Mark Lett (2014) 25:193–206

DOI 10.1007/s11002-013-9252-3

Modeling advertising impact at campaign level:

Empirical generalizations relative to long-term
advertising profit contribution and its antecedents

Philippe Aurier & Anne Broz-Giroux

Published online: 31 July 2013

# Springer Science+Business Media New York 2013

Abstract Research on advertising effectiveness is focused on sales and provides few

empirical generalizations on profitability and its antecedents. To fill this gap, we
develop an econometric model to capture the impact of advertising at campaign level,
using retail panel data coupled with TV audience tracking data. Our study involves 31
brands from six packaged goods categories observed weekly and nationally over
4 years and representing 264 TV campaigns. Although we confirm empirical gener-
alizations on the capacity of advertising to increase sales, we establish a different
picture for profitability. Only 11 % of campaigns make a positive contribution to
profit. Advertising is more profitable for challengers and medium brands, whereas
leaders and small brands (recent or established) have a lower profitability. Advertis-
ing intensity in the category and campaign carry-over emerge as the strongest
(respectively) negative and positive drivers of profitability. The antecedents of
carry-over are also analyzed and discussed.

Keywords Advertising campaign . Campaign profitability antecedents . Advertising

carry-over . Advertising Adstock . Advertising econometric model

The purpose of this paper is to assess the impact of advertising campaigns on sales
and profits (vs. sales only). Several questions remain unanswered in this regard. First,
the marketing discipline has been urged to develop performance-based financial
metrics (Hu et al. 2007; McAlister et al. 2007; Rust et al. 2004). Yet, most research
focuses on sales, overlooking profitability (Osinga et al. 2011). On this basis,
advertising is considered more successful for small brands or new brands, a finding

P. Aurier (*)
School of Business Administration, Montpellier Research in Management, University of Montpellier2,
Place Bataillon, 34095 Montpellier, France
e-mail: philippe.aurier@univ-montp2.fr

A. Broz-Giroux
IRI, 4 rue André Derain-BP 49, 78240 Chambourcy Cedex, France
e-mail: anne.giroux@IRIworldwide.com
194 Mark Lett (2014) 25:193–206

underlined in most meta-analyses, be they based on advertising-tests or econometric

modeling (Henningsen et al. 2011; Hu et al. 2007; Sethuraman et al. 2011). While the
drivers of profitability may differ from those of sales effectiveness, few papers deal
with advertising profitability. Working at the campaign level with TV-advertising test
experiment data, Hu et al. (2007) present only a “typical scenario” of advertising
profitability. Using econometric modeling, Sriram and Kalwani (2007) estimate
brand-level advertising–profit elasticities. They show that the leader is more receptive
to the long-term effect of advertising, compared to its follower. However, this study is
limited to one category (orange juice) and two brands, over a limited geographical
area (Chicago), using quarterly data (32 periods). Local brand advertising expendi-
ture is inferred from nationally aggregated (all categories) spending by the brands.
Moreover, the research does not study the drivers of advertising profitability. Simi-
larly, Jedidi et al. (1999) have estimated brand-profit elasticities in one (unknown)
category and four brands and observe low or mixed impacts. Again, they do not study
profitability antecedents, and advertising expenditure is not measured directly: quar-
terly spending is divided by 13 to be converted into weekly spending, before being
matched with weekly data.
Secondly, in most econometric models, brand advertising expenditure is not consid-
ered as structured into specific campaigns, but more as a continuous variable whose
value changes over time. Consequently, models estimate the overall effect of all
advertising campaigns affecting brand sales over the studied period. It is not possible
to measure the impact of a specific campaign defined in terms of copy, media, cost, etc.
Yet advertising effectiveness and decay are likely to vary from campaign to campaign,
across as well as within brands. It cannot be hypothesized as constant over time (Hu
et al. 2007; Norris 2008). Brands’ advertising expenditure is embedded into specific
campaigns. In Fig. 1, the patterns of weekly advertising weights for brands A (lozenges)
and B (squares) are a succession of off-air vs. on-air periods corresponding to specific
campaigns, which carry-over can overlap.
In short, research on advertising efficiency is divided into advertising–test–exper-
iment research and econometric research. Both are focused on sales effectiveness and
provide few empirical generalizations on advertising profitability and its drivers. The
former category produces findings at the campaign level, but do not provide empirical
results when comparing the advertising incremental sales with related costs. The latter
category estimates advertising return at brand rather than campaign level, ignoring
the variability of effectiveness. Empirical generalizations are limited due to the small
number of brands and categories studied.

