Does advertising grow markets?

‘Does advertising grow markets? Another look 25 years on from Simon Broadbent’s original paper’ – Bridget Angear

Amid calls for ‘degrowth’ and reduced consumption to combat climate change, the question of advertising’s role has once again come into sharp focus.

For every person who believes that economic growth is important for our prosperity, there is another who believes it promotes unsustainable consumption. Which side of the divide you are on tends to determine your view of advertising; either as a force for good, stimulating competition, or one that encourages wasteful spending. However, the core question is whether advertising fundamentally grows markets or simply encourages brand switching. This was the topic of my original essay, ‘Does Advertising Grow Markets?’

This essay looks at the most up-to-date IPA Effectiveness data to determine whether our original hypothesis that, in general, advertising does not grow markets still holds true. For the avoidance of any doubt, I am referring to overall market growth, not market share. This conclusion may disappoint some people on both sides of the debate, as it will reveal that advertising is not as powerful as they would like to believe.

Consumption is influenced by several factors, but once consumption of a product or service has reached an equilibrium point, the market is not likely to grow unless there are changes to population or disposable income. From this perspective, it would suggest that advertising’s key role is in fact to encourage switching between brands. Evidence gleaned from over 700 advertising effectiveness cases spanning more than 40 years confirms this view. Whilst good advertising is very effective at increasing market share (i.e., encouraging consumers to switch from one brand to another) it is not good at growing markets (i.e., growing overall consumption).

When Simon Broadbent first looked at this question in 1997, using data from the IPA Effectiveness Awards database (156 cases from 1980-1994), he concluded that, in general, advertising does not grow markets. Only 17% of the cases he reviewed demonstrated market growth.

When Tim Broadbent revisited Simon’s conclusions in 2008 (using 129 IPA database cases between 1996-2006) he reached the same conclusion. This time only 13% of cases demonstrated market growth.

In 2015, I reviewed these findings with updated numbers from the IPA database (190 cases from 2008-2014). To be honest, I was hoping to find startling evidence of change. It is far easier to capture people’s attention with new discoveries than it is when presenting more of the same. But the data never lies. For those six years of data, only 8% of the cases showed evidence of market growth. It would seem to be a consistent finding that, whilst advertising is very good at growing market share, it is not so good at growing markets.

Which brings us to the present day. With 199 new cases added to the database from 2016-2022, now seemed a good time to investigate whether these conclusions still hold. After all, with so much ongoing economic and political turbulence, perhaps everything we knew to be true is no longer. Three prime ministers in less than a year, soaring energy bills and food prices, and inflation topping 13%: perhaps this I might find the scoop I had been looking for 7 years ago?

Most advertising (still) does not grow markets

Well, dear reader, you might find it reassuring to know that in a rapidly changing, unpredictable world, some things do indeed remain the same. When asked to identify their metrics of success, only 24 of the 199 cases reported market growth – just 12% of the total. Put another way, the vast majority (88%) evidenced no market growth. These 24 cases were then double-checked to ensure that they did evidence market growth.

With the total sample of cases reviewed now close to 700 and spanning 42 years, I feel more confident than ever in asserting that, in general, advertising does not grow markets.

Source : IPA database

There are, of course, exceptions and learning to be gained from studying these outliers. In his original thesis, Broadbent listed six conditions under which advertising could grow markets:

1. A small market with very similar products
2. A new market with many products
3. A market with a high proportion of trialists
4. A market with a single dominant brand
5. A market that is already growing for other reasons such as social change
6. When a group of manufacturers combine to produce a generic campaign

In the 2015 review, two of these conditions seemed more prevalent than the others – ‘a small market with very similar products’ and ‘a market with a single dominant brand’. Analysis of the 24 ‘exceptional’ cases this latest time around suggests that the latter of these (condition four) tends to be the most prevalent. McDonalds, Tesco, Gordon’s Gin and Cadburys are all examples of dominant brands in their markets. One of the interesting conclusions in the 2015 analysis was the importance of innovation for those brands that had grown markets, it being a common characteristic in most of the ‘exceptional’ cases. This time around, innovation does not appear to have played such an important role, being cited in only a few cases, True Match by L’Oreal being one such rare case.

