By: Dr. David Bridwell, People Scientist and Jake McKenzie, Chief Executive Officer
Marketers are often tasked with the challenge of estimating the long term impact of marketing and advertising on sales. This is a difficult question of course, with many factors coming into play including the size of the brand, advertising spend, competitors advertising spend, the advertised message, and more. It’s helpful to take a look at some data across a range of brands to get some rough approximations of the impact of advertising spend on sales.
Fortunately, the Ehrenberg-Bass Institute for Marketing Science published some important data recently in the Journal of Advertising Research, along with a report of the key findings. In the report, they reveal a year over year decline in sales when advertising stops, with an average decrease in sales of 16% in the first year, 25% in the second year, and 36% in the third year.
When they break down the data by the size of the brand and the trajectory of recent advertising sales, they found that larger brands show a more gradual decline in sales compared to smaller brands and brands that are on the upward trajectory in terms of sales show a less steep decline in sales than those who are on a downward trajectory in sales.
These patterns aren’t necessarily surprising, but they provide some important figures for estimating the impact of advertising on sales as a function of current sales trajectory and brand size. So what can marketers do with this knowledge:
Share with your organization. This recent research provides some compelling data points that can be shared with decision makers within your organization who often struggle with seeing the long term impact of advertising spend or the consequences of cutting spend even for a brief period of time.
Understand the psychology behind advertising and sales. We can understand the link between advertising spending and sales by focusing on human perception and behavior. The typical customer isn’t just bombarded with advertisements throughout the day, they’re bombarded with information in general. Each second, the brain receives more information from the environment than it can effectively process and as a result, the brain has developed hundreds of biases and heuristics that help to quickly extract meaningful information.
Truly effective advertising ensures that information is clearly presented to the consumer, either through creative storytelling, through fluent imagery, or hopefully, both. When we instantly recognize your brand identity, customers will begin to recognize the brand more easily when they see it, which amounts to more efficient and effective advertising spend. Customers also begin to develop trust and affinity for the brand as a result of the familiarity principle or the mere-exposure effect.
There are many reasons to keep your brand identity and brand image top-of-mind for customers, and that’s why maintaining advertising spend is so important. At Intermark Group, we leverage psychology and the behavioral sciences, including memory science, to help make sure that advertisements have the most impact. We work with you at all levels of the campaign, from strategy, creative, production, and media, and more. Feel free to give us a call at 833-578-1314 or email us at firstname.lastname@example.org to discuss how we can help with your marketing challenges. In addition, sign up for our newsletter to stay in touch with the latest insights in marketing psychology.