A scented candle or confidence? Why advertising deserves both

Opinion

WPP’s David Wilding explores six reasons to feel confident about advertising and investing in media.

David Nicholls’ book One Day has sold over 7m copies worldwide and been translated into 40 different languages. It contains one of the best lines I’ve ever read in any book when Dexter turns to Emma and says;

You’re gorgeous, you old hag, and if I could give you just one gift ever for the rest of your life it would be this. Confidence. It would be the gift of confidence. Either that or a scented candle.”

I suspect you might already own more scented candles than you need (you might even have re-gifted the odd one), so if it’s ok, let me gift you six reasons to feel confident about advertising and investing in media.

Advertising is a unique and highly effective growth lever for a business  

There are many growth levers available to a business (such as product innovation, pricing, or distribution), but advertising is a uniquely scalable, agile, and controllable one. And who doesn’t want a bit of control right now?

What’s more, advertising effects are relatively predictable too – so long as a business has the confidence to invest to the right level.

Les Binet and Will Davis’s Go Big or Go Home research for the IPA found that 89% of the variations in profit payback observed in IPA Effectiveness award-winning case studies was explained by budget setting. In other words, we have a unique and predictable growth lever at our fingertips; we just need to invest appropriately.

Advertising’s payback is immediate

You can be confident and still recognise that we live in volatile times. And volatility can heavily bias businesses towards a short-term focus. Many companies experience the very strong pull of what Eric Ries terms financial gravity – via the burden of quarterly operating models and financial reporting.

Well, fear not. Profitability 2 is the biggest ever econometric meta-analysis of the drivers of advertising effectiveness. Some 141 brands covering £1.8bn of media spend across 10 media channels and 14 sectors.

And it finds that advertising delivers a short-term ROI of £1.87 within three months of investment, and that all channels show a profitable average return.

There are simple ways to increase that immediate impact

At Thinkbox’s recent Advertising through Adversity event, my WPP Media colleagues Dom Charles and Olga Zaitseva shared some simple ways for advertisers to maximise the in-year payback of their advertising investment.

They highlighted ways to prioritise different media channels over time and advised the audience to spend heavily early to maximise adstock (36% of money invested in month one of a company’s financial year pays back within the same financial year) and to front-weight channels that skew longer and flatten channels that skew shorter.

Even if you have “performance” priorities, you’re not limited to a “performance” media plan

Now let’s imagine that your short-term focus is so all-encompassing that you want to eliminate longer-term effects entirely and only focus on an in-year ‘performance’ plan (I think you’re wrong, but ok).

Even in this scenario, you might be pleasantly surprised to see that you can do this in channels that don’t have to eliminate your brand’s distinctiveness and all forms of memory structure.

At the same Thinkbox event, Dom and Olga showed that advertisers could increase their in-year profit contribution from advertising by 9.3% by shifting spend away from PPC and Paid Social toward AV.  

Advertising creates a sustained growth effect that starts immediately

We’ve talked about this before, I know, but ‘near-future’ sales really is a more accurate way to describe advertising’s ‘long-term’ impact than to keep saying ‘long term’.

Again, the evidence definitively backs this up. That £1.87 profit ROI within three months highlighted in Profitability 2 and referenced in point two above? It increases to £4.11 in ‘near future sales’.

There is much more growth to be gained by investing in advertising.

The good and bad news is that most businesses are still investing at below the level at which their investment would stop returning a media-driven profit (the so-called marginal ROI saturation point).

The research presented at the Advertising through Adversity event estimated that this under-investment is leaving around £32bn in potential profit on the table. The confident take is that there is huge upside here – especially in categories such as travel and retail, where the headroom for additional growth is largest.

The average brand could profitably double its current ad spend and unlock an additional 11% in growth.

I’m confident you should now be feeling a little more confident. But if that hasn’t worked, you could always try The Guardian’s guide to the UK’s best-selling candles.

David Wilding is EVP strategy at WPP Media and writes a monthly column for The Media Leader.