The reasons

You may well be wondering at this point why it is the case that most advertising – even the most powerful and successful, as these IPA cases are – does not seem to grow markets. The conclusion reached in 2015 was that “across our case studies, and in markets more generally, some kind of substitution probably occurred: that when a consumer bought more of one thing, they bought less of something similar and therefore the market overall did not grow”. If a new brand of jam appears on the supermarket shelves and consumers are mindful to try it, they are much more likely to substitute it for their regular brand, rather than buy more jam. Substitution remains the most plausible explanation. And it leads on to the most important consideration of all – how should a market be defined? Perhaps a pertinent question we can ask ourselves is what market we are in. Indeed, the response to this question will determine the way advertising is planned, deployed and evaluated.

Defining a market is not as straightforward as you might think. Broadbent used the following example to highlight the difficulty and subtlety of market definition. Suppose we want to know whether successful advertising for a particular car – in this example, a Mitsubishi Shogun – had grown the car market. There are many answers to the question ‘which car market?’ and the market definition we choose is likely to affect whether market growth can be claimed.

The further up the categories you go, the lower the likelihood of detecting market growth. For example, in a mature economy with no sizeable population growth, the overall market for transportation is unlikely to grow. It is much more likely for road vehicles to take share from buses or trains rather than to grow the overall market size. It probably takes big societal shifts rather than advertising to grow super-categories. If we assume there exists a super-category of sanitation, it is likely that COVID-19 was successful in growing this super-category in a way that no advertising could ever have hoped to.

In reality, consumers are likely to define markets in much broader terms than marketeers (i.e., towards the top of the ladder). The choice of whether to take a holiday may compete with the desire for a new kitchen or a packet of crisps with a chocolate bar. In the former example, consumers might define the category as ‘big ticket luxury products and services’ and the latter as ‘treats to enjoy between meals’. So, if we work with consumer category definitions, rather than the typical narrower marketing ones, we are likely to see even smaller market growth effects. Consumers have finite resources and a purchasing choice is usually at the expense of another. Advertising is a powerful force when used to encourage consumers to buy one brand over another and grow market share, as over 500 cases spanning four decades prove.

Using Broadbent’s terminology, many of the most recent IPA ‘market growth’ cases would appear to have grown ‘markets’ at the sub-sector level. Again, this is consistent with previous findings. Sensodyne grew the market for sensitive toothpaste, but at the expense of regular toothpaste. Aldi and Lidl grew the discount retailer sector but mostly at the expense of the traditional retailers. Audi grew the luxury car sector, probably taking away sales from more standard marques.

We as an industry have so few evidence-based papers on how advertising works that I would urge everyone to read all of them, especially since their findings often fly in the face of received wisdom. In 2016, a poll conducted amongst the members of the Account Planning Group (a community of planners and strategists in the UK and beyond) asked the members whether they agreed or disagreed with the statement, ‘Most successful advertising grows markets’. Two-thirds agreed that it did. I see no reason to believe that these numbers would have changed in the intervening years. Why these myths still prevail might be worth further investigation; is it possible that overall market growth has been misinterpreted as growth of market share?

The IPA database continues to be a treasure house of learning and certainly has much more to reveal to us if we continue to ask questions of it.

If this article stimulates any questions you’d like answered, please send them to Credos@adassoc.org.uk

Bridget Angear has spent most of her working life in advertising. She ran the strategy function at AMV BBDO for over fifteen years with Craig Mawdsley where they were named London’s top strategists six times in eight years.

Just over two years ago she started her own brand strategy agency with Craig, absolutely loving the varied nature of the challenges they have been given.