Is there any point in a company that is already well-known advertising over and over again?
When watching TV commercials or advertising on the streets, we often see repeated ads for companies that have been around for a long time and are already well-known to many people. Navdeep Sahni, a professor of marketing at Stanford University, explains whether there is any point in such companies advertising repeatedly.
Consumer Memory and Competitive Interference: The Case of Auto Insurance Advertising by Navdeep S. Sahni, Yifan Yang :: SSRN
Why well-known brands invest millions in repetitive advertising
Sahni says that even for well-known companies, advertising is definitely worthwhile, not only to remind consumers of the brand but also to push competitors out of consumers' minds.
In fact, to measure the effectiveness of advertising, Sahni conducted an experiment on one of the world's top five most visited websites. Of the more than 325,000 visitors who had installed the relevant plugin, 75% were shown a banner ad from an auto insurance company. The remaining 25% were shown a public service ad unrelated to insurance.
As a result, visits to the insurance company's website spiked on the day of the experiment, with the probability of visiting the site increasing by 300%, from 0.2% to 0.8%. Sahni then tracked users' online behavior over the next three months and found that, although the ads were only shown for one day, their effectiveness diminished over time, but the cumulative total effect was similar to that of the ads on the day of the experiment.
Sahni also analyzed the impact of advertising on competitors. In an experiment using an insurance company ad, he found that the advertiser's competitors were less prominent in people's minds. The effect wasn't immediate: there was no change in visits to the competitor's website on the day the ad was shown, but the next day, visits dropped by 11%, roughly the same as the increase the advertiser saw.
Furthermore, the ad made the category of 'car insurance' itself more prominently known. Consumers who saw the ad and thought about car insurance in the following days tended to think of the advertiser first. Additionally, consumers tend to think of advertisers they've seen most recently, so a competitive move like running an ad after a competitor has already done so is clearly meaningful.
'These very strong effects of advertising fade over a few days, but then come back,' Sahni said. 'Plus, the days immediately following the ad are the most costly for competitors. They have an incentive to advertise even more to push the competitor out of consumers' minds. This is how a competitive environment is built around advertising and consumer psychology.'
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