8.6
Advertising Elasticity
The percentage change in sales produced by a 1% change in advertising spend, generalised across studies into a single magnitude.
Meta-analytic generalisation: Assmus, Farley & Lehmann (1984), superseded by Sethuraman, Tellis & Briesch, JMR (2011)
What it does
Sets the size of the prize before anyone argues about the creative. Across 751 short-term elasticities from 56 studies the mean is 0.12, and the long-term mean is 0.24. So a 10% budget increase buys roughly 1.2% more sales in the short run. That is the number that decides whether a proposed increase can pay for itself at all.
When it breaks
It is an average, and it has been falling. Elasticity is higher for durables than non-durables, higher early in the life cycle than at maturity, and higher when advertising is measured in gross rating points than in money. The headline figure describes no actual brand. Used as a planning input it also silently assumes average-quality advertising, which is the variable most under a team's control and precisely the one the meta-analysis averages away.
Case
Sethuraman, Tellis and Briesch meta-analysed 751 short-term and 402 long-term brand advertising elasticities drawn from 56 studies published between 1960 and 2008. The mean short-term elasticity came out at 0.12 against 0.22 in the previous generalisation, and the mean long-term elasticity at 0.24 against an implied 0.41. Advertising's measured effect had roughly halved, and the decline runs through the period rather than sitting at one end of it.
Sethuraman, Tellis & Briesch · How Well Does Advertising Work? Generalizations from Meta-Analysis of Brand Advertising Elasticities, JMR (2011) ↗In the wild
Unchecked · not part of the tier
What people have written about this tool in the last twelve months. A machine found these and nobody has read them. Everything above this line was checked by hand.
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