Why well-known brands invest millions in repetitive advertising

After a century of research on advertising, scholars still don’t have an empirically solid grasp of exactly how or why it works. One leading theory suggests that advertisements provide consumers with new information. If that’s the case, why do the most prominent brands need to advertise?  

Another influential theory suggests that advertisements create associations in consumers’ minds, hitching a particular brand to a category. 

Sahni and Stanford doctoral candidate Yifan Yang attempt to resolve these issues in a new working paper that shows the dramatic benefit of auto insurance advertising. The paper is published on SSRN (Social Science Research Network). 

They found that ads not only boost visits to an advertiser’s website, but also interfere with consumers’ recall of alternative brands, dislodging the competition from their minds. The findings help explain why spending millions on repetitive campaigns, even by well-known brands, is essential to remaining in people’s memories. 

The persistence of memory 

Sahni and Yang’s experiment ran on a single day on one of the world’s top five most visited websites. Selecting more than 325,000 visitors who had installed a related browser plug-in, they showed 75% of them a banner ad for an auto insurance company. The other 25% saw a public service announcement unrelated to insurance. 

The researchers observed a surge in visits to the insurer’s website on the day of the experiment. 

They continued to track users’ online behaviour for three more months, and although the effects of the advertisement decreased with time, the total effect was equal in magnitude to the effect on the day the ad ran. 

“This very strong effect dissipates in a matter of days,” Sahni says. “However, if we continue to look into the future, then the effect comes back, and the total cumulative future effect of advertising is the same as what we see on the day of the advertisement.” 

Within their sample, the researchers were also able to see what effect advertising had on the insurer’s competitors. Sahni and Yang found that advertising makes competitors less salient in consumers’ minds – but its effect does not show immediately.  

On the day the car insurance ad was shown, there was no change in the number of visitors to competitors’ websites. This suggests that the advertiser’s 300% boost in traffic was not at the expense of its competition. But the following day, its competitors experienced an 11% decrease in visits – a figure similar to the gain experienced by the advertiser. 

“On days immediately after the advertisement is when competitors stand to lose the most,” Sahni notes.  

Seeing the ad made the advertiser more prominent that day, and auto insurance more salient. Consumers who were shown the ad during the experiment and thought about auto insurance in the days that followed appeared to have the advertiser at the top of their minds, so the competitor got fewer visits from those who saw the ad, versus those who did not. 

“Our paper stands out in predicting effects, and it gives us a path for thinking in a more structured and rigorous manner about consumer perceptions … about what is top-of-mind when they’re making decisions,” states Sahni. 

You can find out more about the study here.