TV Advertising Effectiveness and Profitability: Generalizable Results from 288 Brands
46 Pages Posted: 20 Jan 2020 Last revised: 10 Feb 2021
Date Written: January 29, 2021
We estimate the distribution of television advertising elasticities and the distribution of the advertising return on investment (ROI) for a large number of products in many categories. Our results reveal substantially smaller advertising elasticities compared to the results documented in the literature, as well as a sizable percentage of statistically insignificant or negative estimates. The results are robust to functional form assumptions and are not driven by insufficient statistical power or measurement error. The ROI analysis shows negative ROIs at the margin for more than 80% of brands, implying over-investment in advertising by most firms. While the overall ROI of the observed advertising schedule is only positive for one third of all brands, statistical uncertainty provides the possibility that advertising may be valuable for a larger number of brands if advertising is reduced at the margin.
Keywords: Advertising, Publication Bias, Generalizability
JEL Classification: L00, L15, L81, M31, M37, B41, C55, C52, C81, C18
Suggested Citation: Suggested Citation