Josh McQueen, Executive VP at advertising giant, Leo Burnett.  Mr.
 McQueen became aware of the Lifetime Value of Marketing(TM) model based on a
 presentation done by PDI at the Advertising Research Foundation's Annual
 Conference in March.  "The Lifetime Value model goes a long way toward closing
 the gap of uncertainty about how a particular brand's advertising works," he
 added.  "I am excited about the potential of this source to understand the
 impact of advertising," Mr. McQueen concluded.
     "Generally brands will spend about 5% of sales on advertising.
 Traditional marketing mix models typically show that ads only drive between 3%
 and 6% of sales volume.  Therefore, advertising does not appear to be
 extremely cost-effective at first glance," said Gregg Ambach, VP of
 Advertising Research at PDI.  "But the Lifetime Value of Marketing model
 confirms the existence of a 'multiplier effect' beyond advertising's short-
 term contribution, based on analysis of consumer behavior on factors such as
 Trial purchasing, Repeat buying and also increased brand usage.  PDI's
 analyses show that short-term sales results are multiplied by 1.5 to 3 times
 in order to calculate the actual long-term effect of ads," Mr. Ambach
     Jeff Hunter, Director-Consumer Insights, Best Practices and New
 technologies for General Mills, revealed that the new model has already
 changed the way his company allocates its marketing budget.  General Mills
 marketing executives are using this modeling to support advertising
 expenditures over trade promotion and retailer incentives, based on analyses
 confirming higher long term return from advertising.
     Mike Hess, COO of PDI added that, "The Lifetime Value of Marketing(TM)
 model represents a radical change in how marketers will make decisions about
 marketing budgets and allocation.  At present, managers are making these
 decisions with fairly good information about the short term impact of their
 decisions, but virtually no information about quantifying the long term
 effects.  For many years advertising budgets have been dwindling, while more
 was spent on promotions.  With this new model we expect the pendulum to start
 swinging back again.  For the first time managers can fully understand the
 short vs. long term tradeoffs and weigh the impact of their decision on the
 volume sold at retail."
     In addition to its headquarters in Cincinnati, PDI also has an East coast
 office in Fairfield, CT. For more information on the Lifetime Value of
 Marketing  model visit www.AdvertisingDecisions.com , the company's website
 devoted to advertising issues.