JOURNAL OF MARKETING RESEARCH | 1

Advertising Effectiveness
By Peter J. Danaher | 1.26.2021

The internet has enabled many business developments, but

it has turned media allocation and planning on its head.
In traditional mass media like television, advertisers can
purchase a commercial slot and expect large audiences.
However, many of those reached
are not interested in the advertised
product or service, so a large
percentage of those exposed to
advertising do not respond to the
message. In digital advertising,
websites containing specialized
content (e.g., model airplanes) allow
advertisers to display their products
to loyal and attentive audiences. In the
social media space, Facebook delivers
ad content to ideal target audiences
by examining the web activity of
users and their networks. Paid search
advertising sends firms customers who
are already “in the market” for their
products, as indicated by their keyword
use.
Over the past 15 years, television
channels have grown in number.
But the more significant change
has been the exponential growth in
websites supporting themselves with
advertising, not to mention the rapid
uptake of paid search advertising.
Advertisers have moved to new
digital media outlets not only
because of their ability to target
customers, but also their lower cost
compared to traditional media.
Furthermore, digital media allows
firms to connect ad exposures and
search clicks to downstream sales, a
feature Danaher and Dagger (2013)
suggest eludes traditional media.
Sethuraman, Tellis, and Briesch (2011)
show the most convincing way for
firms to demonstrate advertising’s
effectiveness is by linking the effort
to sales. In turn, researchers can use
two methods to assess advertising
effectiveness: field experiments and
econometric models.
Field Experiments
Targeting and retargeting customers
who are more likely to respond to
offers, an increasingly common
practice, makes advertising appear
more effective than it is. Lambrecht
and Tucker (2013), in an award-winning
Journal of Marketing Research paper,
reported a comparison of advertising
response between customers
exposed to standard banner ads and
retargeted banner ads showed the
ads displaying products previously
viewed were six times more effective
at generating sales. However, the
consumers receiving retargeted ads
had already demonstrated product
predilection. The researchers therefore
randomly assigned consumers to a
treatment group seeing retargeted,
product-specific ads and a control
seeing generic product category ads.
They found the retargeted ads were
less effective than the generic ads,

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as the customers were in different
stages of the purchase funnel, and
while retargeted ads work well near
purchase, they are not effective for the
larger group of customers embarking
on their search.
The use of field experiments to
determine ad effectiveness has
subsequently blossomed, with studies
using “ghost ads” on Google (Johnson,
Lewis, and Nubbemeyer 2017) and
Facebook (Gordon et al 2019) to
create randomized control groups.
For example, Sahni (2016) used a
field experiment to show digital ads
for one restaurant increased sales at
competing restaurants offering similar
cuisine.
In every case, these field experiments
have shown that advertising effects are
often difficult to detect. For example,
the study of Facebook ads by Gordon
and colleagues (2019) examined 15
campaigns and found that only eight
produced a statistically significant lift
in sales.
Econometric Models
The studies by Johnson, Lewis,
and Nubbemeyer and Gordon and
colleagues also highlight the challenges
of designing an experiment to assess
digital ad effectiveness. Individual
customers use the internet in different
ways, and providers deliver digital ads
via unique online auction processes.
Econometric models therefore provide
a versatile approach to gauging
advertising effectiveness. And while
field experiment studies have been
limited to examining one medium at
a time, econometric models allow
researchers to compare effectiveness
across several media.
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Researchers can use econometric
models to examine time series data,
such as weekly or monthly advertising
and sales records.Dinner, van Heerde,
and Neslin (2014) studied traditional
and digital advertising’s effects on in-
store and online sales for an upscale
clothing retailer across 103 weeks. The
retailer made about 85% of its sales
in-store, and the researchers examined
three media: traditional (i.e., total
spend on newspapers, magazines,
radio, television, and billboards),
online banner advertising, and paid
search. They found online display
and paid search were more effective
than traditional advertising. Although
firms might expect digital advertising
to influence only online sales, the
researchers found it also influenced in-
store sales.
Researchers can also use econometric
models to examine single-source data
linking individual-level ad exposure
to sales, the strategy employed by
Danaher and Dagger in 2013. They
examined 10 media types employed
by a large retailer: television, radio,
newspaper, magazines, online display
ads, paid search, social media,
catalogs, direct mail, and email. The
researchers found traditional media
and paid search effectively generated
sales, while online display and social
media advertising did not.
Multimedia, Multichannel, and
Multibrand Advertising
Danaher and colleagues (2020) also
used single-source data but extended
it to multiple retailer-brands, two
purchase channels, and three media
(email, catalogs, and paid search).
They collected the data from a North
American specialty retailer selling
mostly apparel, where 80% of sales
were in-store. The parent retailer
owned three relatively distinct brands
operating independently. They
collected customer data in a combined
database, giving them information on
sales for each retailer-brand over a
two-year period.
The researchers found emails and
catalogs from one retailer-brand
negatively influenced competing
retailer-brands in the category. Paid
search influenced only the focal
retailer-brand. However, competitor
catalogs often positively influenced
focal retailer-brand sales among omni-
channel customers. The researchers
also segmented customers by retailer-
brand and channel usage, revealing
customers shopping across multiple
retailer-brands and both purchase
channels were the most responsive
group to multimedia advertising.
Summary
In the contemporary business
environment of ever-increasing
media channels but static advertising
budgets, firms must be able to
measure advertising effectiveness.
Many businesses have shifted their
advertising expenditure toward digital
media, but multiple studies show
traditional media remain effective.
How do marketing managers decide
what is best for their companies?
Digital media firms like Google
and Facebook offer in-house field
experiment methods of examining
advertising effectiveness. For
multimedia studies, analysts can apply
econometric models in any setting
where time series or single-source data
are available.

