Market Mix Modelling — Long Term Effect (Advertising)

It is generally accepted that the impact of advertising on sales is primarily long lasting. By attracting new users, many of who stay with the brand, the persuasive element of advertising has a prolonged impact on sales. Furthermore advertising effects gets carried over time as they imbue brands with symbols, values, feelings and meaning. Their short term impact on the other hand tends to be weak — advertising elasticity, based on various research findings, is usually 15 to 20 times lower than price elasticity.

According to Millward Brown, the long term effects of advertising outweigh short term effects in 80% of cases. And the scale of the impact is generally believed to be several times greater in the long term, than in the short term impact.

Though there are some approaches for doing so, capturing long term effects is not one of the strengths of market mix modelling. The dynamic effects discussed earlier capture mainly the short term lead and lag effects. Long term effects are more difficult to tie back specifically to advertising.

Assessing the short term impact of advertising is useful of course, for the short term.  Moreover, experts claim that you do not get long term impact from advertising without achieving short term success. Yet short term gains do no guarantee the long term effectiveness of the ad.

Because most market models do not capture long term effects, it is not advisable to use market mix models to measure the ROI of advertising.

The research methods covered in Chapter , Advertising Analytics are best suited for assessing the long term potential of advertising. They dwell on the ability of advertising to build empathy with consumers, increase their disposition to purchase the brand, emphatically communicate the value proposition and positioning, and generate impact through salience and differentiation. Though these methods provide detailed understanding of the impact of advertising, they do not forecast the impact of advertising on sales, nor do they provide any estimate of the ROI of advertising.

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Market Mix Modelling - Solutions

Market Mix Modelling - Solutions

Solutions for market mix modelling.