Editor’s note: Jordan Rosenblum is a research analyst for a New York City-based international marketing firm.
It isn’t easy to think of a time where advertising had moved me to action. I choose TV shows and movies based on critic reviews, like Rotten Tomatoes or IMDB, and recommendations from friends. I found an apartment by mining Google for listings. Even for a small, temporary purchase like beer I might look at reviews online. I doubt my experiences are extraordinary. How did you initially learn about your most beloved products and services? What convinced you to give them a shot? Perhaps advertising is responsible for generating an initial awareness, impacting me in ways I’m unaware of.
A 2011 meta-analysis of over 700 studies conducted by The Journal of Market Research titled, How Well Does Advertising Work?– exhaustive, comprehensive research advertising efficacy – showed a 12 percent correlation for advertising spend to sales in the short-term that jumped to 21 percent in the long term, $100 spent on advertising resulted in a $12 increase in the short-term and a $21 increase in the long-term. The study goes on to show advertising effectiveness in 1984, where each dollar spent correlated with a 25 percent relative increase of sales in the short-term and over a 40 percent increase in the long-term. Put more succinctly, advertising is around half as effective as it was 20 years ago.
Why is advertising getting weaker? Itamar Simonson and Emanuel Rosen take on the challenge in their 2014 book, Absolute value: What really influences customers in the age of (nearly) perfect information. Their argument is this: modern advancements in technology have created an increasingly social environment with easy access to trustworthy sources like friends and experts – sources many consumers value more than marketers. More than ever before, we can get closer to knowing our actual experience with a product or service, i.e. its absolute value. Simonson and Rosenson elaborate:
“There’s a lot of talk these days about the ‘the new consumer’ – a smarter, skeptical person who’s immune to marketing. We don’t buy that view. People are fundamentally the same as they were fifty years ago and will be fifty years from now. They are becoming less susceptible to marketers’ influence not because they are smarter or more logical. It is tools like advanced search engines, reviews from other users, unprecedented access to experts and easy access to friends and acquaintances that are changing things.”
To date, advertising has claimed responsibility over generating interest, building consumer preference through persuasion and encouraging purchase behavior. If Simonson and Rosenson are correct, encouraging purchase behavior through incentives – e.g. promotions and coupons – won’t change but persuasion will increasingly become less relevant. “It’s almost pointless to try and persuade people to consider your product when they can (and do) easily turn to more reliable sources,” the co-authors write. I spoke with Simonson and he reinforced this view, placing little importance on creative strategy: if Simonson is correct, in categories where consumers care enough to consult with sources other than marketers, neither credential-based nor entertainment-based messaging will be enough to break through.
While persuasion’s power is softening, generating interest stands to become more important. Moreover, generating interest by “help(ing) consumers get closer to knowing their likely experience with a product” – this goes beyond top-of-mind awareness. Rosenson and Simonson suggest marketers do this by connecting consumers with credible, independent sources that are timely and helpful. Moreover, they recommend: “Generating awareness by soliciting, monitoring and syndicating reviews, transparently recruiting honest opinions from experts or actual consumers (and) releasing genuine content that helps consumers evaluate their likely experience with a product.”
In a marketplace where consumers can now easily share their opinions and consult with sources they trust, Simonson and Rosenson advocate a shift in market research from predicting to tracking. Whereas traditional market research focuses on predicting actions based on consumer preferences and claimed actions, modern market research will increasingly be about monitoring and responding quickly to consumer needs, i.e. tracking consumer demand rather than predicting it. The authors discuss social analytics companies like Bazaarvoice and Bluefin Labs to exemplify this approach; each company keeps a pulse on consumer buzz with social media and other technology so that clients can quickly respond to changing consumer desires. When I asked Simonson if he thinks social analytics were more predictive of behavior than traditional research tactics, he said, “I think such techniques (social analytics), the now widely available big data, and easy to conduct experiments allow marketers to get better, quicker insight into actual purchase behavior; such insights in turn allow them to respond quickly and effectively.” Market researchers may no longer have to rely on positioning questions to try and predict how well advertising is working as modern technology allows them to track behaviors and perceptions directly.
Absolute value acknowledges that consumers will not seek out additional information for everything; traditional advertising will still play a role for commodity-type, low-effort decisions, for example, deodorant and toothpaste. However, for more significant matters, technology has made it easier than ever for us to turn friends, family and experts for advice. While the Journal of Marketing Research study demonstrates that advertising works, its utility is undoubtedly shifting. Success will increasingly be about bringing consumers as close to their actual experience with a good or service as possible.