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TV Advertising Effectiveness and Profitability: Generalizable Results From 288 Brands

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  • Bradley T. Shapiro
  • Günter J. Hitsch
  • Anna E. Tuchman

Abstract

We estimate the distribution of television advertising elasticities and the distribution of the advertising return on investment (ROI) for a large number of products in many categories. Our results reveal substantially smaller advertising elasticities compared to the results documented in the literature, as well as a sizable percentage of statistically insignificant or negative estimates. The results are robust to functional form assumptions and are not driven by insufficient statistical power or measurement error. The ROI analysis shows negative ROIs at the margin for more than 80% of brands, implying over‐investment in advertising by most firms. Further, the overall ROI of the observed advertising schedule is only positive for one third of all brands.

Suggested Citation

  • Bradley T. Shapiro & Günter J. Hitsch & Anna E. Tuchman, 2021. "TV Advertising Effectiveness and Profitability: Generalizable Results From 288 Brands," Econometrica, Econometric Society, vol. 89(4), pages 1855-1879, July.
    • Handle: RePEc:wly:emetrp:v:89:y:2021:i:4:p:1855-1879
    DOI: 10.3982/ECTA17674
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    4. Kim, Woojin, 2022. "Television and American consumerism," Journal of Public Economics, Elsevier, vol. 208(C).
    5. Chen He & Tobias J. Klein, 2023. "Advertising as a Reminder: Evidence from the Dutch State Lottery," Marketing Science, INFORMS, vol. 42(5), pages 892-909, September.
    6. Mateusz Mysliwski & Lars Nesheim & Simeon Duckworth, 2023. "Taking the biscuit: how Safari privacy policies affect online advertising," CeMMAP working papers 04/23, Institute for Fiscal Studies.
    7. Bart J. Bronnenberg & Jean-Pierre Dubé & Chad Syverson, 2022. "Marketing Investment and Intangible Brand Capital," Journal of Economic Perspectives, American Economic Association, vol. 36(3), pages 53-74, Summer.
    8. Weijia Dai & Hyunjin Kim & Michael Luca, 2023. "Frontiers: Which Firms Gain from Digital Advertising? Evidence from a Field Experiment," Marketing Science, INFORMS, vol. 42(3), pages 429-439, May.
    9. Taizo Horikomi & Mariko I. Ito & Takaaki Ohnishi, 2022. "ID-POS Data Analysis Using TV Commercial Viewership Data," The Review of Socionetwork Strategies, Springer, vol. 16(2), pages 431-451, October.
    10. Rahman, Rajib & Rojas, Christian, 2024. "The Effect of Singapore’s Sugar-Sweetened-Beverage Advertising Ban on Product Entry," 2024 Annual Meeting, July 28-30, New Orleans, LA 344019, Agricultural and Applied Economics Association.
    11. Ali Goli & Simha Mummalaneni & Pradeep K. Chintagunta & Sanjay K. Dhar, 2022. "Show and Sell: Studying the Effects of Branded Cigarette Product Placement in TV Shows on Cigarette Sales," Marketing Science, INFORMS, vol. 41(6), pages 1163-1180, November.
    12. Abi-Rafeh, Rossi & Dubois, Pierre & Griffith, Rachel & O'Connell, Martin, 2023. "The Effects of Sin Taxes and Advertising Restrictions in a Dynamic Equilibrium," CEPR Discussion Papers 18527, C.E.P.R. Discussion Papers.
    13. Yufeng Huang & Bart J. Bronnenberg, 2023. "Consumer Transportation Costs and the Value of E-Commerce: Evidence from the Dutch Apparel Industry," Marketing Science, INFORMS, vol. 42(5), pages 984-1003, September.
    14. Andrey Simonov & Szymon Sacher & Jean-Pierre Dubé & Shirsho Biswas, 2022. "Frontiers: The Persuasive Effect of Fox News: Noncompliance with Social Distancing During the COVID-19 Pandemic," Marketing Science, INFORMS, vol. 41(2), pages 230-242, March.
    15. Abi-Rafeh, Rossi & Dubois, Pierre & Griffith, Rachel & O'Connell, Martin, 2023. "The Effects of Sin Taxes and Advertising Restrictions in a Dynamic Equilibrium," CEPR Discussion Papers 18527, C.E.P.R. Discussion Papers.
    16. Ryan Dew & Nicolas Padilla & Anya Shchetkina, 2024. "Your MMM is Broken: Identification of Nonlinear and Time-varying Effects in Marketing Mix Models," Papers 2408.07678, arXiv.org.
    17. Brett R. Gordon & Robert Moakler & Florian Zettelmeyer, 2022. "Close Enough? A Large-Scale Exploration of Non-Experimental Approaches to Advertising Measurement," Papers 2201.07055, arXiv.org, revised Oct 2022.

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