The parsnip hype (‘pastinaak’ in Dutch) recently put online advertising in the spotlight again. A Facebook ad, aimed at female fans of the cooking show Dagelijkse Kost living in Eeklo, encouraged them to buy parsnips. The sale of this vegetable rose significantly in two local supermarkets.
At the same time De Correspondent published a contradictory viewpoint, based on the eBay case. This company stopped all Google advertisements in 2013, but after eight weeks sales figures remained stable. Conclusion: for years eBay had been spending millions of dollars on useless online advertising.
Does online advertising work or not? The truth lies in the grey area.
To reinforce this conclusion, we spoke with Koen Pauwels, Distinguished Professor of Marketing at the Northeastern University and member of our company's advisory board. He followed the discussions closely and carried out a study on online advertising. Based on his knowledge and our experience, we analyzed the viewpoints in the article in De Correspondent.
Two viewpoints we support:
- “Advertising is not as powerful as some people think”
Advertisements seldom have 100% control or 0% effect on their public. The effect is somewhere in between and varies according to the product, brand and advertising goal. Do not overestimate the power of online advertisements, but take a critical look at whether they were effective. What were the sales of parsnips like in other local shops? What other factors played a role here? For example, retailers that gave parsnips a more prominent position on their shelves, such as Colruyt. This could have influenced purchasing behavior too, irrespective of online advertising.
Another example is the Cambridge Analytica scandal, a case that was blown out of proportion by the media, but for which there is still no proof that the advertisements were so effective and manipulating.
- “Online advertising can be ineffective”
Both offline and online advertising can be ineffective. So optimize by tests and measurements and use the right methodology. Control groups are vital here. At one of our clients, a Belgian telecom company, half of the group is exposed to a campaign, with the other half as the control group. We only continue to work on campaigns that achieve significantly better results with the test group than with the control group.
Three viewpoints that we contradict:
- “It’s useful for the company Unilever to know whether its campaigns are cost effective, but not for the marketing department”
The authors suggest that marketeers interpret data incorrectly out of self-interest. Don’t question their intention per se, but shift the focus to reliable measuring systems that give reliable results.
We therefore implemented a marketing automation tool at a B2B company specialized in industrial gasses to generate more sales. After a month-long online campaign the results were impressive: the number of prospects tripled and successful sales rose by approximately 20% (read the case study). These figures were achieved by a result-driven marketing team that supports the corporate objectives.
- "Marketeers use criteria that are fundamentally misleading because no distinction is made between the selection effect and the advertisement effect"
According to the selection effect, it doesn’t matter whether consumers saw an advertisement or not, as they would have purchased the product anyway. The advertisement effect occurs when the consumer purchases a product as the result of an advertisement. The advertisement effect is often overestimated, as the selection effect does actually play a role in generating sales.
But the writers define the advertisement effect further based on direct actions, such as clicks and direct sales or downloads. These are not the only factors that determine the effectiveness of an online campaign. Think of objectives such as informing consumers – or convincing a distribution channel, such as Colruyt in the parsnip case, to pay more attention to the advertised product. Each objective has a different advertising approach and results.
- “Paid advertisements aren’t effective”
Perhaps for eBay, but how about for other companies? Take a look at the company context: is your organization an established or a relatively unknown player? Professor Pauwels demonstrated that paid search advertisements were the most effective marketing instrument for a company selling office furniture, precisely because this seller was relatively unknown. Moreover, customers who need a product urgently often search online.
Conclusion
There is no proof that online advertising has an extremely large or extremely small effect on consumer behaviour. Don’t shun investment in online marketing altogether, but increase your advertising budgets carefully. The impact of online advertisements is to be found in understanding the success factors: a reliable measuring system and insight into the advertisement context.