AUTHOR
Peter J. Danaher is Professor of Marketing and Econometrics and Department Chair at
Monash Business School in Melbourne, Australia. He was recently appointed a co-editor of the
Journal of Marketing Research.

CITATION
Danaher, Peter J. (2021), “Advertising Effectiveness,” Impact at JMR, (January), Available at:
https://www.ama.org/2021/01/26/advertising-effectiveness/

REFERENCES
Danaher, Peter J., and Tracey S. Dagger (2013), “Comparing the Relative Effectiveness of
Advertising Channels: A Case Study of a Multimedia Blitz Campaign,” Journal of Marketing
Research, 50(4): 517-534. https://doi.org/10.1509/jmr.12.0241
Danaher, Peter J., Tracey S. Danaher, Michael S. Smith, and Ruben Laoizo-Maya
(2020), “Advertising Effectiveness for Multiple Retailer-Brands in a Multimedia and
Multichannel Environment,” Journal of Marketing Research, 57(3): 445-467. https://doi.
org/10.1177/0022243720910104

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Dinner, Isaac, Harald J. van Heerde, and Scott A. Neslin (2014), “Driving Online and Offline
Sales: The Cross-channel Effects of Traditional, Online Display, and Paid Search Advertising,”
Journal of Marketing Research, 51(5): 527-545. https://doi.org/10.1509/jmr.11.0466
Gordon, Brett R., Florian Zettelmeyer, Neha Bhargava, and Dan Chapsky (2019), “A
Comparison of Approaches to Advertising Measurement: Evidence from Big Field Experiments
at Facebook,” Marketing Science, 38(2): 193-225. https://doi.org/10.1287/mksc.2018.1135
Johnson, Garrett A., Randall A. Lewis, and Elmar I. Nubbemeyer (2017), “Ghost Ads: Improving
the Economics of Measuring Online Ad Effectiveness,” Journal of Marketing Research, 54(6):
867-84. https://doi.org/10.1509/jmr.15.0297
Lambrecht, Anja, and Catherine Tucker (2013), “When Does Retargeting Work? Information
Specificity in Online Advertising,” Journal of Marketing Research, 50 (October): 561-576.
https://doi.org/10.1509/jmr.11.0503
Sahni, Navdeep S. (2016), “Advertising Spillovers: Evidence from Online Field Experiments
and Implications for Returns on Advertising,” Journal of Marketing Research, 53(4): 459-78.
https://doi.org/10.1509/jmr.14.0274
Sethuraman, Raj, Gerard J Tellis, and Richard A. Briesch (2011), “How Well Does Advertising
Work? Generalizations from Meta-Analysis of Brand Advertising Elasticities,” Journal of
Marketing Research, 48 (June): 457-471. https://doi.org/10.1509/jmkr.48.3.457

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