Fig. 1 Patterns of advertising campaigns (weekly data—102 Euros)

Mark Lett (2014) 25:193–206 195

To fill this gap, the intended contribution of this paper is twofold. First, we propose
a methodology to estimate advertising effectiveness at campaign level, using econo-
metric modeling. We deal with—across and within—the heterogeneity of brand
advertising returns, as recommended in the literature (Bass et al. 2007; Batra et al.
1995; Hu et al. 2007; Norris 2008; Vakratsas et al. 2004). Secondly, using this model,
we provide empirical generalizations on advertising profitability and its drivers
(category, brand, and campaign characteristics). Our results are based on a sample
of 264 TV campaigns aired by 31 brands pertaining to six mature frequently
purchased categories, observed nationally (450 stores) over almost 4 years on a
weekly basis (both advertising and sales). We analyze advertising effectiveness in
relation to sales effectiveness (success/failure in increasing sales) and profitability.
We also analyze campaign carry-over, which emerges as a strong positive antecedent
of profitability but has been studied essentially in relation to its duration and
estimation procedures (Aravindakshan and Naik 2011; Assmus et al. 1984; Jones
1995). Its antecedents and its impact on profitability remain essentially unknown.

1 Model development

1.1 Sales response function

We use a multiplicative model, due to its robustness (Leeflang et al. 2000), specif-
ically in advertising (Danaher et al. 2008). Before integrating advertising effects, we
use the following structure:
K J
S lit ¼ μl αi : ∏ ∏ X kijt βkj :W it ω :εlit
bl di
ð1Þ
k¼1 j¼1

with:
t for time (weeks), i for stores, and j for brands in a category (including focal brand l).
Slit de-seasonalized volume sales of focal brand l, estimated by IRI using moving
average methods similar to Abraham and Lodish (1993), so as not to confound
variance due to marketing mix variables with seasonal impacts.
Xkijt kth marketing variable observed for all brands j in the category (including focal
brand l) in store i, at time t.1 We consider:

– Price: average reference price, when brand is not on promotion.

– Five types of sales promotion: free-product, in-store-communication, features,
display-with-leaflet, and display-without-leaflet. Because a brand has usually
only a fraction of its line on promotion, binary indicators are weighted by the
(volume) share of the baseline sales related to the promotion. Baseline sales are
de-seasonalized and de-promoted volume sales, as estimated by IRI using the
Abraham and Lodish (1993) methodology.

1
Thus, the right-hand side of Eq. 1 accounts for marketing mix variables of all brands in the category, and
not only those of focal or advertised brands.
196 Mark Lett (2014) 25:193–206

– Assortment: number of brand’s SKU (+1, due to logarithmic transformation),

representing brand exposition, and shelf clutter.
Wit Category-level variable representing category turnover and accounting for store
traffic.
αi Constant representing the systematic effects of store i, different from those
captured with Xkijt and Wit (socio-economic characteristics of the area, etc.).
di Binary store indicator.
μl Constant representing the systematic effect of focal brand l.
bi Binary brand indicator (1 for i=l, 0 otherwise).
βkj ω, random coefficients allowed to vary over years, to control shifts in the
marketing environment using a normal random specification.
εlit Random component.
Parameters are estimated after a “log-log” transformation of (1):
K X
X J


logðS lit Þ ¼ bl logðμl Þ þ d i logðαi Þ þ βkj log X kijt þ ωlogðW it Þ
k¼1 j¼1

þ logðεlit Þ ð2Þ

1.2 Dynamic of advertising impacts

We use an advertising stock (“Adstock”) formulation of campaign carry-over (Broadbent

and Fry 1995). It employs a unique variable representing the total discounted stock of
advertising relative to all previous periods, which substitutes the multiple advertising
weights (Ajt−1, Ajt−2, Ajt−3,…) of a Koyk model. Adstock models are rare but increasingly
used (see Bonfrer and Dhar 2008 for aggregated models and Aravindakshan and Naik
2011, Terui and Ban 2008, and Ban et al. 2011 for single-source models). However, they
use a unique Adstock for each brand, which is equivalent to hypothesizing a constant
decay, whatever the variations in the marketing environment (Norris 2008).
In this paper which models advertising at campaign level we simultaneously
incorporate all the Adstock variables associated with all ongoing campaigns, i.e.,
campaigns with unfinished carry-over. Let brand j having aired cj=1, 2…Cj cam-
paigns over the period analyzed. On the first week (t=t1) of campaign cj, only a
fraction of advertising weight occurs, its impact being delayed in following weeks:


