In 2019, advertisers in the U.S. spent over $66B in commercials, so it would be safe to assume that this huge investment yielded a positive result to the ad buyers. This assumption is wrong, says new research from Anna Tuchman (Kellogg), Bradley Shapiro (Chicago Booth), and Günter Hitsch (Chicago Booth). Their newly published ad effectiveness analysis for 288 well-known consumer packaged goods should be required reading for advertisers everywhere.

Establishing the efficacy of television advertising has been a fiendishly hard task ever since the medium was invented. Over the years, different researchers have approached the problem in different ways. Some analyses focused on case studies, which were instructive but hardly indicative of overall patterns. Other researchers looked at the question from a high level, performing meta-analyses that were generally negative about the claimed impact of advertising but still left a lot of room for interpretation. New research from Tuchman and her colleagues is more promising.

Tuchman’s team started with sales data from 288 well-known brands and purchase data from 60,000 households from 2010-14, noted a recent summary of the work:

The researchers obtained data from Nielsen on the products’ sales at about 12,000 stores in the United States, as well as data on purchases by more than 60,000 American households, from 2010–14. The team also examined Nielsen data on traditional T.V. ads during the same time period. (Streaming services were not included in the data set.) For each commercial, Tuchman and her colleagues calculated the percentage of households in a particular local market that saw the ads (zones known as “designated market areas” or DMAs). 

To determine how much commercials drove sales, Tuchman’s team calculated a measure called advertising elasticity, which captures how much sales change with a given increase in ad exposure. This calculation is trickier than it sounds because ads can be affected by many things, such as seasonality and spot availability of products in a given DMA. The researchers adjusted their calculations to account for such variables and arrived at what they hope is an accurate indicator of ad elasticity.