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Meta-analytic generalisation: Assmus, Farley & Lehmann (1984), superseded by Sethuraman, Tellis & Briesch, JMR (2011)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 — so 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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