How Significant is the "Brand Equity Building Effect" of TV Commercials? Unveiling the Core of Advertising Impact Through Statistical Analysis

In the wake of the COVID-19 pandemic, companies across many industries are cutting back on their marketing budgets. As they focus on short-term profits, many companies are unable to continue branding advertising, such as TV commercials, which take up a large portion of their budgets.

Originally, branding advertising plays an important role in accumulating brand power for mid- to long-term sales growth while contributing to short-term sales improvement. However, many companies are faced with the dilemma of having to give up on implementing branding advertising because they are unable to grasp the mid- to long-term effects.

This time, we will look at TV commercials as a representative example of branding advertising, and examine just how much of a "brand accumulation effect" they have.MMM (Marketing Mix Modeling)We will introduce the results of our analysis using the

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How big is the "brand accumulation effect" of TV commercials?

In 2021, XICA Co., Ltd. conducted research*1 on the advertising effectiveness of television commercials in collaboration with Fuji Television Network. The research utilized the MMM analysis platform MAGELLAN and statistical data extracted from approximately 250 domestic marketing case studies.

This research clarified the magnitude of various effects of TV commercials, such as the ripple effect and residual effect. In particular, the following findings were made regarding the "brand accumulation effect."

Television commercials have a 'brand accumulation effect,' continuing to generate results such as purchases and conversions over the medium to long term even after the ads have aired.

When considering the results obtained shortly after the initial advertisement as 100% (including residual effects), in the case of a certain durable goods brand, TV commercials generated an additional 65% in results over the following 47 months.

In the case of a certain consumer goods brand, they achieved a 70% increase in results over a period of 18 months.

■Details of the joint research report

It is also known that the brand accumulation effect literally "accumulates" little by little from the past as TV commercials are continuously aired. In other words, the brand accumulation effect plays a role in supporting sales over the medium to long term, and furthermore, the continuous broadcast of TV commercials is thought to gradually raise the baseline sales.

What is MMM, the method that quantifies the brand accumulation effect of TV commercials?

Some of you may be wondering how MMM analyzes the effects of TV commercials, including the brand accumulation effect. Here, we will briefly introduce MMM's analysis methodology.

MAGELLAN, an MMM tool, uses a statistical method called "path analysis," which is a type of multiple regression analysis. This quantifies the relationship (= correlation) between each variable that affects results (volume of each advertisement, external factors, etc.) and the amount of results (sales, number of web conversions, etc.).

In this case, it is important to distinguish between the short-term effects of advertising and the medium- to long-term effects. Advertising not only has short-term effects (including ripple effects and residual effects) such as an increase in inquiries in the few days immediately after the advertisement is placed, but also has medium- to long-term effects that contribute to improving brand recognition over several months or years.

Short-term effects decay significantly immediately after advertising, but mid- to long-term effects accumulate little by little as advertising is continued. MAGELLAN models the waveform of this accumulation and quantifies it while taking into account the actual amount of results and each variable. This makes it possible to quantify the brand accumulation effect.

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What are the benefits of analyzing the brand accumulation effect of TV commercials?

So far we have looked at the size of the brand accumulation effect of TV commercials and methods for analyzing it. Now let's consider again the benefits of analyzing the brand accumulation effect of TV commercials.

The biggest benefit is that it provides companies with a basis for planning and executing marketing strategies with an eye toward medium- to long-term sales growth.

Here we will introduce some actual examples.

A case study of a DtoC brand that found evidence for expanding TV commercial spending

The marketing manager of a DtoC brand was faced with the challenge of being unable to get internal approval for the actions necessary for mid- to long-term brand growth.

[Background]
Previously, the company ran a large-scale promotion once a year, including TV commercials. The TV commercials were aimed at short-term sales promotion, and their effectiveness was mainly measured to confirm short-term results.

However, as competition in the DtoC market has intensified amid the COVID-19 pandemic, it has become even more important to make efforts to increase brand power with an eye to the medium to long term in order to differentiate from other companies.

As a concrete action to take, we came to the hypothesis that continued advertising on television commercials would be effective.

[Issues]
To gain internal approval for this action plan, it was necessary to show the medium- to long-term effect that the TV commercial would have on brand power in terms of sales. However, we faced the challenge of not being able to explain this because we did not have any numerical evidence to back it up.

[Solutions]
Using the MMM tool MAGELLAN, we visualized the sales contribution of each marketing initiative, including TV commercials, from the past few years to the present. One of the points of analysis was the visualization of the medium- to long-term effect that TV commercials have on brand sales.

As a result of the analysis, we were able to quantitatively demonstrate two facts.

First, TV commercials do not only have a short-term effect that can be achieved in the first few months after they are aired, but also have a significant brand accumulation effect that can be achieved over the medium to long term. We found that approximately 1% of the success of TV commercials in the past was due to the brand accumulation effect.

Another point is that the brand accumulation effect accumulates over time as TV commercials are continued. In other words, we were able to visualize the accumulation of the baseline that supports sales.

These two facts made the company realize the importance of managing and measuring the effectiveness of TV commercials from a medium- to long-term perspective. In addition, by visualizing the cumulative brand effect, the company was able to obtain evidence to support the continuation of TV commercials outside of major promotion periods.

By visualizing the cumulative effect of brands, more strategic marketing can be carried out with a view to the mid- to long-term

In this article, we have looked at the significant brand accumulation effect of TV commercials revealed by MMM, the benefits of analysis, and examples of analysis being put into practice.

By visualizing the brand accumulation effect, it is possible to reevaluate TV commercials and other branding advertisements from a medium- to long-term perspective. In addition, by understanding the brand accumulation effect and being conscious of how to operate and expand it, companies will be able to carry out more strategic marketing with a view to the medium to long term.

For measuring the effectiveness of TV commercials, including brand accumulation effects, MMM analysis, which uses data science to enable advanced analysis, is ideal. With MMM, you can quantify purchases and conversions that originated from offline advertising, which are difficult to measure with cookies.

MAGELLANMAGELLAN is an MMM analysis platform that can measure the effectiveness and efficiency of all types of advertising. In addition, MAGELLAN enables "brand equity analysis," which visualizes and predicts the impact of branding advertising, including TV commercials, on medium- to long-term business results.

*1) Fuji Television Network, Inc. (2021). TVCM DATA Analysis "Visualizing the true advertising effectiveness of TV commercials"

Helpful related articles

• Are TV commercials really effective? What are the effective ways to evaluate them?
• The Importance of Branding and Creativity: The Actual Short-, Medium-, and Long-Term Effects of Advertising
• Building Brand Equity: The Building Blocks, 4 Ways to Measure It, and Best Practices

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XICA Co., Ltd. Marketing Team