Advertising equity – What is it and why is it important?
Sara Rosengren is not only a prize-winning researcher and associate professor at the Stockholm School of Economics. With a diverse professional career — analyst and columnist for industry newspapers, frequent lecturer and Board member of The European Advertising Academy — she has come to be Sweden’s most well-known talent in the research field of advertising and marketing. We posed five questions to her about the significance of advertising in today’s Swedish businesses.
Tell us about your main research area.
My research focuses on how people react to different types of marketing activities. This can be about anything from creative advertising campaigns to changes in price or to designing a shop window. What interests me is how marketing can combine business value with creating positive experiences for the people you want to reach.
You talk a lot about advertising equity – what does this mean?
Advertising equity is a measure of advertising’s value to the end user. The value represents an asset for the company. Our research shows that brands whose advertising is perceived as valuable build an advertising equity that generates revenue in the form of more cost-effective advertising investments, positive brand perceptions and winning collaborations.
How do you create advertising that receivers want to watch or take part of?
The opportunities to build end-user value through advertising are many. Basically, it’s a question of combining the company’s objectives with the context and situations in which people will respond to the ad. And to understand what can create value for the end user there and then. In traditional advertising, end-user value is often based on entertainment, but it might as well be about something like knowledge, inspiration or aesthetics.
You’ve highlighted Volvo’s commercials as a good example of advertising that not only creates value for customers, but also for the media and investors. Why do you think Volvo’s commercials have become so successful?
The people at Volvo have systematically worked to create an interest in their advertising that far exceeds the interest car ads can be expected to achieve. By creating commercials that end users value, they have built an advertising equity that not only makes more consumers willing to take part in their advertising and buy their cars – they’ve also gained access to premium partners like Zlatan and Robyn, and have been able to capitalize on the advertising equity internally.
What are the biggest pitfalls and the most common errors that companies make when it comes to advertising?
There are many questions and misunderstandings around what advertising can and should achieve. The strength of advertising lies mainly in attracting more people to pay more for a brand or a product. This should also be reflected in how to evaluate the ad, which unfortunately is not always the case. When it comes to the advertising equity mentioned earlier, it’s also unusual for it to be followed up. This has the effect that advertising efforts do not always get the continuity that’s needed. But by measuring the advertising equity, companies can better adapt and capitalize on their advertising.
