Profit Ability: the business case for advertising, by Ebiquity and EffWeek partners Gain Theory, provides robust, impartial evidence of advertising’s ability to deliver shareholder value. It does a powerful, evidence-based job for all forms of advertising, but particularly TV, which emerges as vital to business success.
The study was born out of a crisis in advertising. It was commissioned by Thinkbox in response to a worrying climate, with advertising effectiveness in free-fall, as shown by Binet & Field in the IPA’s Media in Focus.
It’s well established that the effectiveness crisis has been driven by short-termism and a drift away from investment in brand advertising. This has damaged advertising in general, blunting its edge. But it’s been especially bad for brand-building media like TV. Many media agencies and advertisers were calling for quantifiable, robust evidence that would start turning the ship around and help marketers make the case for brand advertising in the boardroom.
Profit Ability addressed these issues, not by pursuing a TV-only agenda, but by arming advertising as an industry and, in doing so, using the rising tide to float all the brand-building boats.
“If TV didn’t exist and something new turned up with these numbers, the industry would abandon everything else”
Alex Hesz Chief Strategy Officer at adam&eveDDB
Ebiquity and Gain Theory’s guaranteed impartiality and media neutrality were crucial to the study’s integrity – as was the fact that it was a combined perspective from two competing companies.
Using their pre-existing databanks of client-funded data, the study analysed over 2,000 advertising campaigns across 11 categories. For the first time, it quantified the impact that different forms of advertising have on the bottom line in both the short and the longer term. Importantly, this comprehensive data provided a view of the average case; there was no cherry-picking of successful campaigns. Category level detail ensured that it was relevant to advertisers’ own businesses.
The study has changed the conversation about marketing investment and re-focused attention on the value of brand building. It makes a compelling, evidence-based case for the long-term, but not to the detriment of short-term returns, which are also included in the report. What emerged was a persuasive case for re-thinking advertising investment and hard evidence of what businesses can trust to deliver growth. Here’s a summary of what Ebiquity and Gain Theory found, or download the full report:
58% of advertising’s profit return is overlooked when ignoring the long-term
Less than half of advertising’s profit impact happens in the short term. Businesses optimising their advertising investment based solely on these more easily visible short-term returns are hugely undervaluing the total profitability driven by advertising. They are not maximising the growth and value of the company.
Advertising is a powerful business investment
Looking at total profit ROI over 3 years, the average campaign delivers a profit ROI of £3.24 per pound spent. This varies by channel, but all forms of advertising, except online display, deliver profitable returns when you look at their long-term impact.
Focus on volume and scalability
In the short term, TV is responsible for 62% of all advertising-generated profit at an ROI of £1.73 for every pound spent, the highest of any media. In the longer term, TV advertising creates 71% of total advertising-generated profit at an ROI over 3 years of £4.20 for every pound spent, also the highest of any media.
TV delivers scale of return
TV drives the most profit because its scale and popularity enable it to deliver an efficient profit return at high volumes of spend. Businesses can increase investment in TV to a higher level than other media and it will continue to generate a profitable return before diminishing returns kick in.
Advertising can be risk assessed
In the long term, 72% of advertising campaigns create profit. Advertising is a safe business investment. TV is the ‘safest’ medium as it is most likely to create advertising-generated profit, both in the short and long term. In the short term, 70% of TV advertising campaigns deliver a profitable return. During the 3 years after ad campaigns finish, this increases to 86% of TV advertising campaigns delivering a profitable return.
It’s time to reassess the return that advertising can generate
Businesses can now reassess the potential return that can be generated by different forms of advertising. For example, the study concludes that advertisers may be missing out on maximising advertising-generated profit by under-investing in TV. Currently, TV accounts for 54% of advertising spend in Ebiquity’s database, yet it is responsible for 71% of total advertising-generated profit.
Profit Ability has transformed the conversation about advertising and put it toe to toe in the boardroom with other investments. It has thankfully been welcomed across the advertising industry and has armed businesses with benchmarks for what they can trust advertising to deliver with Alex Hesz, adam&eveDDB’s Chief Strategy Officer commenting: “If TV didn’t exist and something new turned up with these numbers, the industry would abandon everything else.”
“Just what the industry needs, great collaboration between clients and agencies on the topics that drive business growth.”
Bridget Angear, Joint Chief Strategy Officer at AMV BBDO
“It’s great to see the IPA in the UK bring the whole industry and particularly the trade bodies together to focus on effectiveness. This new Marketing Effectiveness initiative will enable people across the industry to work together to build on best practice.”
David Wheldon, Chief Marketing Officer, RBS
“Effectiveness is a team sport, so it was great to see the industry in the widest sense, come together. In an increasingly diverse and fragmented world, only by using all parts of the brain will we solve effectiveness challenges and design our campaigns to deliver short and long term value. That’s why what happens next is important – if the IPA can help facilitate progress on this with a long-term initiative around Marketing Effectiveness, we’ll definitely crack it.”
Bart Michels, Global CEO Kantar Added Value and Country Leader Kantar UK
“The time spent at #EffWeek was extraordinarily effective. It was great to hear the diverse views from all areas of the industry. All tied together with the common themes of accountability and effectiveness.”
Andrew Canter, Global CEO, BCMA
“It has been a privilege to be part of the inaugural Effectiveness Week. The agenda is one which we at O2 UK feel passionately about. To see and hear perspectives across the industry demonstrates how the breadth of marketing effectiveness is increasingly being valued within businesses. Data, insight, social, customer experience, test and learn, ROI, these are all fundamentals and were covered expansively at the event”.
Sandra Fazackerley, Marketing & Consumer, Telefónica UK Limited
“The full week of effectiveness events brought into clear focus the need for marketers to use data and insight to achieve the key business objectives of growth and profits. Marketers today are in a better position to quantify their knowledge of customers and measure the ability of investments in marketing to increase brand and shareholder value.”
Chris Combemale, Group CEO, DMA