Gain Theory reveals advertising delivers nearly 3x return on investment

Global marketing effectiveness and foresight consultancy, Gain Theory, today released a new report ‘Measure, Thrive, Optimize: How to Demonstrate Advertising’s Value and Boost Growth’ revealing that advertising delivers 2.9x return on investment, with companies investing 3% of revenue on advertising generating 8.7% contribution to total sales.

The comprehensive analysis of 75 company-market combinations demonstrates the significant impact advertising has on business growth. It provides marketers with concrete evidence and practical guidance to demonstrate advertising effectiveness and secure budget confidence.

“The data speaks for itself – advertising is not a cost centre, it’s a growth engine. Companies that invest 3% of their revenue in advertising see an 8.7% contribution to total sales, delivering nearly three times the return. What’s even more compelling is that companies actively measuring and optimising their advertising contribution are seeing year-on-year growth. This is more important than ever in a market of volatility where marketing teams are under immense pressure to deliver with budgets under scrutiny,” said Matthew Chappell, Global Client Success Officer at Gain Theory.

The research, based on Gain Theory’s extensive global client database spanning a wide range of sectors, reveals two critical pathways to advertising growth: spending more wisely and spending more. The analysis shows that companies achieving the strongest results combine both approaches, with optimisation improvements (0.4%) slightly outpacing increased investment (0.3%) in driving contribution growth.

Key findings from the report include:

1. Strong ROI evidence: Advertising contributes 8.7% to business revenue on average, against a 3% investment rate – a 2.9x multiplier that provides compelling business case material.
2. Sector-specific insights: CPG companies face unique challenges with lower contribution rates compared to non-CPG companies, requiring more sophisticated measurement approaches.
3. Growth through measurement: Companies that measure and optimise advertising contribution experience 0.7 percentage point increase year-over-year, equivalent $70M additional revenue for a $10BN company.
4. Practical measurement roadmap: Two primary measurement techniques are recommended – Marketing Mix Modelling (MMM) for larger companies with complex media strategies, and A/B testing for smaller companies with simpler approaches.

The research concludes with three essential actions for marketers:

1. Implement robust measurement programs: MMM is often the best approach to effectively demonstrate advertising’s contribution, but may not be suitable for every brand. For those with smaller budgets or unable to access necessary data, A/B testing may be a more appropriate method.
2. Analyse and optimise spend allocation: Focus on spending more wisely through data-driven channel and strategy optimisation rather than simply increasing budgets.
3. Build compelling business cases: Use measurement insights to demonstrate clear ROI and advocate for increased investment with C-suite stakeholders.

‘Measure, Thrive, Optimize: How to Demonstrate Advertising’s Value and Boost Growth’ can be accessed here: www.gaintheory.com/measure-optimize-thrive-how-to-demonstrate-advertisings-value-and-boost-growth/

Source: Gain Theory

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