Advertising Saturation: Diminishing Returns Effect
Increasing the amount of advertising increases the percent of the audience reached by the advertising, hence increases demand, but a linear increase in the advertising exposure doesn’t have a similar linear effect on demand. Typically each incremental amount of advertising causes a progressively lesser effect on demand increase. This is advertising saturation. Saturation only occurs above a threshold level that can be determined by Adstock Analysis.
For e.g. for the ad copy in the above graph, saturation only kicks in above 110 GRPs per week.
Adstock can be transformed to an appropriate nonlinear form like the logistic or negative exponential distribution, depending upon the type of diminishing returns or ‘saturation’ effect the response function is believed to follow.
Read more about this topic: Advertising Adstock
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