Working Paper: NBER ID: w27684
Authors: Bradley Shapiro; Guenther J. Hitsch; Anna Tuchman
Abstract: We provide generalizable and robust results on the causal sales effect of TV advertising for a large number of products in many categories. Such generalizable results provide a prior distribution that can improve the advertising decisions made by firms and the analysis and recommendations of policy makers. To provide generalizable results, we base our analysis on a large number of products and clearly lay out the research protocol used to select the products. We characterize the distribution of all estimates, irrespective of sign, size, or statistical significance. To ensure generalizability, we document the robustness of the estimates. First, we examine the sensitivity of the results to the assumptions made when constructing the data used in estimation. Second, we document whether the estimated effects are sensitive to the identification strategies that we use to claim causality based on observational data. Our results reveal substantially smaller advertising elasticities compared to the results documented in the extant literature, as well as a sizable percentage of statistically insignificant or negative estimates. Finally, we conduct an analysis of return on investment (ROI). While our results show that many brands perform better with their observed advertising than they would without advertising, we document considerable over-investment in advertising at the margin.
Keywords: TV Advertising; Sales Effect; Causal Inference; Advertising Elasticities; Return on Investment
JEL Codes: B41; C18; C52; C55; C81; L00; L15; L81; M31; M37
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| television advertising (M38) | sales (M31) |
| advertising return on investment (ROI) (M37) | sales (M31) |
| observed advertising (M37) | sales (M31) |