I have worked in marketing / advertising and market research for nearly 40 years. I have written 2 books that have been published in 9 languages, I have spoken at many international conferences in 4 continents about measuring advertising effects – the most recent will be in February 2012 for the Australian Market and Social Research Association’s Annual Summer School.
My last session at this conference will be about estimating the effects of advertising on market share and the implications for budgeting.
Most people claim that they do not look at advertising and that advertising has no effect on them. Some of these self same people will claim that advertising has a bad effect on society. They will blame advertising for alcohol abuse, obesity and cigarette smoking.
Whilst all the anti-smoking legislators’ first step is to ban advertising one does not read any empirical evidence that implicates advertising as a factor that causes (or increases) cigarette consumption.
The fact is that there exists very little evidence that in any market the total consumption is influenced by the total advertising spend in that market. The only exception being when a market is very new.
When, in the early 1970’s, I worked at Stellenbosch Farmers Wineries (South Africa’ largest winery at the time) my job was to statistically estimate the effect of advertising on the sales of brands.
At the time I was fortunate to find a book by R. Smalensee of the University of California titled The Economics of Advertising published in 1972. His objective in the book was to study ‘the impact of advertising on consumer behaviour and market performance. He uses the cigarette market because of the readily available data at the time.
In his preface he notes:
“After surveying the work of others and extending it in various directions, the study reaches negative conclusions: there is barely a molehill of hard evidence behind the mountain of prose on the subject of advertising.”
His conclusion at the end of his study – after 215 pages of heavy statistics- is:
“”…advertising seems unlikely to be a very powerful force in the cigarette industry. We cannot formally prove (and do not really believe) the null hypothesis that advertising affects nothing. The adage ‘where there’s smoke there’s fire’ cannot be turned into ‘where a careful search reveals no smoke there’s no fire’. But it does seem likely, given our failure to detect any smoke at all, that there is no big fire.”
This work by Smalensee was published in 1972, long before the MSA or any advertising bans ewere invoked. If the legislators took any notice of this work then they would certainly not have penalised their media industry and benefitted the cigarette industry. However, it is most likely that the cigarette industry would have been very aware of this work (econometrics was very much the rage in those days) and would have welcomed any bans on cigarette advertising.
In my introduction I mention that if cigarette producers stop competitive advertising this would be seen as conspiracy by them. Which is why they need advertising to be banned, rather than themselves stopping voluntarily. In Smalensee’s history review he notes that this has happened regarding price competition:
“In 1946, the three leading firms (American, Reynolds, and Ligget & Myers) were found guilty of conspiracy to retrain trade and to monopolize the cigarette market. Fines were imposed for the offence of conspiracy via ‘conscious paralellelism’,..”