Decay Effect
Advertising has been shown to have an effect extending several periods after
the original exposure, which is generally referred to as Advertising ‘Adstock’. Adstock is a model
of how response to advertising builds and decays in consumer markets.
Each
new exposure increases awareness to a new level, which will be higher if
there have been recent exposures and lower if there have not been. The idea
here is the `advertising pressure’ (as measured by response) does not end as
soon as the ad has been seen, but decays over time back to its base level,
unless or until this decay is reversed by a new exposure.
Adstock analysis measures this decay process and is usually expressed in
terms of the ‘half-life’ of the ad. A ‘two-week half-life’ means that it
takes two weeks for half the awareness effect of that ad to be gone. Every
Ad copy is assumed to have a unique half-life. Some academic studies have
suggested half-life range around 7-12 weeks, while industry practitioners
typically report half-lives between 2-5 weeks, with the average for Fast
Moving Consumer Goods (FMCG) Brands at 2.5 weeks. The copy in the above
graph has a half-life of 2.5 weeks
Advertising tries to expand consumption in two ways; it both reminds and
teaches. It reminds in-the-market consumers in order to influence their
immediate brand choice and teaches to increase brand awareness and salience,
which makes it easier for future advertising to influence brand choice.
Adstock is the mathematical manifestation of this behavioral process.
Advertising Saturation: Diminishing Returns Effect
Increasing the amount of advertising increases the percent of the audience
reached by the advertising, hence increases demand, but a linear increase in
the advertising exposure doesn’t have a similar linear effect on demand.
Typically each incremental amount of advertising causes a progressively
lesser effect on demand increase. This is advertising saturation. Saturation
only occurs above a threshold level that can be determined by Adstock
Analysis. For e.g. for the ad copy in the above graph, saturation only kicks
in above 110 GRPs per week.
Adstock can be transformed to an appropriate nonlinear form like the
logistic or negative exponential distribution, depending upon the type of
diminishing returns or ‘saturation’ effect the response function is believed
to follow.
Adstock transformations serve a dual purpose;
-
Measuring the
Advertising Half-Life enables Brand Managers to efficiently space
advertising schedules to maximize the effect of each advertising
exposure.
-
Measuring the
Advertising Saturation indicates if current levels of advertising are
too high or too low, helping Brand Managers determine if more or less
investment is needed to make advertising more effective.
MetriScient™ 
