Updated Sept 2024
What is the Adstock Effect in Marketing?
A successful ad campaign is influenced by many factors, but one often overlooked is the Adstock Effect. This effect is essential for maximizing the long-term impact of advertising, as it shows that the influence of an ad doesn't disappear once it stops running; instead, it continues to shape consumer behaviour over time. Unlike an immediate impact, adstock explains how exposure to an ad builds progressively with repeated viewings, leaving a cumulative effect in the minds of the audience. This is especially critical for campaigns that require sustained exposure, like those focused on increasing brand awareness or encouraging purchases.
The Role of the Adstock Effect in Advertising Decisions
Optimizing the purchase path is one of the most challenging tasks for an advertiser. Depending on the industry, your customers could spend months researching and comparing products before making a buying decision, and advertisers need to ensure that they are visible and clearly remembered during this process. This prolonged or lagged effect of advertising on consumer purchase behaviour, known as the Adstock effect, is an essential component of optimizing the marketing mix as it informs the advertiser how long they need to be in the market and how to find the right balance between long and short-term focuses.
The diagram below illustrates a client’s media plan for a 52-week period. The year kicks off with a six-week campaign (Weeks 0-6), during which the client allocated a weekly budget of $100-$150 (represented by the grey bars). However, the adstock effect (represented by the blue curve) significantly alters the actual results, highlighting how ad impact lingers and accumulates over time, far beyond the campaign's initial phase.
In Week 0, a small group of customers with shorter purchase paths respond, but the Return On Advertising Spend (ROAS) doesn’t show significant improvement right away. The real boost comes in Weeks 4-6, where conversions surge thanks to both immediate responders (those who saw the ad recently) and slower decision-makers who were exposed to the campaign earlier. The beauty of the adstock effect is that even after the campaign ends (Weeks 7-10), sales continue to come in, driven by the lingering impact of the earlier ads.
Measuring Adstock for Effective Marketing Mix Modelling
For each media channel, adstock is typically measured as a decay rate (a percentage between 0% and 100%). This rate indicates how much impact from the previous week carries over. Here's a breakdown:
- 0% Adstock: No retention of information. Customers either make a purchase immediately after seeing the ad or they won’t purchase at all.
- 100% Adstock: Perfect retention of information. A single exposure ensures the customer remembers the message indefinitely. (Of course, neither extreme is realistic.)
Now, let’s explore how different levels of adstock influence purchase cycles across three media channels:
The Adstock Effect over time on Channel A, B and C
- Channel A (High Adstock - 70%): Retains 70% of the previous week’s impact, meaning even without additional spending, 70% of the ad’s influence carries over. This is like having $70 worth of ad spend this week without running new ads. Channel A excels at driving long-term purchases due to its strong retention of information.
- Channel B (Mid-Level Adstock - 50%): Retains half of the ad’s impact from the previous week. Information decays at a moderate rate, balancing between immediate responses and long-term effects.
- Channel C (Low Adstock - 10%): Quickly loses information, retaining only 10% of the previous week’s impact. By week 3, almost all influence from prior ads is gone, making this channel best suited for short-term campaigns that require frequent exposure.
Adstock Champions: Which channels perform the best?
- TV: With a high average adstock of 64%, TV is the top performer for delivering long-lasting effects in marketing mix models.
- Out-of-Home (OOH) & Radio: These channels are also strong, with OOH achieving a 53% adstock, which helps it deliver memorable messages that resonate for weeks.
- Online Video & Social Media: Typically have lower adstock values, often in the teens, indicating shorter-lasting impacts.
The Takeaway
Understanding the adstock effect is crucial for optimizing your media strategy. By incorporating adstock insights into marketing mix modeling platforms, you can craft a media mix that balances immediate sales impacts with long-term brand building. This strategic approach allows you to combine channels with different adstock strengths, ensuring that your brand maintains visibility and influence across the entire purchase journey.
For example, you might use high adstock channels like TV for sustained brand presence and combine them with other channels like Out-of-Home (OOH) or Radio for memorable, long-lasting impressions. At the same time, incorporating digital channels like Online Video and Social Media can drive immediate engagement and complement your overall strategy.
To leverage these insights and develop a tailored media mix strategy, book a demo with Arima. Our team can show you how to apply adstock principles to achieve both short-term sales goals and long-term brand success.