Do Marketing Investments in Social Media and Traditional Media Still Help Brand Sales?
By V. Kumar, JeeWon Brianna Choi and Mallik Greene
Companies invest heavily in marketing to communicate the value of their products and to increase sales. This is especially true for consumer product goods (CPG), for which the pressure from competition and chance of product failure are high. CPG companies spend typically 2- to 3 percent of sales for marketing expenses. However, companies can experience poorer results from their marketing efforts because they do not provide the same return as in the past.
For example, assume $100 in television advertising spending generated $150 in sales a decade ago and generates only $110 in sales now. Does this mean the effectiveness of TV advertising on sales has decreased? If so, why?
Possible reasons could be due to the decrease in watching TV, an increase in time spent on social media or a growing preference to watch shows through social media. In the marketplace, evidence suggests TV has had a declining effect on brand sales, while social media has an increasing effect. Over the past few years, heavy consumer activity on social media has encouraged CPG companies to adopt social media marketing.
However, various factors such as changing consumer preferences in media consumption and increase in competition can change the effectiveness of social media on brand sales over time.
And traditional marketing isn’t dead, either. Social media and traditional marketing (for example, television advertising, in-store promotions and product sampling) can have media synergy, which enhances the effect of one media through the effect of another media.
How can companies determine the changing effectiveness of different types of marketing and use this information to allocate the right media resources?
Our research team at the Center for Excellence in Brand and Customer Management used a time-varying effect model (TVEM) to look at three years of nationwide sales of a domestic ice-cream brand. We investigated the changing effectiveness of social media marketing over time, along with the time-varying synergy between social media and traditional marketing on brand sales.
We found the effects of social media and traditional media marketing on brand sales varied over the span of three years of our data. We also found media synergy between social media and distribution of product samples, and between social media and in-store promotions.
These media synergies suggest social media users are more responsive to more timely traditional marketing efforts, such as free samples and promotions, rather than mass marketing like television advertising.
Companies can use the information on the current return on marketing investments to make better dynamic resource allocation decisions. We found that the firm we studied could save $400,000 in marketing expenses per year yet still maximize sales.
The research article is published in the Journal of Academy of Marketing Science earlier this year, under the citation: Kumar, V., Choi, J., & Greene, M. (2017). “Synergistic effects of social media and traditional marketing on brand sales: Capturing the time-varying effects.”
V. Kumar is a Regents Professor of Marketing and executive director of the Center for Excellence in Brand and Customer Management (CEBCM). JeeWon Brianna Choi is a Ph.D. candidate in marketing in the J. Mack Robinson College of Business of Georgia State University. Mallik Greene is a former student in Executive Doctorate in Business program at the J. Mack Robinson College of Business.