Advertising Quality — Adfactor
The overwhelming evidence
from research studies suggests that the quality of the creative material is
critical in advertising. It is important therefore to include advertising
quality as a measure when modelling advertising response.
The advertising quality is specific to the
commercial, and it may be assessed in terms of consumers’ perception of the
advertisement on various measures. One approach used by research firm Millward
Brown is based on their Awareness Index (AI). This index
is essentially a measure of efficiency of a commercial in generating awareness.
It represents the incremental level of claimed ad recall generated per 100
GRPs. An adstock type variable called Adfactor is constructed by using ‘GRP
× Awareness Index for the commercial’ as the measure for advertising:
$$ Adfactor_t=\frac{1-r}{f(1-r)+r}(fA_t+rA_{t-1}+r^2A_{t-2}\, ...\, +r^{t-2}A_2+r^{t-1}A_1),$$
$$A_t=AI × GRP_t.$$
Where, r is the retention rate, and f is the impact in the
first period.
Millward Brown has demonstrated, through practical examples, that incorporating
Adfactor into marketing models leads to significantly higher estimates of the contribution of short-term advertising effects.
