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Key Takeaways

1. Combining linear attribution, econometric modeling, and controlled experiments is essential for accurately measuring advertising effectiveness.

2. Erenberg Bass principles bridge the gap between academic research and practical application, shaping the understanding of marketing strategies.

3. Balancing creativity and effectiveness is crucial in marketing to achieve success.

4. The evolution of understanding marketing effectiveness involves factors beyond rational persuasion.

5. Pricing effects can be more profitable than volume effects, impacting revenue and profit significantly. Sales volume increases come with variable cost increases, pricing increases don’t, therefore directly increase profit.

6. Premium positioning and strategic marketing play vital roles in brand growth and success.

7. The power of branding can transform struggling brands into market leaders.

8. Emotional brand building can lead to increased brand value, market share, and pricing power.

9. Continuity in marketing campaigns allows for deeper evaluation and gradual impact on price sensitivity.

10. Market mix modeling shows the importance of price and distribution in driving sales.

11. Look beyond media efficiency in market modeling to consider pricing and distribution.

12. Focus on statistically significant differences in pre-testing for effective advertising strategies.

13. Audio visual media are crucial for brand building.

14. ~60% of advertising payback comes from long-term effects.

15. Setting clear objectives and seeking personal validation are essential for research activities.

16. Measure and evaluate actual effects in the market to make informed decisions for the brand and company.

Gav.notes // Full notes and clip times.

[05:16] Triangulating Advertising Effectiveness

Linear attribution, although previously considered a solution for measuring return on advertising spend, has significant flaws and limitations. Econometric modeling, while superior in many aspects, is not without drawbacks such as being broad, slow, costly, and somewhat opaque. Controlled experiments, while being a gold standard, can yield inconclusive results at times. Combining all three methods - linear attribution, econometric modeling, and controlled experiments - is essential to accurately measure the effectiveness of advertising strategies.

[09:19] Bridging the Gap Between Academic Research and Practice

Erenberg Bass has successfully bridged the gap between academic research and practical application by incorporating principles dating back to the late 1950s. The principles presented in Erenberg's book have been instrumental in shaping the understanding of repeat buying behavior and marketing strategies, making Erenberg and Erenberg Bass significant contributors to the field.

[10:18] Balancing Creativity and Effectiveness in Marketing

Erenberg Bass principles, dating back to 1959, emphasize the importance of balancing creativity and effectiveness in marketing. While the academic approach may be complex, it is crucial for a marketing agency to prioritize both creative caliber and passion for effectiveness to achieve success. The combination of creativity and effectiveness is not a conflict but a fundamental requirement for proper marketing functions and successful client relationships.

[13:08] The Evolution of Advertising Models

The traditional model for advertising used to be based on finding a truth, creating a rational message, wrapping it in emotion, and adding some entertainment to sell a product. This model focused on rational persuasion with a touch of sugar-coating to capture attention. However, this approach has evolved over time with the realization that advertising is not solely about rational persuasion but also about emotional connections and engaging storytelling.

[16:24] Fundamental Principles of Communication and Creativity

The application of fundamental communication principles before delving into creative work is crucial. Understanding how communication works in different ways and media is essential. Many past creative endeavors were based on intuition rather than knowledge of these principles. Communication is not always about delivering messages; instead, it should be approached differently in many cases, marking a significant revelation.

[19:12] Influence of Advertising on Pricing

Advertising not only impacts volume but also influences the price people are willing to pay for a product, potentially justifying a premium price. Good brand advertising can reduce price sensitivity, allowing for higher pricing and increased revenue without incurring additional costs, leading to a significant boost in profits.

[20:07] Pricing Effects Are More Profitable Than Volume Effects

Research suggests that focusing on pricing effects can yield potentially higher profits compared to focusing on increasing sales volume. Increasing product prices by 10% leads to a direct increase in revenue without incurring extra costs, leading to all the benefits going to the bottom line. Despite pricing effects being more profitable, this area of effectiveness is less studied, similar to dark matter in physics where a significant portion of profit generated from advertising may not be measured. Most of the profit from advertising possibly comes from pricing effects rather than volume effects, similar to the previous scenario where short-term effects of advertising were only measured, overlooking the long-term benefits.

