Billboards, commercials and other ads are a major feature of our lives. But how does advertising work?
Advertising inserts itself into our world before we become conscious of it: billboards on family drives, commercials during Saturday morning cartoons (or Youtube videos!), catalogues and magazines lying around the house.
As marketers, advertising becomes our trade. And as digital marketers, we typically perceive and evaluate ads by the results they produce: the sales that result from the dollars we invest. But in focusing on outcomes, we often fail to consider how we achieve those outcomes.
So how does advertising actually work? Do our Facebook ads and Youtube interstitials hijack the human consciousness using some dark psychological arts? Or is there something else going on?
Answering this question is the key to building effective advertising strategies. Advertising essentially works in one of three ways:
#1 Advertising Works By Creating Awareness, AKA Mental Availability
If you’re a frequent traveler on the roads of northern New Jersey, you’ve probably seen the billboard above, or one like it. This is a classic example of creating mental availability through advertising. The copy plays into a regional stereotype (NSFW). You have no idea what they’re selling, so you’re compelled to visit the site and find out more. It’s memorable and repetitive.
Eat Clean Bro actually sells freshly prepared clean and healthy meals. You may not be in the market for the meal service the first time you see the billboard…or the 20th time. But if you do find yourself thinking of trying a prepared meal service, Eat Clean Bro will be top of mind when you do.
This is the essence of traditional brand marketing. You create a memorable, repetitive signal that informs consumers of who you are and what you do. If that resonates with them, your brand will be top of mind when they’re ready to purchase.
The challenge: you have know way of knowing when those consumers will be ready to purchase. So it’s hard to evaluate campaigns like this using traditional “direct response” metrics like return on ad spend. It’s also difficult to forecast demand if this is the only type of advertising you’re running.
#2 Advertising Works By Capturing Existing Demand For Your Brand
Branded search advertising is the best illustration of this principle. It’s also the channel where this principle is most frequently misunderstood or abused.
Branded search is search engine advertising that a user sees when he or she types in a search term containing your brand’s name. So the viewer needs to remember your brand name and want it bad enough to type into Google in order to see the ad. This is a pretty good indication that the ad is capturing existing consumer familiarity and intent.
People who see these ads are quite close to the bottom of the purchase funnel. So of course, the return on ad spend for these campaigns is going to be higher than almost any other advertising you run.
But the revenue you can earn from this type of campaign has a very limited upside. You can’t “push” demand into this channel by spending more. Your impression volume is limited by the number of people searching you brand.
It’s also questionable how much (if any) of the demand you generate this way is incremental, as this experiment from eBay illustrates. But that doesn’t stop unscrupulous or misinformed agencies from constantly pushing for increased spend to inflate account-wide ROAS numbers.
The big takeaway: you can’t grow a business if you only run ads that serve this function.
#3 Advertising Works By Intercepting Existing Demand And Directing It To You
Stop me if this has happened to you before: you’re browsing around online for a smocked boho dress, tie-dyed sweatsuit, or pair of platform sneakers. You tentatively add a few options to cart, but don’t buy anything. The next time you open the Instagram app, every ad you see is for a different iteration of “the thing” from a different brand you’ve never heard of before.
The Facebook algorithm, which collects data from millions of websites that host a Facebook pixel, has picked up on signals that you’re ready to buy “the thing”. And brands that sell similar things are paying to attempt to intercept that demand and win you over.
This is how most programmatic advertising–including Facebook advertising–works. You serve ads to a group of people who have been flagged as having a high intent to shop…for something. But you’re not taking consumers from zero to one. Your ads are not generating net new consumer demand at scale. And this puts an upper limit on the total demand you can capture with this strategy.
Finding The Right Balance
If you want a brand to grow consistently, you need a mix of advertising strategies and tactics that addresses all three of the functions outlined above.
When a brand is first starting out, it will need to lean heavily on intercepting existing demand. This is generally the most predictable way to drive sales and customer acquisition at a reasonable cost.
But there is a limit to the growth a brand can achieve using this strategy alone. Spend enough and you will eventually reach everyone who both finds your product relevant and is in the mood to shop.
At this point, a brand will need to focus on creating awareness. Creating awareness is best done in non-digital channels, because a big part of decision making is what a prospect’s peers think about the brand. Personalized digital advertising doesn’t deliver that shared experience.
As marketers, we may encounter the dreaded situation where we wake up one morning and the status quo simply ceases to work. The media mix that we’ve run effectively for years no longer delivers its prior results.
In this situation, your first instinct may be to audit each channel and campaign for inadvertent changes. Maybe a link is broken! Maybe a key landing page is throwing a 404 error! But more often than not there is no tactical issue to be found. The real issue may be that your status quo strategy has run out of sufficient demand to fuel it. And that is why understanding how advertising works is so important.