In these days of budget cuts and profit woes, even the most hardened of advertisers are wondering about whether to invest in advertising. Hesitancy stems not only from leaner profits making advertising expenditures less viable, but lack of insight into whether advertising really works, and if so, when and why.

Why We Don't Know if Advertising Works

Insight into whether advertising works is difficult, in part because it's so hard to run controlled studies that allow one to tell that it's advertising that is really having any presumed impact (or lack thereof) on sales. It could just as well be a host of other factors, including your product's price, distribution, the economy, your competitor's products and their marketing actions.

However, two recent studies examining the impact of advertising creative content on sales are beginning to shed some interesting insight into this complex picture. One of the studies is recently published in the Journal of Marketing Research (the other is forthcoming in the same prestigious academic journal).

Both studies were conducted under highly controlled market conditions, and both suggest a relatively new insight-- the ability of advertising to impact consumer behavior and sales depends both on market conditions and ad creative content.

Advertising Content in Old vs. New Markets

One study tested consumer response to real ads in 23 markets to a toll-free referral service. The ads were shown in either "old" markets (markets where the service had been in existence for some time) or "new" markets (markets where the service was new to the area). Data included the number of referrals generated by the service.

The authors coded ads for their content-some ads used emotional appeals like warmth, pride guilt and fear appeals. Others used more rationally based content, focusing for example on comparative appeals, and use of a large number of message arguments supporting why the referral service was good.

The results were that emotion-based ads were more effective at generating referrals (e.g., influencing consumer behavior) in older markets. In younger markets, however, fact-based ads were more effective.

New Markets = Lack of Knowledge = Receptivity to Rational Messages

Why? One likely reason is that when ads are shown in new markets, the product is unfamiliar to consumers. Lack of knowledge of the product or service motivates them to find out what it is all about. Rationally focused ads not only tell them what the service is, but why it is good and why it warrants their business. Emotional ads don't work because the consumers are primarily interested in what the service is, not how it makes them feel. Plus, emotionally focused ads don't often provide a hard reason to buy-something that is necessary when products are new to markets.

Old Markets = Lack of Motivation = Receptivity to Emotional Ads

In older markets however, the opposite is true. Emotional ads are more likely to influence consumer behavior than are rationally based ads.

The reason is that consumers are unmotivated to listen to ads about the service because they've already gotten used to it. The don't pay that much attention to the ads and because of that, they don't focus on any rational arguments they contain. Emotional ads however, are attention getting and make the already familiar consumer think about how use of the product or service can make them feel or look great. Their focus is less on the product and more on themselves.

The upshot of the study is that ad content should be tailored to fit the age of specific markets, with different ads for markets of different ages. These results are particularly relevant for products that require a local infrastructure and thus involve rollouts over extended periods of time, e.g. digital subscriber lines (DSL), cellular phone services, and airlines.

Advertising Effectiveness for Frequently Purchased Products in Mature Categories

A second study examined what types of ads for brands purchased in mature product categories like soup, snack chips, and beverages showed increases in sales with increased media spending.

Ads were shown in controlled market experiments for a period of 6 months to one year against a control ad shown in a matched market at the same time. Both ads were backed by increased media weight. Ads were coded for whether they were or were not successful in generating a significant increase in sales relative to the control ad. In all, forty seven such market experiments were conducted.

Frequently Purchased Products = Lack of Motivation = Receptivity to Emotional Ads

A content analysis of these ads showed that those ads that were most likely to show increases in sales were ads that were emotionally based, not rationally based.

When markets are mature and brands are frequently purchased, consumers lack the motivation to process information about the brand. As a result, ads that are more emotional tend to capture unmotivated consumers' attention and make them feel good about the ad and the brand. These good feelings are reflected in their actual purchase behavior. Rationally based ads don't seem to work in these market conditions because consumers are already familiar with the brands in these mature markets are don't want to devote the energy to thinking about why the product might be rationally better than another.

The Take Away

So, does advertising work? Well, it depends. But one thing seems worth thinking about. Many people seem to feel that Internet advertising will be more effective once we have rich-media ads with animation, sound and interactivity. While these things may capture people's attention, going past attention to purchase - well that's a different story.

Combined, the studies suggest that advertisers need to design their ads and allocate their budgets according to the consumer's level of knowledge and motivation to think about the information in the message.

When motivation is low and ability is high (as is the case with old markets or frequently purchased brands in mature categories) emotional ads may work better than rational ads. In contrast, when motivation is high and ability is low (as is the case when products or markets are new) rational ads may fare better than their emotionally focused counterparts.

As usual in marketing, it's understanding your customers - and not just the cool technology - that will make your advertising work.