What Every CEO Must Know: More Science in Advertising Can Lift Stock Price 25%+

This is the fifth in a series of posts on the subject of what CEOs and CMOs must do to keep up with the media metamorphosis that has already occurred The central takeaway is that more science is available than is being applied and that companies who are first to take advantage of available science in advertising will reap both short and long term advantages over competition Part of this science is the AB Test The AB test has long been known to be the unquestionable proof of performance of one advertising strategy over another However the times past were kinder to sloppy advertising processes and the costs of AB testing and the time it took to reach conclusions were both so unfavorable as to allow science to be swept under the rug with impunityNow that media and consumers have utterly changed in the space of a few short years the C Suite must be made aware that their careers could crash and burn if they continue to assume that business as usual is a safe course Also cable zone technology has made AB testing cheap and fast This combination of red zone threats and athand solutions points to a time for bold innovative actionIn the first four posts we looked at four ways to restart the significant growth of mature brands in the US where such growth has recently been deemed impossible the AB testing of a doing more not just monetarily for the internal developing nation of Americans below the poverty line b getting off the addiction to promotion by a shift to loyalty rewards from discounts c a quantum leap in the allocation to owned media and d bold new media mixes In this post we will look at the single most important element advertising creative the very center of the plate of marketing itself What is communicated in advertising and how it is communicated on all levels TRA and Mars Catalyst have reportedamp160that 65 of the ROI increases that science can make in advertising stem from changes to the creative The same report shows that without creating new commercials but merely by measuring which ones lift sales the most and using those more plus media changes Mars brands increased sales 2535 NeuroInsight reported to the ARF that changes to approximately 12 seconds of a 30second commercial increased its sales effect by 25 IBM is able to link changes in creative to doubledigit differences in sales according to former IBM executive Todd Powers now consultant to ARF Based on a five year study by Ameritest involving the testing of 338 different McDonaldamp8217s commercials and 954 competitive commercials among 129000 consumers 25 of the variance in the stock price of McDonaldamp8217s is accounted for by the quality of the television advertising creative used by McDonaldamp8217s at any given point in timeThe proof that advertising creative has a major effect on a companyamp8217s success abounds But what scientific tools exist today that can be used to develop betterselling commercialsHorace Schwerin in the 1930s created the basic methodology still being used today by most practitioners of advertising pretesting During the first half century of use of this method the evidence that it was predictive of actual sales results was sparse Meg Blair during the 1990s changed all that by beginning the process of scientifically validating the technique against actual sales results working with the ARF and companies such as Campbell Soup Today virtually every major company in the field has its body of sales validations However using this technique the average improvement made to the shift in competitive brand preference is only around 4 That is coming through the mill of this technique of pretesting the average surviving commercial generates about a 4 improvement to the advertised brand in the attitudinal domain and a little less than this in the domain of actual buying behavior changeIs that all there is Is science unable to make more than this low single digit improvement in the central measure of value creation in the advertising business No Not any more We have reached a new watershed moment in advertising science just in time to deal with the immense seismic shift in the media and culture that has just occurredWhat limited advertising science until recently was its sole dependence upon paperandpencil and orally collected verbal responses As pointed out by Dr Carl Marci of Innerscope the parts of the brain involved in language are not directly connected to the parts of the brain involved in emotion and nonconscious emotional responses are the major force in the advertising effect Therefore depending only on language to measure ads is the limiting factor causing the low improvement rate of pretesting until recentlyWhen Drs Daniel Goleman and Richard Davidson and I began testing brainwave measures in the advertising industry in the early 1980s we were too far ahead of our time Today with the help of ARF brain and other biometric measures have come into increasing use in advertising development led by companies like NeuroInsight which focuses on the brain and Innerscope which focuses on emotion biometrics such as heartrate and skin conductance response We recommend the use of both in order to cover the spectrum of scientific information available Although all quality research costs in the range of high five to low six figures or more it is penny wise and pound foolish to eschew these costs while rolling the dice on seven and eight figure media costs to transmit commercials that have not been developed using a combination of all of the best techniques available And biometrics by themselves lack sufficient power to help understand why certain ad content works or doesnamp8217t which is the reason that the best of the traditional verbal questions must still be used alongside biometricsAnother technique effectively used by Ameritest is picture sorting using drag and drop Internet capabilities to make it easy for respondents to sort visual excerpts of key moments within a commercial This is a nonlinguistic method and like biometrics circumvents the brainamp8217s inability to make good connections between emotions and wordsThe NeuroInsight method has been independently validated against sales using 20 commercials 10 of which caused large sales increases and 10 of which were duds The NI method correctly identified the group in which to place 19 of the 20 commercialsBesides the use of the best validated biometric picture sorting and verbal methods is there anything else needed to make advertising creative more reliably economically effective YesPeople are not all the same Advertising research to date has made insufficient use of this insight Even when the industry attempts to take individual differences into account the focus has been on gender and age as if these two variables account for everything when in fact studies have shown that demographics on average account for only about 11 of brand choiceIn the next post weamp8217ll examine what is new in the field of psychographic analysis that will enable advertisers and their agencies to better understand how to develop commercials that make an even more positive contribution to shareholder valueamp160 Bill Harvey is a wellknown media researcher and inventor who cofounded TRA Inc and is its Strategic Advisor His nonprofit Human Effectiveness Institute runs his weekly blog on consciousness optimization Bill can be contacted at billbillharveyconsultingcomRead all Billamp8217s MediaBizBloggers commentaries at In Terms of ROICheck us out on Facebook at MediaBizBloggerscomFollow our Twitter updates MediaBizBloggerThe opinions and points of view expressed in this commentary are exclusively the views of the author and do not necessarily represent the views of MediaBizBloggerscom management or associated bloggers MediaBizBloggers is an open thought leadership platform and readers may share their comments and opinions in response to all commentariesImage courtesy of Boians Cho Joo 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What Every CEO Must Know: More Science in Advertising Can Lift Stock Price 25%+

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