[22:47] The Power of Premium Positioning and Marketing Strategy

Premium and super premium positioning in the market, along with strategic marketing, play a crucial role in brand growth and success. An example is Hendrix Gin, which entered the market as a super premium brand. The ability to adjust and maintain prices strategically using marketing tools is often overlooked but can be highly impactful.

[23:27] Emotional Brand Building Success

A case study about the cat food brand Felix demonstrates the success of emotional brand building. The advertising campaign featured a simple concept of a black and white cartoon cat without a clear message. With a successful advertising campaign over 10 years, the brand transformed from almost being delisted to becoming the number one brand in volume sales, demonstrating the significant impact of effective branding strategies. This success was achieved by reducing price sensitivity gradually, resulting in increased volume, market share, and premiumization through emotional brand building.

[26:35] The Power of Continuity in Long-Running Campaigns

Continuity plays a crucial role in the success of long-running campaigns, allowing for evaluation in different ways and the accumulation of slow-burn effects over the years. Consistency in advertising and measurement techniques, such as market mix modeling, is key to observing and leveraging these effects over an extended period of time.

[30:33] Importance of Market Mix Modeling

In defining an effectiveness case, it is crucial to factor in and track various variables comprehensively to understand what drives sales. Market mix modeling involves building a complete model comprising numerous variables - up to 200 in some cases. This process reveals that advertising plays a relatively small role compared to factors like price and distribution, which have a significant impact on sales.

[30:33] Focus on Product, Price and Place/Distribution in Marketing, not just Promo/Advertising

When defining the effectiveness case, market mix modeling shows that advertising has a relatively small influence compared to price and distribution. Building a comprehensive model to understand sales involves examining numerous variables, with price and distribution emerging as the most significant factors. The key elements in marketing are product, place, price, and promotion, with promotion being the least critical. Emphasizing the importance of price and distribution can lead to more effective marketing strategies.

[42:04] Focus on statistically significant differences for effective pre-testing

The key result indicates that in pre-testing advertising, it is crucial to focus on statistically significant differences rather than directional indications like red, green, or amber. This requires large sample sizes, typically around 400 to 500 people, to achieve reliable results. Previous studies showed that rational persuasion pre-testing models only influenced short-term sales effects, while emotional pre-testing was more effective in the long run. The conclusion underlines that advertising effectiveness can be achieved through two avenues: short-term rational and long-term emotional, with current trends moving away from predominantly rational pre-testing methods towards a more balanced approach.

[48:12] The Importance of Audio Visual Media for Brand Building

TV spots are becoming a smaller part of campaigns, but the effectiveness of an idea or campaign is often judged based on testing these spots alone. This focus can lead to overlooking the long-term brand building aspect, which is crucial for overall payback as about 60% of advertising payback comes from long-term effects. Audio visual media are found to be the most effective for brand building, emphasizing their importance in advertising strategies.

[51:49] Clear Objectives and Personal Validation

Setting clear objectives for research activities is crucial, whether aiming for early stage feedback or real-world impact. It is challenging to predict accurately how something will perform, especially with limited stimulus material. Honesty about objectives and metrics is key, avoiding overreliance on research companies and seeking internal validation. Engaging in critical thinking, judgment, and personal involvement are essential for meaningful results.

[56:40] Measure and Evaluate the Actual Effects

All actions need to be informed by understanding what actually works. Pre-testing is not the only answer; it's crucial to measure the actual effects of initiatives in the market. Some clients drop pre-testing after realizing the lack of correlation between pre-test success and real-world performance. It's essential to use various testing methods and metrics. Relying solely on pre-test results without evaluating market performance can lead to making decisions without actual insights, only superficial reassurance. To make informed decisions for the brand and company, both pre-testing and market evaluation are crucial.