Adscjt1 ¼ 1−θcj Acjt1 ð3Þ

θcj Constant decreasing rate (0≤θcj≤1), specific to campaign cj of brand j

Ac j t1 Advertising expenditure.
Adsc j t1 Advertising stock.
The following weeks (t>t1), we introduce the Adstock relating to all previous
periods:


Adsc j t ¼ θcj Adsc j t−1 þ 1−θcj Ac j t ð4Þ

The closer θcj is to 1, the more important the carry-over effect.

Mark Lett (2014) 25:193–206 197

1.3 Shape of the response to advertising pressure

The literature has characterized a concave function linking advertising to sales (decreasing
returns) for mature packaged goods categories (Hu et al. 2007; Sriram and Kalwani 2007),
which is the context of this paper. As the multiplicative model allows for concavity, (4)
can be directly integrated into (2) to capture the impact, at time t, of all ongoing campaigns
aired by the focal brand and all2 its advertised competitors:
X
K XJ


logðS lit Þ ¼ bl logðμl Þ þ d i logðαi Þ þ βkj log X kjit þ ωlogðW it Þ
k¼1 j¼1

XJ XJ X
Cj


þ δcl z logðAdscl zcl t Þ þ δc j zlog Adsc j zcj t þ logðεlit Þ ð5Þ
cl ¼1 j¼1 c j ¼1

j≠l

δcl z (δc j z ) Impact of campaign cl (cj) on sales.

zcl (zcj) Half-life of campaign cl (cj), i.e., the number of weeks necessary
to reach 50 % of its total impact. In the estimation procedure,
following Broadbent and Fry (1995), instead of choosing θcj (θcj),
we select zcl (zcj) which best fits the data (F value associated with
the Adstock coefficient). We systematically tested half-life
durations of one 1 to 20 weeks, for each Adstock variable.
Adscl zclt advertising stock associated with campaign cl (cj) at time t,
(Adsc j zcjt ) calculated with a half-life of duration zcl (zcj).

2 Data, estimation, and secondary dataset

2.1 Data and estimation

We studied six mature packaged goods categories (candy bars, biscuits, mineral waters,
diapers, shower gels, and cleaning products), representing 81 advertised brands. In each
category, we modeled as focal brands the four most important brands in terms of market
share by value, one small brand, and one new brand launched less than a year before the
beginning or during the first year of the period. This represents 31 brands covering a
large spectrum of category sales (28 to 82 %) and advertising expenditure (42 to 100 %).
We used the French IRI retail panel (national representative sample of 450
hyper/supermarkets) for 199 weeks (January 2002–October 2005). Data were matched
with Kantar Media information on campaigns (national weekly TV advertising expen-
diture by the brands). Over the total period, the mean number of brand campaigns is 8.5,
with large variations, from 1 to 15. The mean length of a campaign is 5.6 weeks,
including 5.2 “on-air” and 0.4 “off-air”, with a mean cost of €0.71 million.

2
All advertised brands in the category, i.e., not limited to the modeled brands.
198 Mark Lett (2014) 25:193–206

Maximum likelihood estimations of model (6) are implemented for every focal
brand, using a random coefficient model (SAS PROC MIXED) to control parameter
variations over time, except those associated with advertising, which are allowed to vary
from campaign to campaign. To incorporate heteroscedasticity and correlations of
observations arising from the same store, the covariance matrix of errors is clustered
by stores.

2.2 Secondary dataset

We built a secondary dataset comprising 264 campaigns,3 including campaign costs

and incremental sales estimated on the basis of δlcl z . Each campaign is described
using category, brand, and campaign variables (see Table 1).

