The role of determination time in calculating ad effectiveness
September 19, 2016
By Haren Ghosh, Founder and CEO, Analytic Mix
Many software products have flooded the marketplace that claim to calculate the ROI on TV advertising. But how effective are they? Most look only at the short-term effect of TV advertising by measuring the spike in KPIs such as website visits and online sales within a short (one to two hours) time window of a TV spot airing. Unlike other elements of the marketing mix, such measurement models fail to take into account that the effect of a TV ad can persist for a long time.
In general, people do not forget an ad after an hour of its airing. Well-executed ads can influence their behavior for days after the initial exposure. Failure to incorporate such long-term effects can lead to a lower-than-actual ROI calculation, the wrong determination that the TV ad is not effective, and ad dollars that should be moved to other channels.
While determining ROI depends upon incorporating long-term effects, the effect of TV advertising does not last forever. Media planners and marketers need to know how long the effect of a TV ad lasts or when an ad finally dies so they can stop counting it in their ROI model. Broadly speaking, this depends on two factors: the characteristics of the product advertised, and the demographics of the target segment.
Determination Time by Product Characteristics and Demographics
The time lag between the instant a consumer recognizes a need and when they actually make a purchase is the “determination time.” This is the time a consumer spends searching for product information and evaluating alternatives—often a costly use of time and energy for consumers. The determination time is thus higher for more expensive products and for products consumers buy for a long time. A wrong choice can aggravate a consumer for a long time. Whenever determination time is higher, consumers are involved in the search and tend to remember ads for longer periods.
Demographics also have to be taken into account. For instance, the long-term effect is much reduced for ads that target the elderly, as they may have failing memories, and for millennials with reduced attention spans.
Using a canned, one-size-fits-all ROI software product doesn’t paint a complete picture of TV advertising effectiveness. As marketers tend to use the same lens to understand the effects of all media channels on brand KPIs, they also tend to underestimate the effects of TV, which has much longer effects on consumer attitudes and behaviors. Our research provides marketers and media planners a critical learning of why and how to include long-term effects TV in media research. Contact us for a demo.
About the Author:
Haren Ghosh, founder and CEO of Analytic Mix, is a research industry veteran with more than 20 years of expertise in delivering client-centric predictive media analytics.