How do big companies assess whether their TV ads were useful or not?
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Big companies employ people to do maths to work out the effect of lots of different things on sales. They create models, which are basically just sums that say sales = all these things that influence sales.
This ends up looking like:
Sales = base level of sales + price discounting + Xmas boost + advertising – price increase – competitor advertising
Over time you can see patterns. When we discount sales go up. When we discount AND go on TV sales go up even more. By understanding all of the factors that drive sales, you can put a value on each of them and understand whether your TV ads drove more sales than they cost.
Source: Econometrician – it’s my job to do this.
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