TV advertising pays off in the long term

It is also well known that television advertising has an influence on the success of a brand, especially in the long term, by promoting the brand image and creating trust and loyalty. However, the longer-term effects are still less well analyzed and quantified than the immediate effects. New study results on the long-term effects of TV advertising are now available from Germany.

Using a regression model, market researchers at GfK for Seven-One Media examined the return on investment (ROI) of TV advertising in German food retailing in more detail. In addition to exposure to advertising, the model takes into account a number of other independent variables - from personal consumer characteristics to promotions - in order to predict purchases and identify the impact of TV. The model is based on actual purchase data from 30,000 households from the GfK consumer panel, TV usage data from the TV panel and advertising investments from the advertising statistics over a period of twelve months. The previous study of almost 200 brands from different sectors using this model has already provided interesting findings. For example, the additional sales generated by TV commercials in the short term average EUR 1.15 per advertising euro invested (ROI in the first year). The longer-term ROI for a 5-year period averages EUR 2.66. Two out of three brands surveyed achieve a long-term ROI of more than one, while 43% of all brands achieve a long-term return on investment of more than two.

The returns are obviously even greater in the food retail sector, as the current study of three retailers, including two full-range retailers and one discounter, shows. In the case of the first retailer, one euro invested in TV advertising generates additional sales of 2.52 euros in the first year. The 5-year forecast is additional sales of EUR 4.02. For the second retailer, the ROI is even higher: in the short term, additional sales of EUR 5.61 were calculated per invested TV euro, while the long-term ROI forecast is EUR 10.42. TV spots offer the greatest payback for the third retailer examined. Here, every advertising euro generates additional sales of more than 10 euros in the first year (11.43), while the 5-year forecast is even over 20 euros (23.46).

Another interesting finding: image-oriented campaigns generate more additional sales than a product- or price-oriented advertising approach. In the full-range segment, the 1-year ROI of product-oriented spots is 1.57 euros. In comparison, image-oriented spots achieve a 2.6 times higher short-term return (EUR 4.07). Even in the long term, image-oriented advertising for full-range retailers generates a higher return on advertising than product-oriented spots (EUR 6.05 vs. EUR 2.47). The advantage of image-oriented advertising in discount stores is even more impressive. Product- or price-oriented commercials obviously have little impact on sales for discounters, whose competence is low prices anyway (short-term ROI 0.06 Euro, long-term ROI 0.13 Euro). Qualitative, image-oriented arguments, on the other hand, trigger significantly stronger sales impulses: the 1-year advertising ROI of image-oriented spots is EUR 3.05, the 5-year forecast EUR 4.49.

Clemens Koob

Key Facts

- The analysis of around 200 brands from different sectors shows: in the short term, every TV euro generates additional sales of EUR 1.15 (1-year ROI), and EUR 2.66 in the long term (5-year ROI).
- Returns are even higher in the food retail sector.
- Retailer A has a short-term ROI of 2.52 euros and a long-term ROI of 4.02 euros.
- Retailer B achieves additional sales of EUR 5.61 per TV euro invested in the first year; the 5-year forecast is EUR 10.42.  Retailer C even achieves a short-term return of 11.43 and a long-term return of 23.46 euros per euro invested.
- Image spots generate a higher advertising return in the short and long term than product-oriented spots.