How do big companies assess whether their TV ads were useful or not?
In: 5390
I work in the industry and can tell you it depends on how advanced the marketing team is. The less sophisticated way is running “tests” where you place ads in one market and not another and see whether it made a difference in sales. The problem with that is there are so many other things that could impact sales other than ads – maybe your competitors ran a sale in one market and not another. Maybe you also had digital ads running. Maybe your product is weather dependent and was nicer in one market and not the other. Maybe your sales people are better at their jobs in one market.
That’s where more advanced techniques like multi-touch attribution or mixed media modeling comes in – basically using statistics to estimate how much each possible explanation (ads, competitors, weather, sales staff, inflation, etc…) likely impacted your sales.
(Edited to include an attempt at an actual ELI5 answer since people seem genuinely interested in the topic:)
Let’s say you have a lemonade stand that you run in your front yard every Saturday in the Summer. Everyday you write in your diary about your day with all the details about the lemonade stand including how many customers you had, what the weather was like, if there was a BBQ or block party on your street and whether that annoying girl Suzy a few blocks down was also running her lemonade stand (she uses powdered lemonade mix not fresh lemons btw). After one summer I looked back at all my notes and learned that on a typical summer afternoon I can expect 20 customers. When it rains I only get around 5 customers. When Suzy is also running her stand I get around 15 customers. When there’s a BBQ I get around 30 customers! Knowing this information I could start to estimate how many customers I can expect on any given day. Now I had the idea to start putting out posters at the front of my neighborhood that say I have FRESH squeezed lemonade. Ever since then I average about 30 customers on a typical summer afternoon, that’s 10 more than before! When it rains I get about 10 customers now and when Suzy is out I get about 26 customers. So I can estimate the posters (advertising) is helping make up for the competition and the rain by about 5-6 customers and gives me around 10 more customers on most days.
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