Ad Spend ROI

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Nov 23, 2015 by Mark Maier

When an advertiser spend a dollar in the market, what is the end effect?  The latest report in MediaPost states that impact is a lot higher than I would have anticipated...

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A new report from global economic research firm IHS Economics & Country Risk, backed by the Association of National Advertisers and The Advertising Coalition concludes that the nearly $300 billion in advertising expenditure in the U.S. last year drove about 16% of the nation’s sales activity, or some $5.8 trillion.

The ad spend directly stimulated about $2.4 trillion in sales, or 6.5% of the 36.7 trillion in total U.S. sales activity last year. The report surmises that 2014 ad spending drove an additional $1.4 trillion in indirect sales, the result of a “’multiplier effect’ throughout the economy as dollars flow through supply chains.”

According to the report: “The economic stimulation does not end there; companies and their suppliers hire and pay employees, who, in turn, spend some of their income in the economy on consumer goods and services. These induced consumer effects amounted to $1.7 trillion in 2014.”

Every dollar of ad spending supported, on average, about $19 of economic output (sales), per the report, while the total impact of advertising represented 19% of US GDP.

IHS forecasts ad spending rates will increase an average of 3.3% from 2014 through 2019 with total ad spend rising to nearly $350 billion.

The ANA hopes the report will help marketers persuade lawmakers that current legislative proposals to curb advertising as a business expense are ill-advised, given the positive impact the report says advertising has on the economy and the potential detrimental result if advertisers cut back because of changes in tax law.

In addition to the overall positive affect nationally that advertising creates, the report provides ad expenditure impact analyses by state and by industry.

“Advertising plays a significant role in stimulating US economic activity and supporting jobs in all sectors of the economy,” the report concludes. “Furthermore, advertising activity will continue to make a substantial contribution to the nation's economic activity through the forecast horizon, which extends to 2019.”

The full report, an executive summary and other related materials can be found here.


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