Advertising works. It works very well.
So well that a Kantar WARC analysis shows stopping advertising is devastating to brand market share.
At GroupM we estimate that the global advertising market will grow by 19% in 2021 (TYNY report). This is after a decline of only 3.5% in 2020 versus 2019. Advertising is growing despite the pandemic and its economic impact.
But why does advertising work? Even though it is critical in business and we invest so much money and effort into it, the blunt truth is that we do not really know why advertising works.
There are a lot of theories about it. Let’s examine the most popular to see how they match with observed reality. The most widespread is the common-sense theory.
Common-sense theory of advertising
‘There are no hidden persuaders. Advertising works openly, in the bare and pitiless sunlight.’ Rosser Reeves 1961
The basic assumption is that advertising gives us useful information that helps us make better decisions. As a consumer, you find out that product X solves a problem you have. Or you find out that product A is better than other products in the category because it does Y and Z. Ads provide information that facilitate consumer choice.
This appears to make sense. On the surface.
Looking deeper, it’s clear this theory does not match what happens in reality. If advertising worked according to this common-sense theory then at least three things would be different:
There would be fewer products in each category. Everyone would reach similar conclusions about which is the best product and buy that one. The others would go bankrupt.
There would be no strong brands because they are irrelevant information according to this theory.
There would be fewer ads and all of them would talk about concrete product benefits and characteristics.
The common-sense theory is invalid.
Ads don’t help us choose the best product.
Why do they work then? Another popular theory is that of social signaling.
Social-signaling theory of advertising
“It is an extremely strong desire in a fool to be regarded as cool.” Mokokoma Mokhonoana
It states that ads are not about the products’ direct utility. It says that we buy brand X to signal to others that we have attributes associated with that brand. Ads create associations between a brand and socially desirable attributes. As humans we want to signal those respective attributes and thus buy the product.
According to this theory for example ‘sex sells’ because we want other people to think we are sexy.
Does this theory match reality?
Yes in many cases. As humans we are obsessed with how other people see us. This is an inheritance of how we evolved: as hyper-collaborative animals. Many brands are status symbols that people buy to signal to other people about themselves. For example they buy brands associated with luxury to show they have money and social status.
Yet it fails to explain all of advertising. It does not explain promotions and most sales campaigns. It does not explain purchases that we do not signal to others (e.g. weekly grocery shopping). It does not explain purchases that we keep secret (e.g. sex toys, weight loss pills, junk food).
This theory is a partial explanation. We propose there is a larger, more comprehensive theory which includes social signaling as one of its manifestations. This theory starts with the basis of Behavioural Sciences.
System 1 and System 2
The Nobel prize winner Daniel Kahneman is considered by many the father of Behavioural Economics. In his book ‘Thinking Fast and Slow’ he shows that humans have two types of decision making systems: the ‘imaginatively named’ Systems 1 and 2.
System 2 is conscious, rational, deliberate. It makes decision by weighting options and thinking of consequences. This is the rational, balanced decision making that looks at risks and benefit, the short term and the long term, direct and indirect effects. It is also slow, difficult and indecisive. Your brain’s need to conserve energy minimizes how often you use it. In consequence only 5% of our behaviour comes from System 2 decisions.
The rest of 95% of behaviour comes from System 1. This is unconscious, associative and instantaneous. You make the choice before you are consciously aware you are making a choice. These are split-second decisions and intuitions for which you appear not to think about. Most of the time you don’t even know the real reasons for your decisions if asked about them.
Most human behaviour comes from System 1 decisions. Advertising works because it influences this system.
System 1 decides what you buy
How does System 1 decide which brand to buy? Something makes you want to buy from the respective category. System 1 chooses the first brand that comes to mind for which you have a good opinion. If it’s available, you buy it. If it’s not, then it reconsiders. It is that simple.
All advertising influences System 1. Why? Because of the way in which System 1 works.
You don’t choose the best product, you choose the one that comes first to mind. Thus it’s more important to create mental availability than to convince consumers of the superiority of the product. It is almost the opposite of the naïve common-sense theory that advertising helps people make better decisions.