3 Empirical results

The campaigns’ effectiveness is studied following two criteria: sales effectiveness

(success/failure in increasing sales) and profitability. We also study campaign carry-
over, a strong antecedent of profitability. We use binary Probit regression to explain sales
effectiveness, Tobit regression to explain profitability, and sample selection Poisson
regression to explain carry-over. Tobit regression is used because profitability equals
zero for campaigns which fail to increase sales. Sample selection Poisson regression is
used because carry-over is observed only when a campaign is successful. We fit a system
of two equations with (normally) correlated errors: the binary Probit regression explains
sales effectiveness and the Poisson regression (number of weeks constitutes count data)
explains successful campaign carry-over.4 All estimations are implemented with
NLOGIT given its flexibility to deal with panel data. Heteroscedasticity, non-
independence of observations, and of error terms (auto-correlated disturbances) result
from the clustered structure of data: each product category contains several brands and
each brand replicates several campaigns. We use cluster robust maximum likelihood
estimators of the asymptotic covariance matrix of parameters.
Next, for each model, after providing descriptive results, we implement the
following strategy. First, we identify significant category characteristics. Then we
individually test the impact of each brand/campaign characteristic, along with signif-
icant category-control variables. To limit the file drawer effect, we consider and
comment on significant effects at the 10 % level (instead of 5 %).

3
After eliminating campaigns already launched before the beginning of the modeling period or still
ongoing at the end. NB: successful campaigns are considered when their carry-over is terminated. This
means that national weekly increments lower than 5/1,000 of the total increment or lower than 500 units of
volume were set to zero, in order to shorten the distribution queues of incremental sales. However, these
queues are sometimes very long and make it impossible to include the campaign in the period analyzed,
thereby reducing sample size.
4
This model has a similar structure to brand choice and purchased quantity models estimated in a two-step
procedure (see for example Jedidi et al. 1999). Here, the Poisson distribution is used because carry-over
constitutes count data.
Mark Lett (2014) 25:193–206 199

Table 1 Category, brand, and campaign variables

Product-category variables
volume_PC Size in volume
price_PC Mean price
%adintensity_PC Advertising intensity: (%) advertising expenditure/category size in value
involve_PC Consumer involvement, binary judgment by IRI experts
loyalty_PC Consumer loyalty, binary judgment by IRI experts
hedonic_PC Hedonic product, binary judgment by IRI experts

Brand variables
mshare_B Market share by value in the category, over the period
leader_B Competitive position (leader, challenger, medium, small) measured
challeng_B medium_B as the dichotomized order of the brand market share. The “medium” category
small_B groups the third and fourth brands
recent_B = 1: brand launched less than one year before the beginning, or during
the first year of the period. All recent brands are “small”
= 0: established
smallestab_B =1: small and established brand
=0: other
%adbrand_B Advertising budget as a percentage of sales, over the period
SOV/MS_B Share of voice to market share ratio, over the period
%promo_B Share of promotion, over the period

Campaign variables
budget_C Budget, in value
$week_C Mean weekly budget over campaign duration
length_C Duration (weeks)
rank_C Rank of the campaign relative to the set of campaigns aired by the brand
over the period
%voice_C Share of voice
clutter_C Competitive interference: number of competitors advertised during the campaign
carryover_C Carry-over: number of weeks necessary to reach 90 % of total increments,
once the campaign has ended

3.1 Sales effectiveness

Sales effectiveness is studied to compare our results with well-referenced meta-

analyses. Following Lodish et al. (1995) and Hu et al. (2009), we consider a
campaign successful when it has generated incremental sales, i.e., when δlcl z is
significant (at the 10 % level). On this basis, 192 (72.7 %) campaigns are successful
(Table 2), a value close to that of Jones (1995) 70 %.
We observe a higher success rate for uninvolving (76.5 %) vs. involving (64.2 %)
or unloyal (74.4 %) vs. loyal (60 %) categories, and for hedonic (78.9 %) vs. non-
hedonic (65 %) categories. The competitive position of brands has a strong impact.
The success rate is higher for small brands (93.5 %), whether new (95.8 %) or
200 Mark Lett (2014) 25:193–206

Table 2 Sales effectiveness (mean success rate), mean profitability, mean carry-over

