Tim Ambler and E. Ann Hollier wrote an article for the Journal of Advertising Research titled The Waste in Advertising is the Part That Works (December 2004).
« This study shows that “waste”—the perceived extravagance of an advertisement—contributes to advertising effectiveness by increasing credibility… High perceived advertising expense enhances an advertisement’s persuasiveness significantly, but largely indirectly, by strengthening perceptions of brand quality. »
« According to the Marketing Leadership Council (2001), blue chop marketer respondents estimated that, on average, 26 percent of marketing budgets are wasted. »
« We must first distinguish conspicuous from invisible waste. Everything the consumer sees and hears is conspicuous but other costs of advertising production…are invisible to the consumer. »
« The line between functionality and conspicuous waste is think and an example may help. Consider two advertisements with identical messages and copy that appear in whole and half page variants. If the whole page is not necessary to get the message across, then investing in the full page is conspicuous waste. Small advertisements are functional with little or no waste. In contrast, the longer TV advertisements that some would call indulgent may have little if any message beyond the brand name and, reminder apart, are largely “waste”—or so it may seem. »
« The main claim of this article is that perceived advertising expenditure enhances the consumer’s perception of the brand. As shown by Gale (1994), perception of brand quality is of paramount importance for both market share and long-term profitability. Therefore, this article argues that, however much attention, recall, and persuasion an advertisement may garner, the effectiveness of the advertisement, and thus brand performance, will depend on the perceived advertising expenditure… Scipione (1997) showed that consumers consistently overestimate the amounts of advertising expenditures. »
Theory — the handicap principle
« Birds and animals devote much of the physical resources to aspects of appearance that seem to serve no functional purpose—and in fact may be counterproductive-to their daily survival. The handicap principle was introduced to biological theory in the mid 1970s (Zahavi, 1975) to reconcile these apparent contradictions with the Darwinian concepts of natural selection and survival of the fittest. Briefly, the handicap principle links some extravagances in the animal world (elaborate deer’s antlers, long peacock tail, etc.) to the need to communicate health and strength. »
« A weak specimen has fewer resources to devote to an extravagant handicapping display, making the fitness of superior individuals immediately obvious. »
« The research was conducted through DiscoverWhy, a U.S. internet market research company specializing in online evaluation of TV commercials via streaming video. All commercials were drawn from archives of advertising for the U.K. market to minimize the impact of familiarity on participants’ responses. »
« To create identical commercials that might be differentiated in terms of perceived quality, commercials were technically degraded (color, graininess, sound, and frames per second) until piloting indicated that consumers could clearly distinguish between the altered and the original advertisements.»
« A total of 540 respondents were recruited for the full online survey with 449 completed usable surveys (83 percent). The respondents were randomly assigned to one of eight groups, each of which viewed and answered questions on three original and three degraded advertisements. They also evaluated 3 brands whose advertising they did not see, providing feedback on a toal of 9 brands out of the overall pool of 12. The sequence of presentation was rotated to eliminate possible order effects. »
« Just as [peahens] are drawn to mates with the largest, most spectacular tail feathers because the display signals superior biological fitness, consumers are attracted to brands that invest in lavish displays like Superbowl commercials because such extravagance signals a high-quality, successful brand. »
« These findings have a number of implications for advertising decisions. First, we should understand that people respond to communications, including advertising, in much the same way as other animals. Humans may have developed greater rationality, but that overlays a shared biological substrate that has a largely nonaware influence on our interpretation of the communications we receive.
Second, handicapping is a competitive tool. The need for “wasteful” display is driven by competitive differentiation, and especially the lack of functional differentiation. A brand that is similar to its closest competitor (for example, Coke and Pepsi) is more likely to gain from ensuring that its advertisements are conspicuously wasteful relative to the competitor’s, while a brand that occupies a distinct niche in the marketplace has less need for ostentation to communicate its desirability as a purchase choice. »
« Apart from its direct impact on purchase behavior, the main role of advertising is to incrementally build brand equity in the expectation of influencing future purchase decisions. What advertisements communicate is less important per se than the changed brand memories they leave behind. If they enhance brand equity, an important goal of advertising is met over time even if an immediate impact on likelihood of purchase is less apparent. »
« Handicapping theory is consistent with the limited role of advertising, which cannot compensate for poor product quality and experience. Advertisements highlight he strengths of a brand and can use conspicuous waste to support perceived brand quality and reliability, but not to substitute for them. Indeed, the online age is underlining the need to maximize brand experience first and communications second. »
« Finally, even applied appropriately, handicapping is not a license to spend money. The overall cost/benefit economics are unchanged. The impact of a particular campaign still has to be quantified and balanced against the advertising spend for each particular brand. The handicap principle simply separates advertising effectiveness into two components: the effectiveness of the communication (functional), and the enhanced brand quality and credibility that is communicated by conspicuous waste. Many advertisers would be well advised to rebalance these two components in their advertising strategy because there is little point in communicating if the messages are not believed. In other words, they should more seriously consider the impact of conspicuous waste in driving their message home. »
« This research documents perceived waste as a significant driver of the perceived quality and reliability of the brand, with substantial—but largely indirect—consequences for advertising persuasion. »
« These findings, which are necessarily tentative, can be used by managers to help determine optimal production values and target critical copy testing metrics for tracking advertising effectiveness. Handicapping should be especially useful to brands in product categories that can be regarded as credence goods and brands seeking to differentiate themselves from a close competitor. The nearer the product is to credence on the inspection-experience-credence continuum and the more similar the competitor, the more important conspicuous waste, and its measurement, should be. »
Tim Ambler is the author of Marketing and the Bottom Line.