PDI: Measuring Advertising's Long Term Effects on Behavior
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 explained. 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.
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