Success rate (%) Profitability ($) No. of campaigns Carry-overa

Total 72.7 0.89 264 12.2

Candy bars 76.2 0.52 42 9.6
Mineral water 66.7 1.38 51 15.1
Cleaning products 66.7 0.27 36 11.3
Diapers 60.0 1.30 30 13.5
Shower gels 79.0 0.49 38 12.8
Biscuits 80.6 1.13 67 11.6
Involving categories 64.2 1.35 81 14.5
Uninvolving categories 76.5 0.69 183 11.3
Loyal categories 60.0 1.30 30 13.5
Non-loyal categories 74.4 0.84 234 12.1
Hedonic categories 78.9 0.79 147 11.3
Non-Hedonic categories 65.0 1.02 117 13.5
Leader brands 51.9 0.60 52 12.7
Challenger brands 71.7 1.09 60 11.8
Medium brands 74.5 1.07 106 13.1
Small brands 93.5 0.54 46 10.6
Established brands 70.4 0.93 240 12.4
Recent brands 95.8 0.48 24 10.3
Small-established brands 90.9 0.60 22 11.1

a
Only successful campaigns

established (90.6 %), compared to medium brands (74.5 %), challengers (71.7 %),
and leaders (51.9 %). These results are similar to those of Lodish and Riskey (1997).
The binary Probit regressions show that none of the category, brand, and campaign
variables are significant, except variables in line with brand competitive position and
newness (Table 3). Market share (−.30) and category leadership (−.29) decrease the
probability of success. Conversely, being a small brand (.39), whether recent (.34) or
established (.22), increases this probability.

3.2 Profitability

The profitability of a campaign is calculated as the ratio of margins associated with

incremental sales, to the corresponding advertising cost—both ex-tax (Farris et al.
2010; Van Horne 1995, pp. 141–142). National weekly TV advertising expenditure
by brands are provided by Kantar Media.5 Before calculating margins, one must
subtract retailers’ margins from the incremental turnover. Mean supermarket retail

5
Commercials are identified using artificial intelligence and priced on the basis of tariff grids applied by
the corresponding media. This indicator does not take into account the fixed expenditure associated with
copy creation, nor the possible annual discount on purchased space, which were unknown.
Mark Lett (2014) 25:193–206 201

Table 3 Impacts of category, brand, and campaign variables on campaign success (sales effectiveness),
profitability, and carry-over

Campaign success Profitability Carryover

Binary probit (n=264) Tobit regression (n=264) Sample selection Poisson regression
(n=264)

coeff. prob. coeff prob. coeff prob.

Category variables—individual tests

volume_PC −.08 .75 .43 .00 .36 .00
price_PC −.11 .31 .27 .06 −.01 .80
%adintensity _PC .06 .76 −.87 .000 .02 .70
involve_PC −0.17 .39 .58 .000 .38 .00
loyalty _PC −.13 .21 .29 .06 −.01 .81
hedonic_PC .19 .29 −.05 .70 .24 .75

No control variable With %adver_PC as With volume_PC and involve_PC

control variable as control variables

Brand variables—individual tests

mshare_B −.30 .01 .09 .54 −.01 .88
leader_B −.29 .02 −.27 .08 −.01 .91
challeng_B −.02 .89 .14 .30 −.01 .87
medium_B .05 .25 .32 .03 .00 .96
small_B .39 .02 −.36 .02 .01 .82
recent_B .34 .03 −.25 .10 −.01 .85
smallestab_B .22 .03 −.25 .09 .02 .71
%adbrand .14 .45 −.065 .15 −.13 .00
SOV/MS .20 .18 −.090 .20 −.02 .78
%promo_B .06 .72 −.46 .00 −.02 .60
Campaign variables—individual test
budget_C .06 .63 −.18 .000 .00 .95
$week_C −.06 .62 −.04 .79 .22 .00
length_C .07 .76 −.14 .36 −.10 .10
rank_C .25 .25 .13 .28 −.34 .00
%voice_C −.15 .30 −.08 .58 .01 .92
clutter_C −.22 .30 −.25 .05 −.18 .06
carryover_C – – 0.95 .000 – –

margins (net of all rebates) vary between 25 and 36 %, with an overall mean of 31 %.6
Margins are estimated using direct production costs based on EBITDA7 book values.
They oscillate between 50 and 60 % over the period. For a brand-optimistic
6
ILEC (French National Institute on Consumption Industry Studies): “Margins Observatory”.
7
EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization. Financial statements were
extracted from the Diane databases.
202 Mark Lett (2014) 25:193–206

