Professor of Marketing
Associate Professor of Marketing; Bernice and Leonard Lavin Professorship
Associate Professor of Managerial Economics & Decision Sciences
Associate Professor of Strategy
Once upon a time, advertisers had to trust their instincts. With limited customer data and only rough analytical tools at their disposal, ad execs trying to write an effective commercial or measure the success of a campaign were often left guessing.
But today, the field has become much more scientific. A wealth of research has shed light on how advertising can affect not only our shopping behavior, but also our psyches, our elections, and even our health.
Kellogg faculty share five things that marketers and shrewd consumers alike should keep in mind when it comes to advertising.
Has the same pair of shoes seemed to follow you around the web for weeks? Did you start seeing dog food days after you adopted a puppy?
This is happening because companies are collecting more data about consumers than ever before. Someone browsing the average news website, for instance, can expect to be tracked by more than 50 companies.
However, Brett Gordon, an associate professor of marketing, explains, companies still can’t predict consumer behaviors very well. “Most people don’t know what they’re going to do tomorrow,” he says, “so it’s very hard for marketers to make accurate predictions.”
Even psychographic ad targeting—where people are targeted based on attributes such as their values, emotions, and attitudes—has not been proven to be especially effective.
But as Gordon explains, a person doesn’t have to click on an ad to be affected by it. For example, in one advertising campaign that Gordon worked with Facebook to analyze, “around 75% of all conversions—instances where people saw the ad and made a purchase within about 30 days—never clicked on the ad,” he says.
And Gordon notes that effective ads are only one small part of a purchasing decision. “I like to think of pricing as the hammer of marketing, and advertising as the little feather that tickles you into maybe making a purchase or not.”
These days, people are more skeptical than ever about marketing.
But research from Kent Grayson offers heartening news for companies looking to reach savvy audiences: customers find some marketing tactics manipulative, but others legitimate and informative.
Grayson, an associate professor of marketing, and a colleague asked more than 400 consumers to complete one of two online surveys about 20 different advertising and sales tactics. The participants rated how much they associated each of the tactics with certain positive words (such as “helpful) and negative words (such as “dishonest”).
The researchers found that people most trusted tactics like pledging to match competitors’ prices or allowing customers to return a product for a full refund. Less trustworthy were tactics like comparing a product to an unrelated item, like a precious jewel, or stressing that a product will be on sale for a “limited time” only.
“If you approach marketing with the presumption that people perceive all your actions with suspicion, you may end up taking an overly careful approach.”
— Kent Grayson
Methods like price matching may be considered more credible because they are easier to verify than other marketing ploys, such as whether a celebrity actually uses a particular brand of coffee, Grayson says.
His takeaway: “If you approach marketing with the presumption that people perceive all your actions with suspicion, you may end up taking an overly careful approach to avoid triggering an effect that is not there.”
One time-tested tactic is noting that your product is in the “top ten.” But wouldn’t it be even better to publicize its place among the “top nine” or “top seven” in its class?
No, it turns out. In a separate series of experiments, Grayson and colleagues show that the incongruousness of a top-nine list means consumers are more likely to favor a top-ten product despite the chance that it is actually worse than the other option.
Strange as this may seem, Grayson and his colleagues uncovered a sound explanation: consumers have become accustomed to certain numeric boundaries, so they give it little thought other than to simply accept that the product is among the best.
But when a marketer chooses an unexpected boundary—top seven or top sixteen, for example—the strangeness makes consumers stop and think. “It’s as if somebody pronounced a word wrong,” Grayson says. This momentary pause leads consumers to evaluate marketer’s intentions.
Unexpected boundaries do not have to be jarring, however. The research suggests that if unusually numbered lists became more common, consumers might not stop to wonder about the marketer’s intentions. “It’s not really about round numbers,” Grayson says. “It’s about norms, and it’s about what people are comfortable with.”
Every election season, voters in key states are inundated with political ads every time they turn on the TV. But how much do these costly advertisements actually impact election results?
Jörg Spenkuch, an assistant professor of managerial economics and decision sciences, and a coauthor used a clever quasi-experimental approach to answer this question.
The researchers looked at data from the 2004 and 2008 presidential races, comparing the voting behaviors of people in adjacent counties who happen to be in different media markets—and who therefore see different numbers of ads during election season.
They found that political advertisements do not change overall voter turnout, but they do impact which candidate gets the most votes, by rallying that candidate’s base. “When one party advertises more than the other, core supporters of that candidate are more likely to go to the polls, and supporters of the opponent are less likely to vote,” Spenkuch says.
That suggests that wealthy donors may be able to influence election results simply by airing more ads, which Spenkuch calls “a huge concern for public policy.”
For instance, the 2000 Bush presidential campaign ran twice as many ads in Florida as did the Gore campaign. “If the difference had been narrowed to zero, Bush would have lost about 2% of the popular vote relative to Gore,” Spenkuch says. “And we’d have had a different president.”
Advertisements can have social costs or benefits that go well beyond selling products.
For example, some economists have argued that drugmakers use ads to guide consumers toward expensive branded drugs over equally effective generics. But other economists are more optimistic, reasoning that if drug ads lead more people to take cholesterol-lowering statins, for example, they could prevent costly and life-threatening heart attacks.
To get at the true effects of pharmaceutical ads, Kellogg’s Amanda Starc, an associate professor of strategy, took advantage of their displacement during the months preceding the 2008 presidential election, when campaign ads dominated people’s screens instead.
The displacement of drug ads in specific states—but not others—allowed Starc and colleagues to compare drug sales where the ads were and were not appearing, and then tease out the impact of ads on drug sales.
They found that overall, ads for statins boost sales for more than just the single drug being advertised. “When you see a Crestor ad, you’re more likely to get Crestor, but you’re also more likely to potentially get one of the older drugs that’s off-patent, which we see as positive spillover,” Starc says.
Given the health and financial benefit of taking a pill versus having a heart attack, she calculates that the benefit of the statin ads is enough to justify all spending on drug ads.