After a decade of change in advertising with the emergence of many new forms of advertising competing for investment, Thinkbox’s latest study, ‘Profit Ability: the business case for advertising’ has quantified the total profit generated by different forms of advertising to prove what they actually deliver to the bottom line.
Thinkbox commissioned Ebiquity and Gain Theory to work on the study, based on both businesses’ independent evaluation of advertising performance and effectiveness for hundreds of brands.
The study found that all forms of advertising create profit to varying degrees in both the short and long term. On average, advertising creates a total profit return on investment (ROI) of £3.24 per pound spent over three years.
The study analysed more than 2,000 advertising campaigns across 11 categories, looking at the impact on short-term profit (within three to six months of a campaign finishing), and combined these learnings with results for profit generated over the longer term (up to three years) to determine total profit return.
‘Profit Ability: the business case for advertising’ found that TV was the ‘safest’ (lowest risk) ad investment a business can make, with the highest likelihood of profit return.
TV ads were responsible for 71% of total advertising-generated profit at an average profit ROI over three years of £4.20 for every pound spent, followed by print (which accounts for 18% of total advertising-generated profit), online video ( 4%), Out of Home ( 3%), radio ( 3%), and online display (1%).
• Advertising pays back in the short term
• TV is the dominant driver of both profit and ROI
• ROI is a measure of efficiency, not effectiveness
• TV delivers scale of return
• TV is the ‘safest’ (lowest risk) form of advertising
• By ignoring the longer-term effects of advertising, we’re doing it a massive disservice
• On average, advertising delivers a long-term effect that is 1.9 times greater than the short-term effect
• TV delivers the greatest ‘Long-Term Multiplier’ effect
• FMCG, which struggles to deliver short-term ROI, see some of the greatest effects in the long-term
Read the full Thinkbox overview here.
The study is important because it shifts the emphasis away from the ROI number ‘arms-race’ to a more responsible approach that talks about the scalability of ROI by media channel, and the impact that this has on profit generation.
Andrew Challier, Chief Client Officer, Ebiquity
The Wall Street Journal
Mediatel ‘Adding the ‘R’ word to ROI’
Marketing Week – Getting to the business case
Marketing Week – Russell Parsons: Stop the negativity and remember you’re a value creator
Mediatel – Building a more rigorous and responsible media agency