Persuasive Advertising - J. Scott Armstrong [209]
The findings reported in this book are based on a subset of 1,513 thirty-second spots, tested among a consumer sample of women aged 18 to 65 from 2001 through 2003.
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Appendix D
Prospect theory and persuasion
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People seem to be more affected by the thought of losing something than by the thought of gaining the same amount. Consider your reaction to a 25 percent loss in the stock market versus an equivalent gain. Which would seem larger to you? This common-sense idea has been called “prospect theory” (Tversky and Kahneman 1981).
Few areas related to persuasion have been studied as much as prospect theory. It has led to advice to tell customers how they can cut their losses (“If you do not act now, you could lose $200”), rather than how to make gains (“Save $200 on this sale”). In contrast, many advertising experts say to focus on the positive and tell people how they can make gains. So who is right, the loss-framers or the gain-framers?
Alas, the research on prospect theory has proven to be barren of useful advice with respect to persuasion. Loss-framed messages are no more persuasive than gain-framed messages. The primary evidence was provided in a meta-analysis involving a variety of experiments with 165 effect sizes from 50,780 subjects (O’Keefe and Jensen 2006). An earlier review of 36 studies reached the same conclusion (Levin, Schneider, and Gaeth 1998).
Furthermore, attempts to identify conditions under which loss framing might help have led to little success. A review of prospect theory found 136 papers with experiments using approximately 30,000 subjects, and indicated that it was difficult to determine the conditions under which it is best to emphasize avoiding a loss rather than making a gain (Kühberger 1998). For example, some researchers speculated that prospect theory might apply to health care; however, Wilson, Purdon, and Wallston’s (1988) review of the research on prospect theory did not help them formulate recommendations for health care messages.
Why doesn’t prospect theory help in advertising? One conclusion is that it has been tested in ways that have little relevance to real-world problems (Levy and Levy 2002).
Gal (2006) concluded that the appearance of greater weighting of losses to gains is not a fundamental psychological propensity as claimed by prospect theory proponents. Instead, it is because of an experimental artifact resulting from the status quo (inertia) bias.
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Appendix E
Media allocation methods
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Persuasive Advertising focuses on how to develop ads that persuade. It does not deal with how to deliver those ads to customers. Here are five methods that can be used to decide how much to spend on media as well as how to allocate that spending across various media. I start with the weakest method and work towards the strongest. Ideally, one should use all five methods, but put more weight on the findings from the stronger methods:
Last year’s advertising expenditures for the brand
This method assumes that last year’s advertising was optimal and that the task is to determine how expected changes in the future would affect changes in the ad budget.
1. Ask two or more heterogeneous experts, working independently and anonymously, to examine last year’s advertising-to-sales (A/S) ratio and to provide written lists of the arguments favoring increases in advertising expenditures and those favoring decreases. They are then asked to make subjective estimates of whether to increase or decrease advertising expenditures and by what percentage.
2. The judgmental estimates from the experts are then averaged, presumably using equal weights.
3. Obtain A/S ratios for as many prior years as possible for this product.
The Delphi procedure might be useful with steps 1 and 2 above. Software can be obtained at advertisingprinciples.com
Typical expenditures for the firms in your industry
The typical expenditure method assumes that your competitors are rational and that it is not wise to depart substantially from