perspective, we retain the highest production margin (60 %) and lowest retail margin
(25 %, i.e., a mark-up of 1.25). Based on this, profitability becomes positive when the
ratio is greater than $2.10 (1/0.60=1.67 times 1.25=2.10). Conversely, a campaign
does not even cover its direct advertising costs below a ratio of $1.25. Between $1.25
and $2.10, campaigns cover their advertising costs, but only some of the production
costs associated with incremental sales.
The mean profitability ratio is $0.89, and the median is $0.45 (Table 2). Only 11 % of
campaigns contribute to profit (profitability≥$2.10). Conversely, 78 % of campaigns do
not even cover their advertising costs (profitability≤$1.25). We observe large differences
between categories, with profitability varying between $0.27 (cleaning products) and
$1.38 (mineral water). Involving (diapers, mineral water) and loyal categories demon-
strate greater profitability ($1.35 and $1.30, respectively), compared to uninvolving and
unloyal ones ($0.69 and $0.84, respectively). There are also large differences across
brands, with mean profitability varying between $2.80 (Pampers) and $0.17 (a cleaning
product brand). Advertising increases profit for only two out of 31 brands (profitabil-
ity≥$2.10), whereas 22 are below $1.25. The within-brand variance of campaign
profitability represents 73 % of total variance, underlining within-brand volatility. As
with sales effectiveness, we observe strong impacts from brand competitive position, but
in quite different directions. Leaders ($0.60), but also small brands ($0.54), whether new
($0.48) or established ($0.60), have much lower profitability compared to medium
brands ($1.10) and challengers ($1.10).
The censored (Tobit) multiple regression (Table 3) shows that more variables
impact profitability than sales effectiveness. Among category variables, we observe
a strong negative impact from advertising intensity (−0.87) and positive impacts from
category size (0.43), price (0.27), consumer involvement (0.58), and loyalty (0.29).
When these variables are simultaneously included in the regression, only advertising
intensity remains significant and is retained as a control variable.
Among brand variables, with the exception of brand share on promotion which has
a noticeable negative impact on profitability (−0.46), only brand competitive position
variables have an impact. Being a small brand (−0.36), whether recent (−0.25) or
established (−0.25), has a negative impact, as does being a leader (−0.27). Converse-
ly, being a medium brand has a positive impact (0.32).
Among campaign variables, we observe limited negative impacts from absolute
budget (−0.18) and competitive clutter (−0.25). Conversely, campaign carry-over has
a strong positive impact (0.95) and emerges as the main positive driver of profitability.
Including all significant variables in the model, we observe a R2 of 47 %8
demonstrating that profitability is quite well explained on the basis of these variables.

3.3 Campaigns carry-over

Carry-over is calculated for a successful campaign as the number of weeks necessary,

after it has ended, to reach 90 % of a campaign’s incremental sales. The mean carry-
over is 12.2 weeks, the median is 9.5 weeks, and 90 % of campaigns cover between 3
and 26 weeks.

8
R2 associated with the two-step least square estimators which serve as starting values for the maximum
likelihood procedure.
Mark Lett (2014) 25:193–206 203

The sample selection Poisson regressions show that, among category variables,
category volume (0.36) and involvement (.38) have positive impacts on carry-over.
They were selected as control variables. Among brand variables, only advertising
budget has a negative (limited) impact (−.13). Among campaign variables, there is no
impact from absolute campaign budget, but a positive impact from the weekly budget
(.22). Campaign duration (−.10) and rank (−.34) have negative impacts, characteriz-
ing wear-out effects. Competitive clutter also has a small negative impact (−0.18).

4 General discussion and conclusion

4.1 Methodological contributions

Modeling advertising at campaign level provides several advantages. We deal with the
heterogeneity of advertising returns, an important point given their volatility (Bass et al.
2007; Norris 2008). Whereas the literature attributes this volatility to inter-brand
differences (Lodish et al. 1995, Lodish and Riskey 1997), we show that within-brand
volatility is even more important (73 % of total variance), which underlines the need to
control it. The model makes it possible to test new as well as established campaigns on
the basis of standard retail panel data. This may be more external-valid and less
expensive, compared to advertising test experiment data. Because copy strategy and
media-planning variables play an important role (Vakratsas and Ambler, 1999) but were
unknown, future research integrating them would be promising.
Our model does not deal with the potential endogeneity of advertising. However,
by using weekly sales data at store level with a large number of stores (450) and
controlling for advertising heterogeneity, we can consider this not to be a serious
limitation (Leeflang et al., 2000; Yang et al. 2003).

