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
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
"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.