Marketing Incrementality: Has Print Advertising been Under Leveraged in the Long-Term?

By Joy V. Joseph

Introduction: The general practice in evaluating the impact of Marketing investment is to analyze monthly or weekly sales of key brands vs. drivers like price, marketing and competition using a regression analysis technique called Marketing Mix Analysis. While this captures how Marketing impacts sales at the Brand level, it doesn't tell you if the marketing drove incremental sales or not. Incrementality analysis can only be done when looking at the impact of Marketing on aggregate category or industry demand.

Marketing is truly incremental if it helps drive not only brand sales but also category or industry sales, because brand growth can also come due to switching, while category or industry growth can only come from incremental consumption. Also a truly long-term analysis cannot be conducted with just a couple of years of data.

While we do not have access to data for Marketing Investment at the category or industry level, we did obtain total annual Marketing investment data and total Retail Sales for the U.S. since 1968 (Retail Sales were obtained from U.S. Census Bureau, while Marketing data was obtained from multiple sources on the internet).

Methodology: The approach we used was a simple log-linear regression model where annual changes in Retail Sales were modeled against changes in the log of Television Advertising, Print Advertising, Inflation Rate and change in Personal Income. Other Marketing data tested included Radio Advertising and an aggregate of Outdoor and Internet Advertising, which did not turn up as significant in this long-term “Incrementality” model. This of course doesn’t mean that other drivers don’t impact retail sales, all it says is that other Marketing drivers do not impact total Retail sales growth. They could still category, industry or brand level growth.

Results: Below chart shows the incremental “elasticity” of each of these drivers on total Retail Sales.

Interestingly after Personal Income, Print Advertising is the next largest driver of Retail Sales, slightly ahead of the impact of Inflation. This doesn’t say that TV Advertising is a less impactful driver of consumer response; all it is saying is that on average Print Advertising may be doing a better job at either increasing overall consumption than TV. In general the accepted norm in the marketing industry is that TV Advertising is generally the largest driver of brand level sales. This opens up the implication that TV advertising works better at getting consumers to switch, whereas Print Advertising works better at driving incremental growth.

Retail Sales Sources of Incremental Growth in 2006

For instance, the above chart shows that overall Retail sales grew by 5.3% in 2006 vs. 2005 and shows what factors contributed to this change (both negative and positive impacts).

	Personal Income	TV Advertising	Other Factors	Inflation	Print Advertising
Year Over Year Change	7.1%	5.8%	5.0%	3.2%	-0.8%

Compare this to how these underlying drivers changed in 2006 vs. 2005 and you will notice that a 5.8% growth in TV Advertising drove only a 0.5% growth in overall Retail Sales, while Print a -0.8% change in Advertising investment resulted in a 0.2% decline in Retail Sales. This underscores the possibility that Print may be a better medium for long-term incremental growth.

The reason why Marketers should be concerned about incremental growth is that it is usually more profitable and has better retention than growth driven purely by share gains- especially for categories that are growing.

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