To those who do Marketibng-Mix modeling, one understands that these tools tend to have a singlular and exclusively short-term focus on marketing measurment. This white paper makes a case to including long-term measures in these models, expecially loking at the long-teerm efffects of advertising. This article makes a good business case for doing this and provides sine reak case studies to support his case.

1. Overview
Analytics
Capabilities
1
Measuring the Long-Term
Effects of Advertising: Cases and
Implications

2. Outline
• Destination
• The importance of short and long-term advertising effects
• Case study
• Summary
• Contact

3. Destination
• Currently, marketing mix models are adept at measuring and
modeling “short-term” advertising effects (advertising effects that
usually last <6 months). However, most marketers agree that there
exists a longer-term effect of advertising. This presentation will
explore an approach for modeling and measuring this phenomena
and illustrate the significance that ignoring this measure can have on
marketing resource allocation

4. The Story behind Long-Term Advertising
Effects
• Bottom-Line Analytics has developed a proprietary approach for modeling and
measuring the long-term effects of media advertising. Big deal, right?
• Yes, it is! As we have found through experience, long-term ad effects average 1.5
to 8 times greater than the short-term effects measured with traditional
marketing-mix models.
• How significant is this? Big time, as we will show you with a real example from a
CPG business
• We begin by comparing “sales decomposition” results from a short-term effects
only versus our approach which measures both short and long-term ad effects.

5. Defining the Long-Term Ad Effect
• Think of advertising with an
incredibly long half-life of 1 year
or more (but it is more than just
that)
• Happens over the life-time of a
customer, once that customer is
acquired. It manifests itself in
the rate of repeat purchases over
time; and should correlate.
• Tied Closely to the concept of
brand equity & long-term
customer value
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LT-AdEffect(LogScale)
Revitalift Brand Long-Term Ad-Effect and Brand Equity
Metrics

6. Short and Long-Term Effects Models
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100%
Short-Term Model Short-Term & Long-Term Model
Short & Long-Term Efffects Model Contributions
Baseline Long-Term Ad Effect Short-Term Ad Effect FSI Coupons
Store Displays Store Feature Ads Store Displays + Feature Ads
• Here, we show a side-by-side
comparison of models of the
same brand (an ice cream brand)
• The model on the left includes
only the contributions from short-
term advertising; while the
second model ads long-term ad
effects into the equation.
• Here we found the long-term ad
effect was over 4x the size of the
short-term ad effect

7. Marketing Return on Investment
The difference between inclusion and exclusion of long-term ad effects, in this case,
it changes the financial returns of advertising from negative to positive
We believe the persistence of MMM companies focusing only on short-term
advertising effects has led to a sub-optimal and under-investment in advertising
over time
Short-Term Effects Model Marketing Contribution Spending Net Returns % ROI
Media Advertising 5,868,590$ 15,000,000$ (9,131,410)$ -61%
Trade Promotions 47,386,152$ 27,000,000$ 20,386,152$ 76%
FSI Coupons 4,440,226$ 5,000,000$ (559,774)$ -11%
Total 57,694,968$ 47,000,000$ 10,694,968$ 23%
Short + Long-Term Effects Model Marketing Contribution Spending Net Returns % ROI
Media Advertising 29,636,472$ 15,000,000$ 14,636,472$ 98%
Trade Promotions 47,386,152$ 27,000,000$ 20,386,152$ 76%
FSI Coupons 4,440,226$ 5,000,000$ (559,774)$ -11%
Total 81,462,850$ 47,000,000$ 34,462,850$ 73%

8. Optimizing marketing spend
• As shown on the next two charts, allocating marketing spend “without”
accounting for long-term ad effects results in a substantially different spending
scheme for media advertising
• By not fully measuring for the total impact of advertising, resources can be spent
in a very different and much less effective manner
• We believe accounting for the full short and long-term ad effects is critical for
companies to most effectively and efficiently spend their marketing resources

9. Allocating Marketing Spend with Short-Term Ad Effects
Contribution Current Spend Optimal Spend
Advertising w/Short-Term $124,398 $13,692 $6,357
Trade/Store Promotions $904,712 $31,785 $39,120
FSI Promotions $101,780 $3,423 $3,423
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Marketing Spending Optimization with Short-Term Ad Effects
$ 48,900 $ 48,900
• When we run mathematical
optimization of marketing spending,
we often hold total spending
constant and simply reallocate
spending from low productive to
high productive activities
• We did this optimization with the
cases on the prior slides. Here is the
solution for the Short-Term
Advertising Effects model
• In this case, the solution
calls for a 50%+ reduction in
advertising spending and a 23%
increase in trade promotion
spending
• The overall growth projection for
this optimization is a +9% increase in
total sales.

10. Allocating Marketing Spend with Short-Term Ad Effects
$ 48,900 $ 48,900
Contribution Current Spend Optimal Spend
Advertising w/Short-Term $260,105 $13,692 $14,670
Trade/Store Promotions $791,623 $31,785 $31,296
FSI Promotions $79,162 $3,423 $2,934
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Marketing Spending Optimization with Short & Long-Term
Ad Effects
FSI Promotions Trade/Store Promotions Advertising w/Short-Term
• When ran the exact same
mathematical optimization using
the same brand but just adding
the long-term advertising effect to
the short-term impact.
• In this case, instead of a -50%
decline in advertising spend, this
solution calls for a 7% increase in
ad spend, flat trade promotion
spending & a -14% decrease for
FSI coupon promotions
• The overall growth projection for
this optimization is a +10%
increase in total sales

11. Summary
• We believe that the lack of attention to long-term advertising and marketing
effects from Marketing-Mix models represents a major issue. We think we have
made the case that it needs to be an integral part of the mix model exercise.
• By failing to include this in models, the results are going to be biased
• The total revenue and impact of advertising will be under-stated
• Often, the financial ROI of advertising will be negative
• Spending optimization will spend less on advertising than is warranted
• When including the long-term effect of advertising in our models often we see the financials
of advertising ROI move from negative to positive

12. 12
Thank You!!
Contact us for questions & further information
Patrick Duncan
EVP & Consulting Director
Bottom Line Analytics Global
E: Patrick@bottomlineanalytics.com
M:404.825.6335
www.bottomlineanalytics.com
Michael Wolfe
CEO
Bottom Line Analytics Global
E: mjw@bottomlineanalytics.com
M: 678.314.8446
www.bottomlineanalytics.com