TV Advertising Effectiveness and Profitability: Generalizable Results from 288 Brands

46 Pages Posted: 20 Jan 2020 Last revised: 17 Apr 2021

See all articles by Bradley Shapiro

Bradley Shapiro

University of Chicago - Booth School of Business

Günter J. Hitsch

University of Chicago - Booth School of Business

Anna Tuchman

Northwestern - Kellogg

Multiple version iconThere are 2 versions of this paper

Date Written: January 29, 2021

Abstract

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

Shapiro, Bradley and Hitsch, Guenter J. and Tuchman, Anna, TV Advertising Effectiveness and Profitability: Generalizable Results from 288 Brands (January 29, 2021). Available at SSRN: https://ssrn.com/abstract=3273476 or http://dx.doi.org/10.2139/ssrn.3273476

Bradley Shapiro (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

HOME PAGE: http://faculty.chicagobooth.edu/bradley.shapiro/

Guenter J. Hitsch

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Anna Tuchman

Northwestern - Kellogg ( email )

Kellogg School of Management
2001 Sheridan Rd.
Evanston, IL 60208
United States

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