Remind me that product X exists and I am more likely to think of it when I want to buy from that category. That’s the essence of advertising.
Any ad, no matter how bad, has some effect. If you see the ad, then it invades your mental space. It primes System 1 in its direction. This supports the saying that ‘There is no such thing as bad publicity’.
Of course, the effectiveness of ads varies greatly. Understanding how ads influence System 1 has decisive implications into how to make a great advertising campaign.
How can you create exceptional ad campaigns?
This insight into how advertising influences System 1, not System 2, has implications both in the creative strategy (what message you show and how you portray it) and in the distribution (media strategy and targeting).
Media strategy
There are multiple approaches used for media strategies. The key elements that are influenced when thinking of influencing System 1 are targeting, frequency, channels.
Targeting.
There are many ways to select the media target. Most are based on the assumption of rational conscious choice. However if we think that it’s a matter of System 1, then the target selection changes.
It becomes clear that targeting own customers is inefficient. System 1 has very high inertia. People who bought your brand multiple times are much more likely to buy the brand again. In a recent study we did across many categories in Romania we found a 0.95 correlation between previous purchase and intention to buy in the future. The maximum correlation is 1. The value found is exceptionally high, showing the inertia of purchases.
Thus targeting for System 1 is more along the lines of Byron-Sharp theory: address all potential buyers of the category, no matter how light. This ensures you maximize the growth you can generate.
Reach & frequency.
We have limited processing capacity and pay little attention to most ads and purchases. If we paid more attention, they would become System 2 decisions. Thus all advertising has a limited temporal effect. As a result we should strive to maximize continuity across the year so that the brand is in most consumers minds most of the time. The implication is to go for maximizing reach 1+ across the widest target group for the longest time, rather than push for higher frequencies on more narrow targets.
Channels.
System 1 attention is surprise and novelty-oriented. At its origin, it was meant to detect threats and opportunities from the environment. Stimuli that are unexpected catch more attention because they are more likely to be a threat or an opportunity.
When it comes to modern advertising this means we should use as many channels as possible. Seeing the same ad in the same context multiple times is expected, and thus boring. Seeing it in different formats on different channels attracts more consumer attention. There are many pieces of research supporting this conclusion. Use as many channels as possible whilst maintaining at least a minimum effective investment in each.
Creative
The same logic that indicates multiple channels are more effective also shows that multiple creatives work better than only one. This is provided they are consistent enough that it is intuitively clear they are part of the same ad campaign.
A whole book could be written on how to create ads persuasive to System 1. The key factors are: surprise, emotion, about the consumer, not your products. The last one is key.
About the consumer.
Many ads are about how great the product is. From a logical standpoint, this makes sense. Show the product benefits and people should choose it. But we saw that the decision is not rational System 2, it’s intuitive System 1.
At the moment when most consumers see ads, they are not interested to buy from that category. And thus product advantages are irrelevant to their System 1. They will ignore them.
To influence System 1, the creative must tell a story that is relevant to the consumer. Devilishly this story must also say something relevant about your brand. It’s difficult, but when it works, it brings exceptional results.
Surprise.
We saw System 1 notices the unexpected. A successful ad is surprising to the consumer. However it must not be too unconventional. Research shows that we ignore anything that is too different from our expectations. A great ad must be around 95% familiar, yet have 5% unexpected. It’s a delicate balance which is why great ads are rare. It must conform to the MAYA principle from design: Most Advanced Yet Acceptable.
Emotion.
What are emotions? They are signals to pay attention and act. They are also signals whether something is relevant enough to remember or not. System 1 runs on emotions. Human memory runs on emotions: the hippocampus is an area of the brain critical both in memory development and emotional reactions.
Any great ad needs to instill powerful emotions into viewers. Otherwise it will fail to create a significant impact in System 1. This lack can be overcome with more spending. If you show any ad often enough to someone, it will influence their System 1 decisions. But a creative filled with emotion achieves greater results for a much lower investment.
Summary
All advertising influences consumers through the unconscious System 1 decision making system. Great advertising campaigns have exponentially greater impact however.
They use numerous channels to maximize reach 1+ across the year to all potential buyers. They tell stories about the consumers filled with emotion and surprise.