Advertising

One thing that is not known by many businesses today is that of all marketing instruments, advertising is probably the most misused. There are a number of "rules" that are generally accepted by companies and advertising agencies for what makes an ad useful, but the truth is that most of these rules has little truth value. Advertising is a very complex process, but if used well it can have a tremendous effect on your business.

Key advertising decisions:

Budget - How much should I spend on advertising?
Media Planning - Where and when should I place the advertisement?
Copy - What should I say in the advertisement?

In order for advertising to be successful, we must pay close attention to the changes in sales and revenue before and during an ad campaign in both the campaign region and other control areas. The impact on revenue incurred by an advertising campaign should be high enough that profits cover any promotion expenses and preferably raise overall profits.

A campaign should be continued as long as the increase in return is better than the return for any other uses of the funds, including other advertising campaigns. How, though, do we know whether other campaigns would be more profitable? Simple. We can perform marketing experiments. These experiments are similar to concept tests in which we implement the advertising in a small area in order to monitor it's effect before rolling it out in full.

These are a few characteristics that are critical of market experiments:

Random assignment of which regions are control/experimental.
Assurance that nothing else could have caused the results.
The results can be logically projected to real marketing.
The experimental campaign precedes the effect it is said to have caused.
One comparison group either did not receive the campaign, or received a different campaign (control group).

If possible, we should evaluate the revenue impact of a certain advertising campaign before executing it through using planned experiments on a sample market segment.