Why can't even well-known brands stop advertising?
We often encounter the same question from clients: if a brand is already well-known, why should it continue to spend money on advertising?
Why do we need advertising at all?
At first glance, this seems really strange. For example, insurance companies in the US invest huge budgets in advertising every year — leading brands spend more than $1.5 billion annually, even though their names have long been known to everyone. When Geico launches another commercial featuring its famous gecko, and Progressive releases a new ad with the character Flo, a logical question arises: aren't they wasting their money? Actually, no. And the reason for this is much deeper than simply “supporting brand recognition.”
The main task of advertising is to fight for a place in the user's mind
After more than a century of advertising research, marketers still do not have a completely accurate model of how advertising works. There are several popular theories.
1. One of them says that advertising simply provides new information to the consumer. But then a logical question arises: if the brand is already known to everyone, what new information does it convey?
2. Another theory suggests that advertising forms associations in people's minds — linking the brand to a specific category.
But there is a problem here too. If a person thinks about car insurance and remembers Geico, it may also remind them of other companies — for example, Progressive. In other words, the theory does not provide a precise answer as to how advertising influences choice.
What advertising actually does
A recent study conducted by researchers at Stanford Graduate School of Business revealed an interesting mechanism of how advertising works. It turns out that advertising does two things at once:
1. It increases traffic to the advertiser's website.
2. It reduces the likelihood that users will remember competitors.
It is the second effect that explains why big brands continue to advertise even when everyone knows them. Advertising literally pushes competitors out of users' memories.
Эксперимент с реальными пользователями
Researchers conducted a large-scale experiment on one of the world's most popular websites. More than 325,000 users participated in the study. 75% of them saw an insurance company banner ad.
The remaining 25% saw a neutral social ad unrelated to insurance. The results were very revealing. On the day the ad was displayed, the probability of visiting the insurance company's website increased from 0.2% to 0.8%. This is a 300% increase. But the most interesting part came later. The researchers continued to observe user behavior for another three months. At first, the effect of the ad quickly diminished. But then it reappeared — and the total impact of the ad in the future turned out to be about as strong as on the day it was shown.
How advertising affects competitors
An even more interesting effect was revealed when analyzing competitors. On the day the ad was shown, competitors' traffic remained unchanged. This means that the advertiser's traffic growth did not occur directly at the expense of competitors. But the next day, something else happened. Visits to competitors' websites decreased by approximately 11%. The reason is simple: advertising makes a brand more visible and strengthens its presence in users' memories. When a person later thinks about the category again (for example, car insurance), the first brand that comes to mind is the one they saw advertised.
Why advertising becomes even more important in competitive markets
The study revealed another unexpected effect. In regions where competitors actively advertised on television before the experiment, banner advertising proved to be even more effective. This is because brands are constantly competing for the user's attention. When competitors launch advertising, they displace your brand from the audience's memory. When you launch your advertising, you displace them. The result is a constant advertising race. This is why big brands cannot afford to stop advertising.
Top-of-mind
Competitive memory
Displacement effect
Advertising race
Why this is important for business
At WAMP, we often explain one simple thing to our clients: advertising is not just a tool for attracting new customers. It is also a tool for protecting your position in the market. If a brand stops advertising, its place in the consumer's mind is very quickly taken by competitors. This is especially noticeable in highly competitive niches such as insurance, finance, e-commerce, travel, SaaS, and many others.
How this changes marketing
When researchers took into account:
- the power of advertising at the moment of display
- its impact on user memory
- the interaction of competitors' advertising
they were able to build a new model for predicting advertising effectiveness.
And it showed more accurate results than the standard models currently used in the industry. This is an important step toward a more accurate understanding of how advertising affects user behavior.
Main conclusion
Advertising works not only through clicks or direct sales. It influences something much more important—which brand first comes to mind when a person makes a decision. And as long as there is competition, brands will continue to invest in advertising.
Because there is always one thing at stake in the market—a place in the consumer's memory!
