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ABSTRACT
The objective of this study is to examine the impacts of alternative measures of advertising exposure on the evaluation of advertising effectiveness. This study used quarterly data of post-buy actual GRPs and corresponding advertising expenditures for the New York City fluid milk market. First, the correlation was tested between GRP and expenditure series. Then, advertising effectiveness was evaluated using these two series. Correlation tests suggested no correlation between GRP and expenditure variables was highly unlikely. The econometric analysis, however, found that the two alternatives produced quite different advertising elasticities and rates of return. The results indicate that the choice of advertising exposure measure may provide researchers with different evaluation results. [Econ-Lit citations: Q130, M300, M370] (C) 1999 John Wiley & Sons, Inc.
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1. INTRODUCTION
In evaluating generic advertising programs, researchers have typically used advertising expenditures as a measure of advertising exposure. This approach mostly assumes there is a constant relationship between each dollar spent on advertising and its impact on sales. Another measure of advertising exposure is gross rating point (GRP), which has been frequently used in the marketing literature. GRP is a product of the reach of the advertisement and the average of its distribution of exposures delivered to a target audience. GRP is a direct measure of physical advertising exposure, while expenditure is an indirect way of measuring consumer's exposure to advertising programs. Using expenditure and GRP, this study examines the impacts of alternative measures of advertising exposure on the evaluation of advertising effectiveness.
The assumption of a constant impact on sales per dollar expended on advertising can be divided into two assumptions: a) the cost per exposure is constant, and b) the relationship between an exposure unit and its impact on sales is constant. If there is a constant cost per exposure (e.g., GRP), given constant advertising effectiveness per exposure, both expenditure and GRP measures should be equivalent and produce the same evaluation results. However, casual observations suggest the assumption of constant cost per GRP may not hold in any practical applications. First, the per unit cost of GRPs, in general, decreases as GRPs increase due to volume discounting. It is a well-known fact in any negotiated business, such as media buying,...