4.2 Empirical generalizations

4.2.1 Sales effectiveness (campaign success)

We confirm meta-analyses which have established that brand competitive position

(leaders vs. small/new brands) strongly moderates advertising sales effectiveness
(Eastlack and Rao 1989; Henningsen et al. 2011; Lodish et al. 1995; Hu et al. 2009;
Jones 1995; Riskey 1997; Sethuraman et al. 2011). We also confirm that campaign
duration, advertising budget (total or weekly), and brand share of voice also have no
impact (Lodish et al. 1995).

4.2.2 Profitability

We show that the drivers of advertising profitability are quite different to those behind
sales effectiveness. Both leaders and small brands (recent or established) have the
lowest profitability, compared to challengers and medium brands, but for different
reasons. Small brands have a high rate of campaign success (93.5 %), but with low
financial return, most likely because the advertising cost and its corresponding
increase in brand attraction applies to a smaller number of stores and consumers.
204 Mark Lett (2014) 25:193–206

Conversely, leaders have a low rate of campaign success (51.9 %) as underlined in the
literature (Hu et al. 2009). This results in low overall profitability, even if their
successful campaigns provide satisfying returns. Finally, advertising is more profit-
able for medium brands and challengers that mix reasonable campaign success rates
(>70 %) and return of their successful campaigns.
The share of sales on promotion appears to be a negative antecedent of profitabil-
ity. Brands which overuse this lever decrease advertising profitability, most likely due
to its detrimental impact on brand equity. This negative indirect impact (through
advertising profitability) adds to the direct negative impact of promotion established
in the literature, complementing the findings of Naik et al. (2005) and Sriram and
Kalwani (2007) on the negative interaction between advertising and promotion.
We also establish that category characteristics have a strong impact on profitability.
Profitability increases with category size and involvement, a noticeable antecedent.
Conversely, advertising intensity in the category emerges as the main negative driver
of profitability, whereas it has no impact on sales effectiveness. Competitors seem
caught in a prisoner’s dilemma: their situation becomes worse because of their
independent decisions to advertise more, in order to gain advantages over competitors
(Chen et al. 2009). To a lesser degree, competitive clutter during a campaign is also a
negative antecedent. Finally, carry-over emerges as the main positive driver of
profitability. Yet, incremental sales are still at work while the brand is not spending
money on advertising.

4.2.3 Campaign carry-over

Carry-over (measured from the end of a campaign) ranges between 3 weeks and
6 months. We establish that consumer involvement has a noticeable positive impact
on carry-over, as involved consumers have a better memory for commercials
(Moorman et al. 2012; Vakratsas and Ambler 1999). Weekly campaign budget is
another positive antecedent of carry-over, whereas campaign duration has a negative
impact. This favors “flighting” compared to long and expensive campaigns.
We identify competitive clutter as having a negative impact. When several brands
advertise simultaneously, competitive interference depreciates campaign accessibility
and makes individuals forget the message more quickly (Keller 1991; Vakratsas and
Ambler 1999; Norris 2008). We also observe noticeable wear-out effects (Bass et al.
2007; Norris 2008): carry-overs are shortened when brands air multiple campaigns
and/or increase the size of their advertising budget. This, indirectly, reduces profit-
ability. These results are noteworthy because we show that advertising intensity,
competitive interference and wear-out effects have impacts on advertising effective-
ness, not through sales effectiveness (probability of a successful campaign) but
through profitability and carry-over, its strongest antecedent. This complements work
by Danaher, Bonfrer, and Dhar (2008), Vakratsas et al. (2004), and Aravindakshan
and Naik (2011). Empirical applications providing more in-depth analyses of carry-
over drivers appear are a promising prospect.
This research focuses on the sole direct impact of advertising on profit. However,
advertising must also be appreciated more globally, through its indirect contribution to
sales and profit, thanks to its multiple impacts on price sensitivity, brand equity, barriers to
entry, line extension potential, sales force motivation, retail trade, employees motivation,
Mark Lett (2014) 25:193–206 205

stakeholders, and shareholders, and ultimately on firm value and risk. Financial markets
do positively integrate the advertising spending signal, whose beneficial impacts on firm
value and systematic risk has been empirically established (McAlister et al. 2007; Osinga
et al. 2011). Future research establishing whether these indirect impacts do anything more
than compensate for the negative direct impact of advertising would be welcome.

Acknowledgments The authors thank IRI France for supplying the data, and the LabEx Entreprendre for
financial support. They also thank Professor J.P. Couderc and the anonymous ML reviewers for their
helpful comments.

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